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
January 28, 1997
(Date of Earliest Event Reported)
MCKESSON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-13252 94-3207296
(State or other (Commission File Number) (IRS Employer
jurisdiction Identification
of incorporation) Number)
McKesson Plaza, One Post Street, San Francisco, CA 94104
(Address of principal executive offices, including Zip Code)
(415) 983-8300
(Registrant's telephone number, including area code)
Item 5 - Other Events.
McKesson Corporation ("McKesson"), General
Medical Inc. ("General Medical") and certain stockholders
of General Medical (the "Continuing Stockholders")
entered into an Agreement and Plan of Merger, dated as of
January 28, 1997 (the "Merger Agreement"), pursuant to
which McKesson will acquire all of the outstanding
capital stock (including options) of General Medical for
approximately $347 million. McKesson will also assume
approximately $428 million in debt of General Medical.
The Merger Agreement, which has been approved by the
Boards of Directors of each company and by the
stockholders of General Medical, provides for the merger
(the "Merger") of Spider Acquisition Corporation, a
wholly owned subsidiary of McKesson ("Merger Sub"), with
and into General Medical, with General Medical being the
surviving corporation in the Merger.
The Merger Agreement provides that each share
of General Medical common stock held by the Continuing
Stockholders will be converted into the right to receive
a combination of cash and shares of McKesson common
stock, par value $.01 per share (the "McKesson Common
Stock"), pursuant to formulas specified in the Merger
Agreement. The issued and outstanding shares of capital
stock held by stockholders of General Medical other than
the Continuing Stockholders (and other than dissenting
shares, treasury shares and shares held by McKesson or
Merger Sub) will be converted in the Merger into the
right to receive cash. Approximately one-half of the
aggregate Merger consideration will be paid in cash and
one-half in shares of McKesson Common Stock. The Merger
Agreement provides that the number of shares of McKesson
Common Stock to be issued in the Merger will be
determined on the basis of the average closing price of
McKesson Common Stock for the five trading days ending
two trading days prior to the closing; provided, however,
that the average closing price of McKesson Common Stock
will not be deemed to be greater than $63.11 or less than
$46.64. Accordingly, in the aggregate, no more than
approximately 3,720,000 or less than approximately
2,750,000 shares of McKesson Common Stock will be issued
in the Merger. The Merger Agreement provides that $30
million of the cash consideration to be paid in the
Merger will be held back from the General Medical
stockholders (and optionholders) and such amount will be
applied against any costs incurred by General Medical and
certain other defendants in connection with a pending
lawsuit involving General Medical and certain other
persons. The lawsuit was brought by the former
controlling shareholder of the predecessor of General
Medical against General Medical, GM Holdings, Inc., a
wholly owned subsidiary of General Medical, Kelso &
Company, L.P., a stockholder of General Medical, and one
of its officers, and certain present and former officers
and a director of General Medical, alleging fraud, breach
of fiduciary duty and participation in and inducing
breach of fiduciary duty in connection with the
acquisition of General Medical from its predecessor
company in 1993.
The Merger is subject to certain customary
conditions, including expiration of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. Copies of the Merger Agreement and the
press release announcing the transaction are attached
hereto as Exhibits 2.1 and 99.1, respectively, which
exhibits are incorporated herein by reference.
McKesson and the Continuing Stockholders have
also entered into a Registration Rights Agreement (the
"Registration Rights Agreement") providing certain demand
and incidental registration rights with respect to the
shares of McKesson Common Stock which such stockholders
will receive in exchange for their shares of General
Medical common stock. The Registration Rights Agreement
also provides for certain "standstill" provisions and
other limitations on disposition of the shares of
McKesson Common Stock. A copy of the Registration Rights
Agreement is attached hereto as Exhibit 99.2, which
exhibit is incorporated herein by reference.
The Private Securities Litigation Reform Act of
1995 provides a "safe harbor" for forward-looking
statements to encourage companies to provide prospective
information about companies, so long as those statements
are identified as forward looking and are accompanied by
meaningful cautionary statements identifying important
factors that could cause actual results to differ
materially from those discussed in the statement. The
press release filed herewith contains certain forward-
looking statements. McKesson desires to take advantage
of the "safe harbor" provisions with respect to
statements it may make concerning the Merger. The
following important factors, among others, could affect
the successful integration of the companies and the
recognition of cost savings or other synergies from the
transaction, as well as McKesson's continuing operations:
Factors specific to the transaction include:
- Absence of legislation which prevents the Merger
from being consummated or makes the benefits expected to
be realized upon consummation of the Merger more
difficult to achieve.
- Possible adverse publicity or litigation from
third parties interested in preventing the Merger from
occurring.
- Loss or retirement of key executives of General
Medical.
Other factors affecting McKesson's operations include:
- Level of competition for McKesson's products,
including a possible willingness on the part of certain
competitors to cut prices for their products in order to
preserve or gain market share.
- Increase in spending by competitors.
- Risks inherent in new product introductions,
including uncertainty of customer acceptance of the
product's value proposition relative to competitors'
products, and competitors' response to the introduction.
- General economic and business conditions.
- Uncertainty in the economic environment in foreign
countries.
- Other risks detailed from time to time in
McKesson's filings with the Securities and Exchange
Commission.
The foregoing review of factors pursuant to the
Private Litigation Securities Reform Act of 1995 should
not be construed as exhaustive.
Item 7(c) - Exhibits.
2.1 Agreement and Plan of Merger, dated as of
January 28, 1997, by and among General Medical
Inc., McKesson Corporation, Spider Acquisition
Corporation and certain stockholders named
therein.
99.1 Press Release of McKesson Corporation, dated
January 28, 1997.
99.2 Registration Rights Agreement, dated as of
January 28, 1997, by and among McKesson
Corporation and certain stockholders named
therein.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
MCKESSON CORPORATION
(Registrant)
Date: February 5, 1997 By: /s/ Nancy A. Miller
--------------------------
Name: Nancy A. Miller
Title: Vice President and
Corporate Secretary
EXHIBIT INDEX
Exhibit Page
2.1 Agreement and Plan of Merger, dated as of
January 28, 1997, by and among General Medical
Inc., McKesson Corporation, Spider Acquisition
Corporation and certain stockholders named
therein.
99.1 Press Release of McKesson Corporation, dated
January 28, 1997.
99.2 Registration Rights Agreement, dated as of
January 28, 1997, by and among McKesson
Corporation and certain stockholders named
therein.
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
GENERAL MEDICAL INC.,
MCKESSON CORPORATION,
SPIDER ACQUISITION CORPORATION
and
THE
CONTINUING STOCKHOLDERS
NAMED HEREIN
Dated as of January 28, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
1.1 The Merger.......................................................3
1.2 Effect on Shares.................................................4
1.3 Holdback of Cash Consideration...................................6
1.4 Surrender of Certificates.......................................19
1.5 Sales Taxes; Transfer Taxes and Fees; Withholding...............21
1.6 No Further Ownership Rights in Shares...........................23
1.7 Closing of Company Transfer Books...............................23
1.8 Stock Options...................................................23
1.9 Lost Certificates...............................................24
1.10 Dissenters' Rights..............................................24
1.11 Closing.........................................................25
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation....................................26
2.2 Bylaws..........................................................26
2.3 Directors and Officers..........................................26
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Corporate Organization and Authority............................27
3.2 Capitalization..................................................29
3.3 Subsidiaries....................................................31
3.4 Consents and Approvals; No Violations...........................31
3.5 SEC Documents...................................................34
3.6 Financial Statements............................................34
3.7 Absence of Material Adverse Changes, etc........................35
3.8 Absence of Undisclosed Liabilities..............................37
3.9 Information Statement...........................................38
3.10 Taxes...........................................................38
3.11 Employment Matters..............................................44
3.12 Environmental Matters...........................................50
3.13 Legal Proceedings, etc..........................................52
3.14 Compliance with Applicable Law..................................53
3.15 Certain Contracts and Arrangements..............................54
3.16 Real Property...................................................55
3.17 Certain Fees....................................................57
3.18 Intellectual Property...........................................57
3.19 Board Recommendations; Takeover Provisions......................59
3.20 Labor Matters...................................................59
3.21 Transactions with Affiliates....................................60
3.22 Existing Stock Agreements.......................................60
3.23 Product Liability...............................................61
3.24 Legal Opinion...................................................61
3.25 Opinion of Financial Advisor....................................61
3.26 Full Disclosure.................................................62
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY
4.1 Corporate Organization and Authority............................62
4.2 Capitalization..................................................64
4.3 Consents and Approvals; No Violations...........................65
4.4 SEC Documents...................................................67
4.5 Financial Statements............................................68
4.6 Absence of Material Adverse Changes, etc........................68
4.7 Absence of Undisclosed Liabilities..............................69
4.8 Taxes...........................................................69
4.9 Employment Matters..............................................70
4.10 Legal Proceedings, etc..........................................70
4.11 Compliance with Applicable Law..................................71
4.12 Certain Fees....................................................71
4.13 Financing.......................................................71
4.14 Information Statement...........................................72
ARTICLE V
CONTINUING STOCKHOLDERS
5.1 Authority, Binding Effect.......................................72
5.2 Title...........................................................73
5.3 Consents and Approvals; No Violations...........................75
5.4 Investment Intention............................................76
5.5 Federal Securities Laws Matters.................................77
5.6 Investor Status.................................................77
ARTICLE VI
COVENANTS
6.1 Conduct of the Business.........................................78
6.2 Information Statement...........................................82
6.3 Access to Information; Confidentiality..........................83
6.4 No Solicitation.................................................84
6.5 Obligations of Merger Subsidiary................................85
6.6 Director and Officer Liability; Indemnification.................85
6.7 Reasonable Best Efforts.........................................88
6.8 Regulatory Compliance...........................................89
6.9 Public Announcements............................................91
6.10 Further Assurances..............................................91
6.11 Employee Matters................................................91
6.12 Treatment of Public Debt........................................93
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Each Party's Obligations..........................93
7.2 Conditions to the Obligations of the Company....................95
7.3 Conditions to the Obligations of Buyer and Merger
Subsidiary......................................................96
ARTICLE VIII
TERMINATION
8.1 Termination.....................................................97
8.2 Effect of Termination...........................................98
ARTICLE IX
MISCELLANEOUS
9.1 Notices.........................................................98
9.2 No Survival of Representations and Warranties...................99
9.3 Amendments, Modification and Waiver............................100
9.4 Expenses.......................................................101
9.5 Successors and Assigns; Binding Effect.........................102
9.6 Governing Law..................................................102
9.7 Severability...................................................102
9.8 Third Party Beneficiaries......................................103
9.9 Schedules......................................................103
9.10 Entire Agreement...............................................104
9.11 Counterparts; Effectiveness....................................104
TABLE OF DEFINED TERMS
TERM SECTION NO.
accredited investor........................................................5.6
accumulated funding deficiency.................................3.11(f), 4.9(f)
Acorn Partnership.....................................................Recitals
Acquisition Proposal.......................................................6.4
Active Subsidiary.......................................................3.1(a)
Affiliate.................................................................3.21
Agreement.............................................................Recitals
Assumed Options........................................................6.11(a)
Average Price...........................................................1.2(a)
Bernstein Claims...........................................................1.3
Buyer.................................................................Recitals
Buyer Common Stock......................................................1.2(a)
Buyer Disclosure Schedule...............................................4.3(a)
Buyer ERISA Plans.......................................................4.1(a)
Buyer Material Adverse Effect...........................................4.1(a)
Buyer Plans.............................................................4.9(a)
Buyer Preferred Stock......................................................4.2
Buyer Rights............................................................1.2(a)
Buyer SEC Documents........................................................4.4
Buyer Securities...........................................................4.2
CEA...................................................................Recitals
Certificate of Merger...................................................1.1(b)
Class A Common Stock..................................................Recitals
Closing...................................................................1.11
Closing Date..............................................................1.11
Code....................................................................1.4(c)
Common Stock..........................................................Recitals
Company...............................................................Recitals
Company Board...........................................................3.1(b)
Company Disclosure Schedule................................................3.3
Company SEC Documents......................................................3.5
Company Securities.........................................................3.2
Consideration Shares....................................................1.2(a)
Continuing Cash Portion...................................................2(a)
Continuing Share Portion................................................1.2(a)
Continuing Stockholders...............................................Recitals
Costs...................................................................6.6(a)
DGCL..................................................................Recitals
Dissenting Shares.........................................................1.10
Distribution Amount........................................................1.3
Effective Time..........................................................1.1(b)
employee pension benefit plan..................................3.11(a), 4.9(a)
employee welfare benefit plan..................................3.11(a), 4.9(a)
Employment Agreements..................................................6.11(a)
Environmental Claim.................................................3.12(a)(i)
Environmental Laws.................................................3.12(a)(ii)
Equity Value............................................................1.2(a)
ERISA..................................................................3.11(a)
ERISA Affiliate........................................................3.11(a)
ERISA Plans............................................................3.11(a)
Excess Expense Amount......................................................9.4
Exchange Act.......................................................3.4(b)(iii)
Exchange Share Fractional Amount........................................1.2(a)
Excluded Shares.........................................................1.2(a)
GAAP.......................................................................3.6
General Medical.........................................................3.1(c)
Governmental Entity.....................................................3.4(b)
Hazardous Materials...............................................3.12(a)(iii)
Holdback Amount............................................................1.3
Holdings...................................................................3.5
HSR Act.................................................................3.4(b)
Indemnifiable Claim.....................................................6.6(a)
Indemnified Lawsuit.....................................................6.6(a)
Indemnified Party.......................................................6.6(a)
Information Statement...................................................6.2(b)
Intellectual Property.....................................................3.18
IPO Prospectus.............................................................3.5
Kelso Parties.........................................................Recitals
KEP II................................................................Recitals
KIA IV................................................................Recitals
Leased Real Property...................................................3.16(a)
Leases.................................................................3.16(a)
Lien.......................................................................3.3
Material Adverse Effect.................................................3.1(a)
Merger..................................................................1.1(a)
Merger Consideration....................................................1.2(a)
Merger Subsidiary.....................................................Recitals
multiemployer pension plan.....................................3.11(f), 4.9(f)
Net Equity Value........................................................1.2(a)
Non-Continuing Cash Amount..............................................1.2(a)
Non-Continuing Stockholders...........................................Recitals
Opel..................................................................Recitals
Option..................................................................1.8(a)
Option Plans............................................................1.8(a)
Outstanding Shares......................................................1.2(a)
Owned Real Property....................................................3.16(a)
Paying Agent............................................................1.4(a)
Permits...................................................................3.14
Permitted Liens........................................................3.16(a)
Person.....................................................................6.4
PGI...................................................................Recitals
PGI Sweden............................................................Recitals
Plans..................................................................3.11(a)
Princes Gate..........................................................Recitals
Real Property..........................................................3.16(a)
Release............................................................3.12(a)(iv)
Registration Rights Agreement...........................................7.2(d)
Representatives.........................................................6.3(a)
Rutledge Partners.....................................................Recitals
SEC................................................................1.8(a), 4.4
SPD................................................................3.11(b)(iv)
Secretary of State......................................................1.1(b)
Securities Act.............................................................3.5
Securities Purchase Agreement..............................................3.2
Securityholders Agreement..................................................5.2
Share Certificates......................................................1.4(b)
Shares................................................................Recitals
single employer................................................3.11(a), 4.9(a)
State Takeover Laws.......................................................3.19
Stock Agreements...........................................................3.2
Stock Subscription Agreement...............................................5.2
Stockholders Agreement.....................................................5.2
Subsidiary.................................................................3.3
Surviving Corporation...................................................1.1(a)
Tax Return..........................................................3.10(b)(i)
Taxes...............................................................3.10(b)(i)
1993 Plan..................................................................3.2
1994 Directors Plan........................................................3.2
1994 Plan..................................................................4.2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 28, 1997 (this
"Agreement"), by and among GENERAL MEDICAL INC, a Delaware corporation
(the "Company"), MCKESSON CORPORATION, a Delaware corporation ("Buyer"),
SPIDER ACQUISITION CORPORATION, a Delaware corporation and a wholly-owned
subsidiary of Buyer ("Merger Subsidiary"), KELSO INVESTMENT ASSOCIATES
IV, L.P., a Delaware limited partnership ("KIA IV"), KELSO EQUITY
PARTNERS II, L.P., a Delaware limited partnership ("KEP II" and together
with KIA IV, the "Kelso Parties"), CHASE EQUITY ASSOCIATES, a California
limited partnership ("CEA"), JOHN RUTLEDGE PARTNERS, L.P., a Delaware
limited partnership ("Rutledge Partners"), PRINCES GATE INVESTORS L.P., a
Delaware limited partnership ("Princes Gate"), ACORN PARTNERSHIP I, L.P.,
a Delaware limited partnership ("Acorn Partnership"), PGI INVESTMENTS
LIMITED, a British Virgin Islands corporation ("PGI"), PGI SWEDEN AB, a
Swedish corporation ("PGI Sweden") and GREGOR VON OPEL ("Opel"), THE
LEWIS and PATRICIA KELSO TRUST, WILLIAM A. MARQUARD, THE FRANK T. NICKELL
IRA, DAVID M. RODERICK, GEORGE L. SHINN, STEVEN B. NIELSEN, F. De WIGHT
TITUS and DONALD B. GARBER. All of the parties hereto excluding the
Company, Buyer and Merger Subsidiary are referred to collectively herein
as the "Continuing Stockholders." All stockholders of the Company,
excluding the Continuing Stockholders are referred to collectively herein
as the "Non-Continuing Stockholders."
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of Buyer, Merger
Subsidiary and the Company have each approved, and deem it advisable and
in the best interests of the stockholders of Merger Subsidiary and the
Company to consummate, the acquisition of the Company by Buyer upon the
terms and subject to the conditions of this Agreement; and
WHEREAS, in furtherance of such acquisition, the respective Boards
of Directors of Buyer, Merger Subsidiary and the Company have each
approved this Agreement and the merger of the Merger Subsidiary with and
into the Company, upon the terms and subject to the conditions set forth
herein, and in accordance with the General Corporation law of the State
of Delaware (the "DGCL"), whereby each issued and outstanding share of
Common Stock, par value $.01 per share (the "Common Stock") and each
issued and outstanding share of Class A Common Stock, par value $.01 per
share (the "Class A Common Stock" and, together with the Common Stock,
the "Shares"), of the Company, not owned directly or indirectly by Buyer,
Merger Subsidiary or the Company, will be converted into the right to
receive the applicable Merger Consideration payable to the holder
thereof, without interest;
NOW, THEREFORE, in consideration of the representations,
warranties, covenants, agreements and conditions hereafter set forth, and
intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger.
(a) Upon the terms and subject to the conditions of this
Agreement, and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.1(b) hereof), the Merger Subsidiary shall be merged
(the "Merger") with and into the Company, whereupon the separate
existence of the Merger Subsidiary shall cease. After the Merger, the
Company shall continue as the surviving corporation (sometimes referred
to herein as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware.
(b) Concurrently with the Closing (as defined in Section 1.11
hereof) the Company, Buyer and Merger Subsidiary shall cause a
certificate of merger (the "Certificate of Merger") with respect to the
Merger to be executed and filed with the Secretary of State of the State
of Delaware (the "Secretary of State") as provided in the DGCL. The
Merger shall become effective on the date and time (the "Effective Time")
at which the Certificate of Merger has been duly filed with the Secretary
of State.
(c) Upon the Merger, all the rights, privileges, immunities,
powers and franchises of the Company and Merger Subsidiary shall vest in
the Surviving Corporation and all obligations, restrictions,
disabilities, duties, debts and liabilities of the Company and Merger
Subsidiary shall be the obligations, restrictions, disabilities, duties,
debts and liabilities of the Surviving Corporation.
1.2 Effect on Shares. At the Effective Time:
(a) Conversion of Shares; Merger Consideration. Each Share
issued and outstanding immediately prior to the Effective Time (other
than (i) Shares held by the Company as treasury stock or by any
wholly-owned Subsidiary (as defined in Section 3.3 hereof) of the Company
or owned by Buyer, Merger Subsidiary or any other Subsidiary of Buyer
("Excluded Shares") and (ii) Dissenting Shares (as defined in Section
1.10)) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive the Merger
Consideration (as defined below), upon surrender of the certificate
formerly representing such Shares in the manner provided in Section 1.3
hereof. All Shares to be converted into the Merger Consideration pursuant
to this Section 1.2 shall, by virtue of the Merger and without any action
on the part of the holders thereof, cease to be outstanding, be canceled
and retired, and each holder of a certificate representing any such
Shares shall thereafter cease to have any rights with respect thereto,
except the right to receive the applicable Merger Consideration therefor,
without interest thereon, upon the surrender of such certificate in
accordance with Section 1.4 hereof. As used herein, "Outstanding Shares"
shall mean the Shares other than Excluded Shares. "Merger Consideration"
shall mean: (i) in the case of the Shares held by Non-Continuing
Stockholders: (I) an amount in cash (the "Non-Continuing Cash Amount")
equal to the Equity Value Per Share (as defined below) and (II) the
Distribution Amount (as defined in Section 1.3 below); and (ii) in the
case of Shares held by Continuing Stockholders: (I) the Continuing Cash
Portion (as defined below), (II) the Continuing Stock Portion (as defined
below), and (III) the Distribution Amount. As used herein, "Equity Value
Per Share" shall be the amount equal to (A) $331,071,912.58 minus the
product of the Excess Expense Amount (as defined in Section 9.4) and
..605, divided by (B) 11,014,357.13. The "Continuing Cash Portion" shall
be an amount in cash equal to (A) .50 times the Equity Value Per Share
minus (B) the quotient of (I) (x) .50 times the aggregate Non-Continuing
Cash Amounts, plus (y) $15,000,000, plus (z) .50 times the aggregate
Option Spreads (as defined in Section 1.8), divided by (II) the total
number of Shares held by the Continuing Stockholders. The "Continuing
Share Portion" shall be the number of shares of Buyer common stock, par
value $.01 per share (the "Buyer Common Stock") and the associated
Preferred Stock Purchase Rights of Buyer to be issued pursuant to the
Rights Agreement, dated as of September 14, 1994, by and between Buyer
and First Chicago Trust Company of New York (the "Buyer Rights") (unless
the context otherwise requires, all references in this Agreement to Buyer
Common Stock shall include the corresponding Buyer Rights) equal to (A)
the Equity Value Per Share minus the Continuing Cash Portion divided by
(B) subject to the provisions of the last sentence of this Section
1.2(a), the average closing price of Buyer Common Stock for the five
trading day period ending two trading days before the Closing Date (the
"Average Price") (such resulting number, the "Consideration Shares") and
(ii) an amount in cash in lieu of fractional shares, if any, calculated
at the Average Price (the "Exchange Share Fractional Amount"). The
provisions of clause (B) of the foregoing sentence notwithstanding, if
(A) the Average Price is greater than $63.11, then the Average Price, for
all purposes of this Agreement (including Section 1.7 hereof) shall be
deemed to be $63.11 and (B) the Average Price is less than $46.64, then
the Average Price, for all purposes of this Agreement other than Section
8.1(d) (but including Section 1.7) shall be deemed to be $46.64.
(b) Cancellation of Shares. All Excluded Shares shall be
canceled and no Merger Consideration or other consideration or payment
shall be delivered therefor or in respect thereof.
(c) Capital Stock of Merger Subsidiary. Each share of common
stock of Merger Subsidiary issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation with the
same rights, powers and privileges as the Shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
1.3 Holdback of Cash Consideration.
(a) The parties agree that at the Closing, Buyer shall
withhold, from the Merger Consideration an amount equal to $30 million
(the "Initial Holdback Amount"). The Initial Holdback Amount shall be
reduced as and to the extent provided in Section 1.3(c) and 1.3(e) below
and, after giving effect to the provisions of such Sections, shall be
referred to herein as the "Holdback Amount."
(b) The Holdback Amount shall accrue interest at the
applicable Interest Rate (as defined below) commencing on the Closing
Date and ending on the Final Holdback Distribution Date (as defined
below). The Holdback Amount, together with all such accrued interest,
divided by 11,014,357.13, shall be referred to herein as the
"Distribution Amount." For purposes of this Agreement, the "Interest
Rate" shall be (i) 6.75% per annum for the period commencing on the
Closing Date and ending on the date that is six months following the
Closing Date (the "Six Month Anniversary Date"), (ii) 8.75% per annum for
the period commencing on the day following the Six Month Anniversary Date
and ending on the date that is twelve months following the Closing Date
(the "Twelve Month Anniversary Date"), (iii) 10.75% per annum for the
period commencing on the day following the Twelve Month Anniversary Date
and ending on the date that is the earlier of (A) the Bar Date (as
defined below) and (B) eighteen months following the Closing Date and for
any other periods thereafter; provided, however, that in the event that
(i) the order of the New York State Supreme Court with respect to the
Bernstein Lawsuit (as defined below) is not affirmed on the appeal or
(ii) a Subsequent Lawsuit (as defined below) is brought or filed, the
Interest Rate shall be 6.75% per annum from and after the date of such
disposition (in the case of clause (i)) or the filing or bringing of such
Subsequent Lawsuit (in the case of clause (ii)) for all subsequent
periods hereunder.
(c) As soon as practicable following the Initial Holdback
Distribution Date (as defined below) Buyer shall distribute the Initial
Distribution Amount (as defined below), and as soon as practicable
following the Final Holdback Distribution Date, the Buyer shall
distribute the Final Distribution Amount, in each case, in accordance
with Section 1.2(a). The right of a holder of Outstanding Shares or
Options to receive any amounts under this Section 1.3(c) may not be
transferred, sold, assigned or otherwise disposed of, except by will,
intestate succession or operation of law. Not later than 10 days
following the Effective Time, Buyer shall cause the Surviving Corporation
to provide to the Stockholder Representative (as defined below) a
schedule setting forth the names and addresses of the holders of all
Outstanding Shares and Options immediately prior to the Effective Time as
such information appears on the records of the Company, together with the
number of Shares or Options held by each such Person at such time. Any
Distribution Amount that Buyer is unable to distribute to a former holder
of Outstanding Shares or Options pursuant to this Section 1.3(c) may be
retained by Buyer (subject to Section 1.3(h)) and such holder shall be
entitled to look to Buyer only as a general creditor with respect to the
pro rata share of the Distribution Amount payable to such holder pursuant
to this Section 1.3(c), subject to applicable abandoned property, escheat
or other similar laws.
(d) For purposes hereof, the following terms shall have the
meanings set forth below:
"Costs" shall mean any and all losses, reasonable costs,
reasonable expenses (including, without limitation, reasonable attorneys'
fees and disbursements, the reasonable costs of any investigation or
preparation incurred in connection therewith and the reasonable fees of
experts and consultants), claims, damages, liabilities, judgments
(including interest on any judgments), amounts paid in settlement and
premiums paid for insurance with respect to the Bernstein Lawsuit
(pursuant to clause (iv) of the definition of "Final Holdback
Distribution Date" contained in Section 1.3(d)).
"Holdback Costs" shall mean any and all Costs (including,
without limitation, any Costs incurred in connection with any
indemnification obligations of the Company or the Company's Subsidiaries)
incurred after the Effective Time by Buyer, the Company, the Surviving
Corporation or the Company's Subsidiaries and all other Defendants (as
defined below) in connection with, arising out of or related to (y) that
certain lawsuit, including any appeal related thereto, styled Richard A.
Bernstein v. Kelso & Company, Inc., Steven B. Nielsen, James C. Robison,
Donald B. Garber, G. Keith Nedrow, Michael B. Goldberg, General Medical
Corp. Inc. and GM Holdings, Inc., Index No. 117957/95 (the "Bernstein
Lawsuit"), filed in the Supreme Court of the State of New York or (z) any
claim asserted in any other proceeding or forum against any entity or
person based on, arising out of or related to facts and/or circumstances
alleged or asserted in the Bernstein Lawsuit (subclauses (y) and (z)
being collectively referred to as the "Bernstein Claims").
"Initial Distribution Amount" shall be 50% of the
Distribution Amount as of the Initial Holdback Distribution Date.
"Initial Holdback Distribution Date" shall be the date which
is thirty days following the first to occur of:
(i) the date of the settlement of the Bernstein
Lawsuit, including the delivery to all persons named as defendants
in the Bernstein Lawsuit (the "Defendants") of an unconditional
written release (or if the delivery of such a release is not
feasible, the entry of an order of a court of competent
jurisdiction which is no longer subject to appeal and which
provides that all claims asserted therein are released or dismissed
with prejudice) (x) from the named plaintiff in the Bernstein
Lawsuit (on behalf of such named plaintiff and any other person or
persons whom such named plaintiff purports to represent) and (y) on
behalf of all other members of any class actually certified or
approved in the Bernstein Lawsuit, from all obligations and
liabilities in respect of all Bernstein Claims and potential
Bernstein Claims other than as expressly provided for in the
settlement agreement); or
(ii) the date on which a final order or judgment of a
court of competent jurisdiction , with respect to the Bernstein
Lawsuit, has become final and no longer subject to appellate
review.
"Final Holdback Distribution Date" shall be the date which is
thirty days following the first to occur of:
(i) the date on which a final order or judgment of a
court of competent jurisdiction, with respect to the Bernstein
Lawsuit, has become final and no longer subject to appellate review
(such final adjudication to have res judicata or similar effect
with respect to all potential Bernstein Claims, and such settlement
to include the delivery to all Defendants of an unconditional
written release (or if the delivery of such a release is not
feasible, the entry of an order of a court of competent
jurisdiction which is no longer subject to appeal and which
provides that all claims asserted therein are released or dismissed
with prejudice) (x) from the named plaintiff in the Bernstein
Lawsuit (y) on behalf of all other members of the purported class
asserted in the Bernstein Lawsuit, from all obligations and
liabilities in respect of all Bernstein Claims and potential
Bernstein Claims other than as expressly provided for in the
settlement agreement); or
(ii) July 20, 1998 (the "Bar Date"), but only in the
event that by such date (A) a final order or judgment of a court of
competent jurisdiction with respect to the Bernstein Lawsuit has
become final and no longer subject to appellate review and (B) no
other Bernstein Claims have been brought or filed against the
Company, any of its Subsidiaries or any Person with respect to
which the Company or any of its Subsidiaries may have
indemnification, reimbursement or other monetary obligations (a
"Subsequent Lawsuit"); or
(iii) in the event that one or more Subsequent Lawsuits
is brought or filed, the date on which there has been, with respect
to the Bernstein Lawsuit and all such Subsequent Lawsuits, the
entry of a final order or judgment of a court of competent
jurisdiction (whether in connection with a settlement or otherwise)
and such order or judgment has become final and no longer subject
to appellate review; or
(iv) on such date as the Stockholder Representative (as
defined below) obtains insurance with respect to the Bernstein
Claims on such terms as are mutually acceptable to the Stockholder
Representative and Buyer.
"Final Distribution Amount" shall be the remaining
Distribution Amount, as of the Final Holdback Distribution Date,
following the distribution of the Initial Distribution Amount, if any.
(e) Buyer agrees to pay or reimburse, or cause the Company or
one of its Subsidiaries to pay or reimburse, Holdback Costs (including
Holdback Costs incurred by any of the Defendants which Buyer, the Company
or the Company's Subsidiaries would not have been obligated to pay or
reimburse but for the provisions of this Section 1.3(e)) on the following
basis:
(A) Prior to the Initial Distribution Date: (x) up to
the first $1 million of Hold back Costs, if any, shall not be
applied against or reduce the Initial Holdback Amount; (y)
Holdback Costs, if any, which exceed $1 million, up to such
excess Holdback Costs which aggregate $30 million shall be
fully applied against and reduce the Initial Holdback Amount;
and (z) Holdback Costs, if any, in excess of $31 million, up
to an additional $9 million, shall be paid or reimbursed
notwithstanding that the Initial Holdback Amount shall have
been reduced to zero; and
(B) On or following the Initial Distribution Date,
after giving effect to the distribution of the Initial
Distribution Amount: (x) up to the first $1 million of
Holdback Costs following the Effective Time, if any, shall
not be applied against or reduce the Holdback Amount; (y)
Holdback Costs, if any, which exceed $1 million, up to such
excess Holdback Costs following the Effective Time which
aggregate not more than $30 million, minus the aggregate
Initial Distribution Amount (less the interest component
thereof) shall be fully applied against and reduce the
Holdback Amount; and (z) Holdback Costs, if any, in excess of
$31 million, minus the aggregate Initial Distribution Amount
(less the interest component thereof), up to an additional
$4.5 million, shall be paid or reimbursed notwithstanding
that the Holdback Amount shall have been reduced to zero.
Subject to the foregoing, Holdback Costs will be paid or reimbursed in
the order in which they are presented to Buyer. Notwithstanding anything
in this Section 1.3(e) to the contrary, no obligation to pay or reimburse
Holdback Costs which constitute costs paid in settlement shall be imposed
under this Section 1.3(e) if the settlement is by a Defendant who is not
a party to this Agreement and it does not satisfy the conditions set
forth in the fourth sentence in Section 1.3(f) below.
(f) The Defendants other than the Company and its
Subsidiaries will continue undertaking the defense of the Bernstein
Lawsuit with counsel of their own choosing. The Stockholder
Representative (as defined below) shall undertake and have sole
discretion and authority with respect to, the defense (and, subject to
this Section 1.3(f), the settlement) of any Bernstein Claims on behalf of
the Company and its Subsidiaries with counsel selected by the Stockholder
Representative; provided, however, that Buyer may select counsel of its
choosing to act as co-counsel (but not lead counsel) on behalf of the
Company and any of its Subsidiaries (the "Company Defendants"), for
purposes of participating in the defense of any Bernstein Claims.
Following the Closing, Buyer will cause the Company Defendants vigorously
and diligently to defend any Bernstein Claims, it being understood that
Buyer may, at any time, cause the Company Defendants to seek the
dismissal of any and all Bernstein Claims against the Company Defendants
on their own motion (and not jointly with the other Defendants). The
Defendants which are parties hereto agree that they will not enter into
any settlement or similar agreement with respect to any Bernstein Claims
unless (i) any such settlement shall include as a term thereof the
delivery to the Defendants by all plaintiffs in the proceeding (on behalf
of such named plaintiff and any other person or persons who such named
plaintiff purports to represent) relating to such Bernstein Claims of an
unconditional written release from all liability in respect of all
Bernstein Claims and potential Bernstein Claims (or if the delivery of
such a release is not feasible, the entry of an order of a court of
competent jurisdiction which is no longer subject to appeal and which
provides that all claims asserted therein are released or dismissed with
prejudice), (ii) such settlement shall not provide for any action by the
Company Defendants other than the payment of money and the execution of
customary settlement documents, and (iii) the aggregate amount of such
money payment shall not exceed the excess, if any, of $40 million over
the aggregate Holdback Costs calculated by the Buyer as of the execution
of the agreement relating to the settlement (but without giving effect to
such money payment), provided that the condition set forth in this clause
(iii) shall be deemed satisfied if any excess over $40 million is not
required to be paid, directly or indirectly (by way of reimbursement,
indemnification or otherwise) by Buyer, the Company or its Subsidiaries,
provided, further, that the $40 million amount set forth in this clause
(iii) shall be reduced to $35.5 million minus the aggregate Initial
Distribution Amount as of Initial Holdback Distribution Date after giving
effect to the disbursement of the Initial Distribution Amount. In the
event of a settlement of any Bernstein Claims as provided in the
immediately preceding sentence, Buyer will cause the Company Defendants
to enter into the settlement or similar agreement with respect to such
Bernstein Claims. In connection with any calculation required by the
second preceding sentence, at Buyer's request each of the Defendants who
are parties hereto shall submit promptly to Buyer such party's claims for
payment or reimbursement of Holdback Costs (including pursuant to Section
1.3(e) above), including by obtaining up-to-date invoices with respect to
attorneys' fees and disbursements and other third party-related Holdback
Costs. Buyer will cause the Company and its Subsidiaries to reasonably
cooperate with the Stockholder Representative and the other Defendants in
order to defend any Bernstein Claims, including, without limitation,
providing reasonable access to all requested documentation and records
and making officers and employees and representatives of the Company and
its Subsidiaries reasonably available to the Stockholder Representative
and the other Defendants and their counsel for such purpose. For purposes
hereof Kelso & Company shall serve as the initial Stockholder
Representative and if Kelso & Company ceases to act as the Stockholder
Representative for any reason, the holders of a majority of the
Outstanding Shares and Options outstanding immediately prior to the
Effective Time shall appoint a replacement Stockholder Representative.
The Stockholder Representative may be removed at any time by vote of the
holders of a majority of the Outstanding Shares and Options outstanding
immediately prior to the Effective Time.
(g) If any Defendant has claims for payment or reimbursement
of Holdback Costs against any third party (other than any other
Defendant), the Defendant shall pursue such claim if reasonably available
to it and, to the extent such Holdback Costs were paid or reimbursed by
Buyer, the Company, the Surviving Corporation or any of their
Subsidiaries, the Defendant shall pay the net proceeds of such claim
(after deducting all out-of-pocket costs of collection, including
attorneys fees and disbursements) to Buyer. To the extent the amount so
paid to Buyer is in respect of a Holdback Cost which would reduce or in
fact reduced the Distribution Amount, an appropriate adjustment and/or
payment (even if after the Distribution Date) shall be made for the
benefit of the Stockholders on the same pro rata basis as provided above
in this Section 1.3. Without limiting the foregoing, to the extent that
any Defendant has claims for payment or reimbursement of Holdback Costs
against any third party (other than any other Defendant), including,
without limitation, any claim under any insurance policy, this provision
shall in no way reduce or mitigate such claims, and the obligation under
this Section 1.3 to make any payment or reimbursement shall be reduced or
eliminated accordingly; provided, that until any claim is collected, this
Section 1.3 shall continue to operate as it would in the absence of this
sentence, including with respect to the obligation to pay or reimburse
Holdback Costs under Section 1.3(e) above.
(h) Upon the occurrence of a Trigger Event (as defined
below), Buyer will deposit with an escrow agent selected by Buyer and
reasonably acceptable to the Stockholder Representative (the "Escrow
Agent"), the Holdback Amount (in the amount of the Holdback Amount at the
time of such deposit), which deposit shall be held by the Escrow Agent
pursuant to the terms of this Agreement and an escrow agreement in form
and substance consistent with the terms of this Agreement to be mutually
agreed to by Buyer, the Stockholder Representative and the Escrow Agent.
For purposes hereof, "Trigger Event" shall mean either (i) a "Change in
Control" (as defined below) or (ii) the senior debt of Buyer shall cease
to be rated at an investment grade level by either Moody's or Standard &
Poors. For purposes hereof, a "Change in Control" shall occur in the
event of (i) the acquisition by any Person of 50% or more of the capital
stock of the Company which is entitled to vote generally in the election
of directors or (ii) a merger or similar business combination involving
Buyer, after which the holders of Buyer Common Stock immediately prior to
such merger or business combination own in the aggregate less than 50% of
the common equity value of the surviving corporation or entity.
(i) This Section 1.3 is not intended to affect the rights or
obligations of the parties with respect to Holdback Costs except as
expressly set forth herein.
1.4 Surrender of Certificates.
(a) Deposit With Paying Agent. Prior to the Effective Time,
Buyer shall designate a bank, trust company, or such Person or Persons as
shall be reasonably acceptable to the Company to act as paying agent
hereunder (the "Paying Agent"). Immediately prior to the Effective Time,
Buyer shall deposit with the Paying Agent, for the benefit of holders of
Shares, (i) the funds necessary to complete the payments contemplated by
Section 1.2(a) hereof on a timely basis and (ii) certificates
representing shares of Buyer Common Stock to be issued pursuant to
Section 1.2(a) hereof.
(b) Surrender Procedure. Promptly following the Effective
Time, Buyer shall cause the Paying Agent to mail (and to make available
for collection by hand) to each holder of record of a certificate or
certificates, which represented outstanding Shares (the "Share
Certificates"), whose Shares are to be converted pursuant to Section
1.2(a) hereof into the right to receive the Merger Consideration, (i) a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Share Certificates shall
pass, only upon proper delivery of the Share Certificates to the Paying
Agent and which shall be in the form and have such other provisions as
Buyer and the Company may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Share Certificates for payment
therefor (which instructions shall provide that at the election of the
surrendering holder, Share Certificates may be surrendered, and payment
therefor collected immediately after the Effective Time, by hand
delivery). Upon proper surrender of a Share Certificate for cancellation
to the Paying Agent, together with a letter of transmittal duly completed
and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions,
the holder of such Share Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each such Share formerly
represented by such Share Certificate, to be mailed (or immediately made
available for collection by hand) within one business day of receipt
thereof, and the Share Certificate so surrendered shall be forthwith
canceled. The Paying Agent shall accept such Share Certificates upon
compliance with such reasonable terms and conditions as the Paying Agent
may impose to effect an orderly exchange thereof in accordance with
normal exchange practices. No interest shall be paid or accrued for the
benefit of holders of the Share Certificates on the Merger Consideration
payable upon the surrender of the Share Certificates. No dividends or
distributions that have been declared and having a record date after the
Effective Time shall be paid to Persons entitled to receive certificates
for shares of Buyer Common Stock until such Persons surrender their Share
Certificates, at which time all such dividends shall be paid.
Notwithstanding anything to the contrary contained herein, neither the
Paying Agent nor any party hereto shall be liable to a holder of Shares
or any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(c) Delivery of Merger Consideration. Any portion of the
Merger Consideration that remains unclaimed by the stockholders of the
Company twelve months after the Effective Time shall be delivered to the
Surviving Corporation. Any former stockholders of the Company who have
not theretofore complied with the surrender procedures described in this
Section 1.4 shall look only to the Surviving Corporation for payment
and/or issuance of the Merger Consideration to which such stockholder is
entitled, subject to applicable abandoned property, escheat or similar
laws.
1.5 Sales Taxes; Transfer Taxes and Fees; Withholding.
(a) Except as provided in Section 1.5(b) below, all sales,
use, transfer, stamp, recording and registration taxes and fees incurred
in connection with the consummation of the transactions contemplated
hereby whether imposed on the Company, Buyer or Merger Subsidiary,
including, without limitation, all real property transfer taxes or fees,
shall be paid by Buyer, and each of Buyer and the Company shall file all
necessary tax returns and other documentation with respect to all such
taxes and fees. The Company and Buyer agree to cooperate with each other
in connection with the preparation and timely filing of all necessary
forms and clearances required by any taxing authority.
(b) If payment or issuance of the Merger Consideration is to
be made to a Person other than the Person in whose name the Share
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Share Certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and
that the Person requesting such exchange shall pay to the Paying Agent
any transfer or other taxes required by reason of the payment of the
Merger Consideration to a Person other than the registered holder of the
Share Certificate so surrendered, or shall establish to the satisfaction
of the Paying Agent that such tax either has been paid or is not
applicable.
(c) Buyer or Paying Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Shares such amounts as Buyer or the Paying
Agent are required to deduct and withhold under the Internal Revenue Code
of 1986, as amended (the "Code"), or any provision of state, local or
foreign tax law, with respect to the making of such payment. To the
extent that amounts are so withheld by Buyer or the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of Shares in respect of whom such
deduction and withholding was made by Buyer or the Paying Agent.
1.6 No Further Ownership Rights in Shares. The Merger Consideration
delivered upon the surrender for exchange of any Share Certificate in
accordance with the terms hereof shall be deemed to have been delivered
(and paid) in full satisfaction of all rights pertaining to the Shares
previously represented by such Share Certificate.
1.7 Closing of Company Transfer Books. After the Effective Time,
the stock transfer books of the Company shall be closed, and no transfer
of Shares shall thereafter be made. If, after the Effective Time, Share
Certificates are presented to the Surviving Corporation, the Paying Agent
or Buyer, they shall be canceled and exchanged for the Merger
Consideration as provided in this Article I.
1.8 Stock Options.
(a) Each outstanding option ("Option") to purchase Shares
pursuant to the Company's 1993 Stock Incentive Plan as amended, and the
1994 Non-Employee Directors' Stock Incentive Plan (collectively, the
"Option Plans") outstanding immediately prior to the Effective Time shall
be canceled and converted into the right to receive from the Company, for
each Share subject to such Option, an amount in cash equal to (I) the
amount by which (A) the Equity Value Per Share exceeds (B) the exercise
price that would have been payable under such Option to acquire such
Share (such calculation, the "Option Spread") and (II) the Distribution
Amount. All applicable withholding taxes shall be deducted from the
amounts payable hereunder. The Company, rather than the Paying Agent will
make payments in respect of the Options.
(b) Notwithstanding any other provision of this Agreement to
the contrary, the Company may, by appropriate action of the Compensation
Committee of its Board of Directors, elect to accelerate the vesting of
all or any portion of the Options to a date prior to the date on which
the Effective Time occurs.
1.9 Lost Certificates. If any Share Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact
by the Person claiming such Share Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by
such Person of a bond, in such reasonable amount as the Surviving
Corporation may direct (but consistent with past practice of the
Company), as indemnity against any claim that may be made against it with
respect to such Share Certificate, the Paying Agent will pay in exchange
for such lost, stolen or destroyed Share Certificate the Merger
Consideration to which the holder thereof is entitled pursuant to this
Article I.
1.10 Dissenters' Rights. Notwithstanding anything in this Agreement
to the contrary, Outstanding Shares held by a holder who has not voted in
favor of the Merger or consented thereto in writing and who has delivered
a written demand for appraisal of such Shares in accordance with Section
262 of the DGCL ("Dissenting Shares") shall not be converted into the
right to receive the Merger Consideration, as provided in Section 1.2(a)
hereof, unless and until such holder fails to perfect or effectively
withdraws or otherwise loses his right to appraisal and payment under
Section 262 of the DGCL. If, after the Effective Time, any such holder
fails to perfect or effectively withdraws or loses his right to
appraisal, such Dissenting Shares shall thereupon be treated as if they
had been converted as of the Effective Time into the right to receive the
Merger Consideration to which such holder is entitled, without interest
thereof. The Company shall give Buyer (i) prompt notice of any notice or
demands for appraisal or payment for Shares received by the Company and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands or notices. The Company
shall not, without the prior written consent of Buyer, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any
such demands.
1.11 Closing. Subject to the provisions of Article VIII hereof, the
closing of the transaction contemplated by this Agreement (the "Closing")
and all actions specified in this Agreement to occur at the Closing shall
take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP,
919 Third Avenue, New York, New York at 10:00 a.m., New York time, on a
date to be specified by the parties, which shall be the second business
day following the day on which the last of the conditions set forth in
Section 7.1 hereof shall have been fulfilled or waived or on such other
date prior to April 1, 1997 (or such later date as provided in Section
8.1(b)) as Buyer and the Company shall agree (such date, the "Closing
Date").
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The certificate of incorporation
of the Company, as in effect at the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law.
2.2 Bylaws. The bylaws of the Company, as in effect at the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended in accordance with applicable law, the certificate of
incorporation of the Surviving Corporation and such bylaws.
2.3 Directors and Officers. From and after the Effective Time, the
directors of Merger Subsidiary at the Effective Time shall be the initial
directors of the Surviving Corporation, and the officers of the Company
at the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly
elected or appointed and qualified in accordance with applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Buyer and Merger Subsidiary to enter into this
Agreement, the Company represents and warrants to Buyer and Merger
Subsidiary as follows:
3.1 Corporate Organization and Authority.
(a) Each of the Company and its Subsidiaries that is actively
engaged in any business or owns material assets (an "Active Subsidiary")
is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has all
requisite corporate power and authority to own, lease and operate the
properties owned, leased and operated by it and to carry on the
operations of its business as now being conducted by it. Each of the
Company and its Active Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
property owned, leased or operated by it with respect to its business or
the nature of the business conducted by it makes such licensing or
qualification necessary, except in such jurisdictions where the failure
to be so duly qualified or licensed or in good standing would not have a
material adverse effect on the assets, liabilities, business, results of
operations, cash flow or financial condition of the Company and its
Subsidiaries taken as a whole (a "Material Adverse Effect"). The Company
has heretofore made available to Buyer true, complete and correct copies
of the certificate of incorporation and bylaws (or other organization
documents of like import) as currently in effect, of the Company and each
of its Subsidiaries.
(b) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and
the performance of its obligations hereunder have been duly and validly
authorized by the Board of Directors of the Company (the "Company Board")
and by the requisite vote of the Company's stockholders and no other
corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly executed and delivered by the Company and
constitutes, assuming due authorization, execution and delivery of this
Agreement by Buyer, Merger Subsidiary and the Continuing Stockholders, a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may
be limited by (1) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally or (2) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in
equity).
(c) General Medical Corporation, a Virginia corporation
("General Medical"), has the corporate power and authority to execute and
deliver the Employment Agreements with the persons listed on Section
3.1(c) of the Company Disclosure Schedule (as defined in Section 3.3) and
to perform its obligations thereunder. The execution and delivery of the
Employment Agreements and the performance of its obligations thereunder
have been duly and validly authorized by the Board of Directors of
General Medical and no other corporate proceedings on the part of General
Medical are necessary to authorize the execution, delivery and
performance of the Employment Agreements. The Employment Agreements have
been duly executed and delivered by General Medical and constitute,
assuming execution and delivery of the Employment Agreements by the
counter parties thereto, valid and binding obligations of General
Medical, enforceable against General Medical in accordance with their
terms, except as such enforceability may be limited by (1) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally or (2)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
3.2 Capitalization. The authorized capital stock of the Company
consists of 20,000,000 Shares of Common Stock and 5,000,000 Shares of
Class A Common Stock. As of the date hereof, there were (i) 8,723,621
shares of Common Stock issued and outstanding and (ii) 1,214,231 shares
of Class A Common Stock issued and outstanding. All Shares of capital
stock of the Company have been duly authorized and validly issued, are
fully paid and nonassessable and are not subject to any preemptive
rights. As of the date hereof, there were (i) outstanding Options in
respect of 958,615.63 shares of Common Stock, which Options were granted
pursuant to the 1993 Stock Incentive Plan, as amended (the "1993 Plan")
and up to 154,759.37 Options in respect of 154,759.37 shares of Common
Stock authorized for possible future issuance pursuant to the 1993 Plan;
(ii) outstanding options in respect of 10,000 shares of Common Stock,
which options were granted pursuant to the 1994 Non-Employee Directors
Stock Incentive Plan (the "1994 Directors Plan") and up to 40,000 Options
in respect of 40,000 shares of Common Stock authorized for possible
future issuance pursuant to the 1994 Directors Plan. The Company has an
obligation pursuant to Section 2.3(d) of the Securities Purchase
Agreement, dated as of July 28, 1994, among Holdings and the Purchasers
(as defined therein) (the "Securities Purchase Agreement") to issue to
the Purchasers 107,889.50 shares of Common Stock in accordance with the
terms of the Securities Purchase Agreement. Except as set forth in this
Section 3.2, and except for changes occurring subsequent to the date
hereof resulting from the exercise of Options outstanding on such date,
there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or any
Subsidiary convertible into or exchangeable for shares of capital stock
or voting securities of the Company and (iii) no options or other rights
to acquire from the Company, and no obligation of the Company to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the
items in clauses (i), (ii) and (iii) being referred to collectively as
the "Company Securities"). Except for the purchase by the Company of
Shares pursuant to the terms of the Stockholders Agreement, the
Securityholders Agreement and the Stock Subscription Agreement
(collectively, the "Stock Agreements"), there are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities.
3.3 Subsidiaries. Except as set forth in Section 3.3 of the
disclosure schedule delivered by the Company to Buyer concurrently with
the execution and delivery by the Company of this Agreement (the "Company
Disclosure Schedule"), all of the outstanding shares of capital stock of
each Subsidiary of the Company are duly authorized, validly issued, fully
paid and nonassessable, and such shares are owned by the Company or by a
Subsidiary of the Company free and clear of any Lien (as defined
hereafter). For purposes of this Agreement, "Subsidiary" means with
respect to any Person, any corporation or other legal entity of which
such Person owns, directly or indirectly, more than 50% of the
outstanding stock or other equity interests, the holders of which are
entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity. All
Subsidiaries and their respective jurisdictions of incorporation are
identified in Section 3.3 of the Company Disclosure Schedule. For
purposes of this Agreement, "Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset.
3.4 Consents and Approvals; No Violations.
(a) Except as set forth in Section 3.4 of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement
nor the performance by the Company of its obligations hereunder will (i)
conflict with or result in any breach of any provision of the Certificate
of Incorporation or Bylaws of the Company or of any Subsidiary; (ii)
result in a violation or breach of, or default (or give rise to any right
of termination, cancellation or acceleration) or result in the creation
of any Lien under any of the terms, conditions or provisions of any note,
mortgage, letter of credit, other evidence of indebtedness, guarantee,
license, lease or agreement or similar instrument or obligation to which
the Company or any of its Subsidiaries is a party or by which any of them
or any of their assets may be bound (provided that the Company makes no
representation as to any contract with any federal, state or local
government or agency thereof) or (iii) assuming that the filings,
registrations, notifications, authorizations, consents and approvals
referred to in subsection (b) below have been obtained or made, as the
case may be, violate any order, injunction, decree, statute, rule or
regulation of any governmental agency or authority or court to which the
Company or any of its Subsidiaries is subject, excluding from the
foregoing clauses (ii) and (iii) such requirements, defaults, breaches,
rights or violations (A) that would not singularly, or in the aggregate,
have a Material Adverse Effect and would not have a material adverse
effect on the ability of the Company to perform its obligations hereunder
or (B) that become applicable as a result of (1) the business or
activities in which Buyer or Merger Subsidiary or any of their affiliates
is or proposes to be engaged, or (2) any acts or omissions by, or facts
pertaining to, Buyer or Merger Subsidiary.
(b) Except as set forth in Section 3.4 of the Company
Disclosure Schedule, no filing or registration with, notification to, or
authorization, consent or approval of, any court, legislative, executive,
governmental or regulatory authority or agency in the United States
(each, a "Governmental Entity") is required in connection with the
execution and delivery of this Agreement by the Company or the
performance by the Company of its obligations hereunder, except (i) the
filing of the Certificate of Merger in accordance with the DGCL and
filings to maintain the good standing of the Surviving Corporation; (ii)
compliance with any applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (iii)
compliance with any applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); (iv) compliance with any
applicable requirements of state blue sky or takeover laws; (v) filings
in connection with the financing of the Merger and (vi) such other
consents, approvals orders, authorizations, notifications, registrations,
declarations and filings that (A) may be required to novate, assign or
transfer any contract or agreement with any Governmental Entity, (B) the
failure of which to be obtained or made would not have a Material Adverse
Effect and would not have a material adverse effect on the ability of the
Company to perform its obligations hereunder or (C) that become
applicable as a result of (1) the business or activities in which Buyer
or Merger Subsidiary is or proposes to be engaged, or (2) any acts or
omissions by Buyer or Merger Subsidiary.
3.5 SEC Documents. The Company, GM Holdings Inc., a Delaware
corporation ("Holdings"), and General Medical have filed all required
reports, proxy statements, forms and other documents with the SEC since
December 31, 1993. The Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and Proxy Statements filed by the
Company, Holdings and General Medical since December 31, 1993, together
with the Company's Registration Statement on Form S-1, Registration No.
333-16317 (as amended, the "IPO Prospectus") and Holdings' Registration
Statement on Form S-1, Registration No. 33-73180, in each case, as
amended, are hereinafter referred to as the "Company SEC Documents." As
of their respective dates, and giving effect to any amendments thereto,
(a) the Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933 (the "Securities Act") or the
Exchange Act, as the case may be, and the applicable rules and
regulations of the SEC promulgated thereunder and (b) none of the Company
SEC Documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
3.6 Financial Statements. The financial statements of the Company
and its Subsidiaries (including, in each case, any notes and schedules
thereto) included in the Company SEC Documents (a) comply as to form in
all material respects with all applicable accounting requirements and the
rules and regulations of the SEC with respect thereto, (b) are in
conformity with generally accepted accounting principles ("GAAP"),
applied on a consistent basis (except in the case of unaudited
statements, as permitted by Form 10-Q as filed with the SEC under the
Exchange Act) during the periods involved (except as may be indicated in
the related notes and schedules thereto) and (c) fairly present, in all
material respects, the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments) which are not material in amount.
3.7 Absence of Material Adverse Changes, etc. Except as set forth
in Section 3.7 of the Company Disclosure Schedule or as otherwise
contemplated by this Agreement, since September 30, 1996, the Company and
its Subsidiaries have conducted their business in the ordinary course
consistent with past practice and there has not been:
(a) any event, circumstances or occurrence of facts which has
had or is reasonably expected to have a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company, or any repurchase, redemption or other acquisition by the
Company or any Subsidiary of any amount of outstanding shares of capital
stock or other securities of, or other ownership interest in, the
Company;
(c) any sale or disposition of material properties or assets
of the Company or its Subsidiaries, except in the ordinary course of
business consistent with past practice;
(d) any amendment of any term of any outstanding security of
the Company or any Subsidiary of the Company;
(e) any incurrence, assumption or guarantee by the Company or
any Subsidiary of the Company of any indebtedness from any third party
for borrowed money, other than borrowings pursuant to the Company's
existing Credit Agreement dated as of July 28, 1994, in amounts and on
terms consistent with past practice;
(f) any making of any loan, advance or capital contribution
to or investment in any Person other than (i) loans, advances or capital
contributions to or investments in Subsidiaries of the Company, or (ii)
other loans, advances, capital contributions or investments in an
aggregate amount not exceeding $250,000;
(g) any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of the
Company or any Subsidiary of the Company which, individually or in the
aggregate, is or may reasonably be expected to have a Material Adverse
Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any Subsidiary of the Company
relating to its assets or business (including, without limitation, the
acquisition or disposition of any material amount of assets) or any
relinquishment by the Company of any Subsidiary of the Company of any
contract, license or other right which, in any such case, individually or
in the aggregate, would have or be reasonably expected to have a Material
Adverse Effect, other than transactions, commitments, contracts or
agreements contemplated by this Agreement;
(i) any change in any method of accounting or accounting
principle or practice by the Company or any Subsidiary of the Company, or
revaluation of any assets of the Company or any of its Subsidiaries
(including, without limitation, any write-downs of inventory or
write-offs of accounts receivables other than in the ordinary course of
business consistent with past practice); and
(j) any capital expenditures or commitments in excess of
$6,000,000 in the aggregate for the additions or property, plant or
equipment of the Company's business;
(k) any loss of major customer contracts or major customers
which either by themselves or in the aggregate represented over
$5,000,000 in revenue; and
(l) any agreement, commitment or understanding entered into
in connection with any of the foregoing.
3.8 Absence of Undisclosed Liabilities. Except as set forth in
Section 3.8 of the Company Disclosure Schedule or in the Company SEC
Documents filed prior to the date hereof, and except for liabilities and
obligations incurred in the ordinary course of business since the date of
the most recent consolidated balance sheet included in the Company SEC
Documents filed prior to the date hereof, neither the Company nor any of
its Subsidiaries has any liabilities of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a
consolidated balance sheet of the Company and its consolidated
Subsidiaries or in the notes thereto except for those that would not in
the aggregate have or be reasonably expected to have a Material Adverse
Effect.
3.9 Information Statement. The Information Statement (as defined in
Section 6.2(b) hereof) (and any amendments thereof or supplements
thereto) will not, other than with respect to information supplied by
Buyer, at the time of the mailing of the Information Statement to the
stockholders of the Company contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.10 Taxes.
(a) Except as set forth in Section 3.10 of the Company
Disclosure Schedule,
(i) all Tax Returns required to be filed by or with
respect to Taxes (as defined hereafter) of the Company and its
Subsidiaries are accurate in all material respects and have been
filed in a timely manner (taking into account all lawful extensions
of due dates);
(ii) all Taxes shown to be due on such filed Tax
Returns have been timely paid or adequate provision in accordance
with GAAP with respect to the matters covered by such Tax Returns
has been made for the payment therefore;
(iii) the Company and its Subsidiaries have not
received any formal written notice of deficiency or assessment from
any taxing authority with respect to liabilities for Taxes of the
Company or its Subsidiaries that have not been fully paid or
finally settled;
(iv) there are no Liens with respect to Taxes upon any
of the properties or assets of the Company or its Subsidiaries
other than Liens for Taxes not yet due and payable or that are
being contested in good faith;
(v) each of the Company and its Subsidiaries has
complied in all respects with all applicable laws relating to the
payment and withholding of Taxes (including withholding of Taxes
pursuant to Sections 1441 and 1442 of the Code or similar
provisions under any foreign law) and has, within the time and
within the manner prescribed by law, withheld and paid over to the
proper governmental authorities all amounts required to be withheld
and paid over under all applicable laws;
(vi) no outstanding waivers or comparable consents
regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns of the Company or any of its
Subsidiaries has been given by or on behalf of the Company or any
of its Subsidiaries;
(vii) neither the Company nor any of its Subsidiaries
has requested an extension of time within which to file any Tax
Return in respect of any fiscal year which has not since been
filed;
(viii) neither the Company nor any of its Subsidiaries
has made a change in accounting methods, received a ruling from any
taxing authority or signed an agreement with any taxing authority
which would have a Material Adverse Effect;
(ix) neither the Company nor any of its Subsidiaries is
required to include in income any adjustment pursuant to Section
481(a) of the Code, by reason of the voluntary change in accounting
method (nor has any taxing authority proposed in writing any such
adjustment or change of accounting method);
(x) neither the Company nor any of its Subsidiaries is
a party to, is bound by, nor has any obligation under, any Tax
sharing agreement, Tax indemnification agreement or similar
contract or arrangement. Neither the Company nor any of its
Subsidiaries is aware of any potential liability or obligation to
any person as a result of, or pursuant to, any such agreement,
contract or arrangement;
(xi) no power of attorney has been granted by or with
respect to the Company or any of its Subsidiaries with respect to
any matter relating to Taxes;
(xii) neither the Company nor any of its Subsidiaries
is a party to any agreement (including this Agreement), plan,
contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code;
(xiii) all Tax deficiencies which have been claimed,
proposed or asserted against the Company or any of its Subsidiaries
have been fully paid or finally settled, and to the knowledge of
the Company no issue has been raised in any examination by any
Taxing authority, which by application of similar principles, could
be expected to result in the proposal or assertion of a Tax
deficiency against the Company or any of its Subsidiaries for
another year not so examined;
(xiv) no closing agreement pursuant to Section 7121 of
the Code (or any predecessor provision) or any similar provision of
any state, local or foreign law has been entered into by or with
respect to the Company or any of its Subsidiaries;
(xv) neither the Company nor any of its Subsidiaries
has filed a consent pursuant to Section 341(f) of the Code (or any
predecessor provision) or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as such
term is defined in Section 341(f)(4) of the Code) owned by the
Company or any of its Subsidiaries;
(xvi) neither the Company nor any of its Subsidiaries
has any or could have liability for Taxes of another person (other
than the Company or its Subsidiaries) under Section 1.1502-6 of the
Treasury Regulations (or any similar provision under state, local
or foreign law), by contract or otherwise;
(xvii) neither the Company nor any of its Subsidiaries
has any deferred intercompany gain or loss arising as a result of a
deferred intercompany transaction within the meaning of Treasury
Regulation Section 1.1502-13 (or similar provision under state,
local or foreign law);
(xviii) the reserves for Taxes (determined in
accordance with generally accepted accounting principles
consistently applied) reflected in the financial statements are
adequate for the payment of all Taxes incurred or which may be
incurred by the Company and any of its Subsidiaries through the
date thereof. Since the date of the financial statements, neither
the Company nor any Subsidiary has incurred any liability for Taxes
other than in the ordinary course of business;
(xix) the Company is the common parent of an affiliated
group of corporations (as defined in Section 1504 of the Code)
consisting solely of the Company and its Subsidiaries. Since
December 31, 1987, neither the Company nor any of its Subsidiaries
has been a member of an affiliated group (or similar state or local
filing group) other than the group in which the Company is the
Common Parent;
(xx) neither the Company nor any of its Subsidiaries
has taken any position on any Tax Return that could give rise to an
understatement of federal income Tax liability within the meaning
of Section 6662(d) of the Code; and
(xxi) neither the Company nor any of its Subsidiaries
has or would have any liability for Taxes under or as a result of
Section 482 of the Code or any similar provision of state, local or
foreign law.
(b) The Company has previously delivered or made available to
Buyer complete and accurate copies of each of: (i) all audit reports,
letter rulings, technical advice memoranda issued to the Company and each
of its Subsidiaries, (ii) United States federal Tax Returns, and those
state, local or foreign Tax Returns filed by the Company and each of its
Subsidiaries and (iii) any closing agreements entered into by the Company
or any of its Subsidiaries with any taxing authority, in each case
existing on the date hereof. The Company will make available to Buyer all
materials with respect to the foregoing for all matters arising after the
date hereof.
(c) For purposes of this Agreement, (i) "Taxes" means all
taxes, levies or other like assessments, charges or fees (including
estimated taxes, charges and fees), including, without limitation,
income, corporation, gross receipts, transfer, excise, property, sales,
use, value-added, license, payroll, pay as you earn, withholding, social
security and franchise or other governmental taxes or charges, imposed by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, and such term shall include any interest,
penalties or additions to tax attributable to such taxes, (ii) "Tax
Return" means any report, return, statement or other written information
required to be supplied to a taxing authority in connection with Taxes,
and (iii) "Treasury Regulations" shall mean the United States Income Tax
Regulations, including Temporary Regulations promulgated under the Code
(including corresponding provisions of succeeding U.S. income tax
regulations).
3.11 Employment Matters.
(a) Section 3.11(a) of the Company Disclosure Schedule
contains a true and complete list of each employment, bonus, deferred
compensation, incentive compensation, stock purchase, stock option, stock
appreciation right or other stock-based incentive, severance or
termination pay, hospitalization or other medical, life, disability or
other insurance, supplemental unemployment benefits, profit sharing,
pension, or retirement plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement,
sponsored, maintained or contributed to or required to be contributed to
by the Company or by any trade or business, whether or not incorporated
(an "ERISA Affiliate"), that together with the Company would be deemed a
"single employer" within the meaning of Section 4001(b)(1) of the
Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder ("ERISA"), for the benefit
of any current or former employees or directors of the Company (the
"Plans"). Section 3.11(a) of the Company Disclosure Schedule identifies
each of the Plans that is an "employee welfare benefit plan," or
"employee pension benefit plan" as such terms are defined in Section 3(1)
and 3(2) of ERISA (such plans being hereafter referred to collectively as
the "ERISA Plans"). Neither the Company nor any ERISA Affiliate has any
formal plan or commitment, whether legally binding or not, to create any
additional Plan or modify or change any existing Plan that would affect
any current or former employee or director of the Company or any ERISA
Affiliate.
(b) With respect to each of the Plans, the Company has
heretofore delivered or made available to Buyer true and complete copies
of each of the following documents:
(i) a copy of the Plan (including all amendments
thereto) or a written description of any Plan that is otherwise not
in writing;
(ii) a copy of the annual report, if required under
ERISA, with respect to each ERISA Plan for the last three years;
(iii) a copy of the actuarial report, if required under
ERISA, with respect to each ERISA Plan for the last three years;
(iv) a copy of the most recent Summary Plan Description
("SPD"), together with all Summaries of Material Modification
issued with respect to such SPD, if required under ERISA, with
respect to each ERISA Plan, and all other material employee
communications relating to each ERISA Plan;
(v) if the Plan is funded through a trust or any other
funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial
statements thereof;
(vi) all contracts relating to the Plans with respect
to which the Company or any ERISA Affiliate may have any liability,
including, without limitation, insurance contracts, investment
management agreements, subscription and participation agreements
and record keeping agreements; and
(vii) the most recent determination letter received
from the Internal Revenue Service with respect to each Plan that is
intended to be qualified under Section 401 of the Code.
(c) No liability under Title IV of ERISA has been incurred by
the Company or any ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any liability under such Title, other
than liability for premiums due the Pension Benefit Guaranty Corporation,
which payments have been or will be made when due. To the extent this
representation applies to Sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made not only with respect to the ERISA Plans but also with
respect to any employee benefit plan, program, agreement or arrangement
subject to Title IV of ERISA to which the Company or any ERISA Affiliate
made, or was required to make, contributions during the five (5)-year
period ending on the last day of the Company's most recent fiscal year.
(d) The Pension Benefit Guaranty Corporation has not
instituted proceedings to terminate any of the ERISA Plans and no
condition exists that presents a material risk that such proceedings will
be instituted.
(e) With respect to each of the ERISA Plans that is subject
to Title IV of ERISA, the present value of accrued benefits under such
Plan, based upon the actuarial assumptions used for funding purposes in
the most recent actuarial report prepared by such Plan's actuary with
respect to such Plan, did not, as of its latest valuation date, exceed
the then current value of the assets of such Plan allocable to such
accrued benefits.
(f) Neither the Company, any ERISA Affiliate, any of the
ERISA Plans, any trust created thereunder nor any trustee or
administrator thereof has engaged in a transaction or has taken or failed
to take any action in connection with which the Company, any ERISA
Affiliate, any of the ERISA Plans, any such trust, any trustee or
administrator thereof, or any party dealing with the ERISA Plans or any
such trust could be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed
pursuant to Section 4975, 4976 or 4980B of the Code.
(g) No ERISA Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, as of the
last day of the most recent fiscal year of each ERISA Plan ended prior to
the Closing Date, and all contributions required to be made with respect
thereto (whether pursuant to the terms of any ERISA Plan or otherwise) on
or prior to the Closing Date have been timely made. No ERISA Plan is a
"multiemployer pension plan," as defined in Section 3(37) of ERISA, nor
is any ERISA Plan a plan described in Section 4063(a) of ERISA.
(h) Each of the Plans has been operated and administered in
all material respects in accordance with applicable laws, including but
not limited to ERISA and the Code.
(i) Each of the ERISA Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the Code is so
qualified. The Company has timely applied for and received a currently
effective determination letter from the Internal Revenue Service with
respect to each such Plan.
(j) No "leased employee," as that term is defined in Section
414(n) of the Code, performs services for the Company or any ERISA
Affiliate.
(k) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to
current or former employees after retirement or other termination of
service (other than (i) coverage mandated by applicable law, (ii) death
benefits or retirement benefits under any "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the books of the Company
or the ERISA Affiliates, or (iv) benefits, the full cost of which is
borne by the current or former employee (or his beneficiary)).
(l) With respect to each Plan that is funded wholly or
partially through an insurance policy, there will be no liability of the
Company or any ERISA Affiliate, as of the Effective Time under any such
insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Effective Time.
(m) Except as described in Section 3.11 of the Company
Disclosure Schedule, the consummation of the transactions contemplated
hereunder will not result in the payment, vesting, acceleration or
enhancement of any benefit under any Plan.
3.12 Environmental Matters.
(a) (i) "Environmental Claim" means any claim, action,
cause of action, investigation or notice (written or oral) by any
Person or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs,
governmental response or remediation costs, natural resources
damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence or Release of
any Hazardous Materials at any location, whether or not owned or
operated by the Company or any of its Subsidiaries or Buyer or any
of its Subsidiaries, as the case may be, or (b) circumstances
forming the basis of any violation of any Environmental Law.
(ii) "Environmental Laws" means all federal, state,
local and foreign laws and regulations relating to pollution or
protection of human health or the environment, including, without
limitation, laws relating to Releases or threatened Releases of
Hazardous Materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, transport or
handling of Hazardous Materials.
(iii) "Hazardous Materials" means all substances
defined as Hazardous Substances, Oils, Pollutants or Contaminants
in the National Oil and Hazardous Substances Pollution Contingency
Plan, 40 C.F.R. ss. 300.5, or defined as such by, or regulated as
such under, any Environmental Law.
(iv) "Release" means any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal,
dispersal, leaching or migration of Hazardous Materials into the
environment (including, without limitation, ambient air, surface
water, groundwater and surface or subsurface strata).
(b) (i) Except as set forth in Section 3.12(b)(i) of
the Company Disclosure Schedule, the Company and its Subsidiaries
are in compliance with all applicable Environmental Laws (which
compliance includes, but is not limited to, the possession by the
Company and its Subsidiaries of all permits and other governmental
authorizations required under applicable Environmental Laws, all of
which are in full force and effect, and compliance with the terms
and conditions thereof), except where failure to be in compliance
would not have a Material Adverse Effect. Since January 1, 1994
neither the Company nor any of its Subsidiaries has received any
written communication, whether from a governmental authority,
citizens' group, employee or otherwise, alleging that the Company
or any of its Subsidiaries are not in such compliance.
(ii) Except as set forth in Section 3.12(b) (ii) of the
Company Disclosure Schedule, (A) there is no Environmental Claim
pending or threatened against the Company or any of its
Subsidiaries or against any Person or entity whose liability for
any Environmental Claim the Company or any of its Subsidiaries has
or may have retained or assumed either contractually or by
operation of law that would have a Material Adverse Effect and (B)
the Company has not received notice nor is it aware of any facts or
conditions that may give rise to any Environmental Claim.
3.13 Legal Proceedings, etc. Except as set forth in Section 3.13 of
the Company Disclosure Schedule, there are no suits, actions, claims,
proceedings or investigations pending, or, to the knowledge of the
Company threatened against, relating to or involving the Company or any
of its Subsidiaries (or any of their respective officers or directors in
connection with the business or affairs of the Company and its
Subsidiaries) or any properties or rights of the Company or any of its
Subsidiaries, before any court, arbitrator or administrative or
governmental body, United States or foreign which, if adversely
determined, would have a Material Adverse Effect. There are no such
suits, actions, claims, proceedings or investigations pending or, to the
knowledge of the Company, threatened challenging the validity or
propriety of the transactions contemplated by this Agreement. Neither the
Company nor any of its Subsidiaries is subject to any judgment, decree,
injunction, rule or order of any court or, to the knowledge of the
Company, any governmental restriction applicable to the Company or any of
its Subsidiaries, which has or would be reasonably expected to have a
Material Adverse Effect.
3.14 Compliance with Applicable Law. Except as set forth in Section
3.14 of the Company Disclosure Schedule the Company and its Subsidiaries
are in material compliance with all applicable laws, ordinances, rules
and regulations of any federal, state, local or foreign governmental
authority applicable to their respective businesses and operations
(including, without limitation, (A) laws regarding the provision of
insurance, third party administration and primary health care services,
including Medicare, Medicaid and "safe harbor" provisions, (B) the
Prescription Drug Marketing Act, the Federal Controlled Substances Act of
1970, the Food, Drug and Cosmetic Act and any state Pharmacy Acts,
Controlled Substance Acts, Dangerous Drugs Acts and Food, Drug and
Cosmetic Acts, (C) laws and regulations relating to billing or sales
practices, and (D) the Foreign Corrupt Practices Act of 1977 and any
other laws regarding use of funds for political activity or commercial
bribery). All governmental approvals, permits and licenses (collectively,
"Permits") required to conduct the business of the Company and its Active
Subsidiaries have been obtained, are in full force and effect and are
being complied with except for such non-compliance and failures to have
Permits in full force and effect, if any, which, individually or in the
aggregate, would not have or be reasonably expected to have a Material
Adverse Effect.
3.15 Certain Contracts and Arrangements.
(a) Except as set forth in Section 3.15 of the Company
Disclosure Schedule, each material contract or agreement (whether written
or oral) to which the Company or any of its Subsidiaries is a party or by
which any of them is bound is in full force and effect, and neither the
Company nor any of its Subsidiaries, nor, to the knowledge of the
Company, any other party thereto, is in breach of, or default under, any
such contract or agreement, and no event has occurred that with notice or
passage of time or both would constitute such a breach or default
thereunder by the Company or any of its Subsidiaries, or, to the
knowledge of the Company, any other party thereto except for such
failures to be in full force and effect and such breaches and defaults as
individually or in the aggregate would not result or would not reasonably
be expected to result in a Material Adverse Effect. Since September 30,
1996, neither the Company nor any of its Subsidiaries has entered into
any material contract or agreement ( whether written or oral), except for
this Agreement, those contracts listed in Section 3.15 of the Company
Disclosure Schedule and such contracts entered into in the ordinary
course of business consistent with past practice.
(b) Except as specifically provided in the Company's
Certificate of Incorporation and By-laws or authorized by a resolution of
the Board of Directors of General Medical dated September 13, 1995, the
Company is not obligated to indemnify or hold harmless (whether by
contract, indemnification agreement or otherwise) any officer, director,
employee, agent or representative of the Company, or any other Person in
connection with Costs arising out of or related to the Bernstein Claims.
3.16 Real Property.
(a) For purposes of this Agreement, "Permitted Liens" means
(i) mechanics', carriers', workers', repairers', materialmen's,
warehousemen's, landlord's and other similar Liens arising or incurred in
the ordinary course of business, (ii) Liens arising or resulting from any
action taken by Buyer or Merger Subsidiary, (iii) Liens for current Taxes
not yet due or that are being contested in good faith by appropriate
proceedings, (iv) any other covenants, conditions, restrictions,
reservations, rights, easements and other matters affecting title, which
do not individually or in the aggregate materially adversely affect the
value or occupancy of any of the Real Property, (v) zoning, building,
land use, and other similar restrictions imposed by law, statute, rule,
regulation, ordinance, order or process promulgated by any Governmental
Entity and (vi) matters set forth in Section 3.16(a) of the Company
Disclosure Schedule. "Leases" means the real property leases, subleases,
licenses and use or occupancy agreements pursuant to which the Company or
any of its Active Subsidiaries is the lessee, sublessee, licensee, user
or occupant of real property, or interests therein, necessary for the
conduct of, or otherwise material to, the business of the Company and its
Subsidiaries as it is currently conducted. "Leased Real Property" means
all interests in real property leased, subleased, licensed, used or
occupied by the Company pursuant to the Leases. "Owned Real Property"
means the real property owned by the Company and its Subsidiaries. "Real
Property" means the Owned Real Property and the Leased Real Property.
(b) Section 3.16(b) of the Company Disclosure Schedule
contains a complete and correct list of all Owned Real Property setting
forth information sufficient to identify specifically such Owned Real
Property and the legal owner thereof. The Company and its Subsidiaries
have good and valid title to the Owned Real Property, free and clear of
any Liens other than Permitted Liens. There are no outstanding options or
rights of first refusal to purchase the Owned Real Property, or any
material portion thereof or interest therein.
(c) Section 3.16(c) of the Company Disclosure Schedule
contains a complete and correct list of all Leased Real Property setting
forth information sufficient to identify specifically such Leased Real
Property. Each Lease grants the lessee under the Lease the exclusive
right to use and occupy the premises and rights demised thereunder in
accordance with the terms thereof free and clear of any Lien other than
Permitted Liens. Each of the Company and its Subsidiaries has good and
valid title to the leasehold estate or other interest created under its
respective Leases free and clear of any Liens other than Permitted Liens.
(d) The Real Property constitutes all the fee, leasehold and
other interests in real property held by the Company and its
Subsidiaries, and constitutes all of the fee, leasehold and other
interests in real property, necessary for the conduct of, or otherwise
material to, the business of the Company and its Subsidiaries as it is
currently conducted, except for any fee, leasehold or other interest
acquired or disposed of in the ordinary course of business after the date
hereof. The use and operation of the Real Property in the conduct of the
business of the Company and its Subsidiaries does not violate any
instrument of record or agreement affecting the Real Property, except for
such violations that individually and in the aggregate would not have a
Material Adverse Effect.
3.17 Certain Fees. Except for the fees of those Persons described
in Section 3.17 of the Company Disclosure Schedule (whose fees shall be
the sole responsibility of the Company), (i) the Company has not employed
any financial advisor or finder and (ii) neither the Company nor any of
its Subsidiaries has incurred any liability for any financial advisory or
finders' fees in connection with this Agreement or the transactions
contemplated hereby.
3.18 Intellectual Property.
(a) Except as described in Section 3.18 of the Company
Disclosure Schedule, the Company and its Subsidiaries own or have rights
to use all intellectual property, including without limitation, all
patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, service marks, service mark rights, trade secrets,
computer software and data bases, including all embodiments or fixations
thereof and related documentation, applications to register, and
registrations for, the foregoing trademarks, service marks, know-how, all
licenses and rights with respect to the foregoing, and other proprietary
rights and information (collectively, "Intellectual Property") used in
connection with or necessary for the business of the Company and its
Subsidiaries as currently conducted, and all goodwill of the business
symbolized thereby. Except as described in Section 3.18 of the Company
Disclosure Schedule, to the knowledge of the Company all of the
Intellectual Property is in good standing and is owned by the Company
free and clear of any and all Liens, except imperfections of title and
encumbrances, if any, which are not reasonably likely to materially
detract from the value of the Intellectual Property subject thereto or to
materially impair the operations of the Company or any of its
Subsidiaries.
(b) Except as described in Section 3.18 of the Company
Disclosure Schedule, the conduct of the business of the Company and its
Subsidiaries as currently conducted does not infringe upon or otherwise
violate any Intellectual Property of any third party except where such
infringement or violation would not reasonably be expected to have,
individually or in the aggregate a Material Adverse Effect, and there is
no restriction or limitation on the right of the Company or its
Subsidiaries to transfer any of their respective Intellectual Property.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in the loss of, or any
encumbrance on, the rights of the Company or any Subsidiary with respect
to the Intellectual Property owned or used by or licensed to any of them,
except where such loss or encumbrance taken individually or in the
aggregate would not reasonably be expected to have a Material Adverse
Effect.
3.19 Board Recommendations; Takeover Provisions. The Board of
Directors of the Company, at a meeting duly called and held, has by the
unanimous vote of all directors (i) determined that this Agreement and
the transactions contemplated hereby are fair to and in the best
interests of the stockholders of the Company and has approved the same,
and (ii) resolved to recommend that the holders of Shares approve this
Agreement and the transactions contemplated herein. No State Takeover
Laws (as defined below) including, but not limited to, Section 203 of the
DGCL, are applicable to Buyer or Merger Subsidiary as a result of the
Merger, this Agreement or the transactions contemplated hereby. "State
Takeover Laws" shall mean any "fair price," "business combination" or
"control share acquisition" statute or similar statute or regulation.
3.20 Labor Matters. Except as set forth in Section 3.20 of the
Company Disclosure Schedule, (i) neither the Company nor any of its
Subsidiaries is a party to or bound by any collective bargaining
agreement or other labor union contract applicable to persons employed by
the Company or its Subsidiaries, nor does the Company know of any
activities or proceedings of any labor union to organize any such
employees, (ii) there are no unfair labor practice charges or complaints
pending against the Company or any of its Subsidiaries before the
National Labor Relations Board or any current union representation
questions involving employees of the Company or any of its Subsidiaries
and (iii) there is no labor strike, lockout, organized slowdown or
organized work stoppage in effect or, to the best knowledge of the
Company after due inquiry, threatened against the Company or any of its
Subsidiaries other than, in cases of clauses (ii) and (iii), those
matters which would not reasonably be expected to have a Material Adverse
Effect.
3.21 Transactions with Affiliates. Except to the extent disclosed
in the Company SEC Documents filed prior to the date of this Agreement,
since December 31, 1993 there have been no material transactions,
agreements, arrangements or understandings between the Company or its
Subsidiaries, on the one hand, and the Company's Affiliates (other than
wholly-owned Subsidiaries of the Company) or other Persons, on the other
hand, that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act. For purposes hereof, the term "Affiliate"
will mean a person who, directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control
with, the Company.
3.22 Existing Stock Agreements. The Company and the Continuing
Stockholders have amended the Stock Agreements to provide that (I) this
Agreement, the Merger and other transactions contemplated hereby shall be
exempt from and not subject to any terms or provisions of the Stock
Agreements, and (ii) such Stock Agreements, including, without
limitation, any registration rights granted to the Continuing
Stockholders therein, shall terminate and be of no further force or
effect immediately prior to the Effective Time.
3.23 Product Liability. Except as described in Section 3.23 of the
Company Disclosure Schedule, there are not presently pending, or to the
best knowledge of the Company, threatened, any civil, criminal or
administrative actions, suits, demands, claims, hearings, notices of
violation, investigations, proceedings or demand letters relating to any
alleged hazard or alleged defect in design, manufacture, materials or
workmanship, including, without limitation, any failure to warn or
alleged breach of express or implied warranty or representation, relating
to any product manufactured, distributed or sold by or on behalf of the
Company and its Subsidiaries, which if adversely determined, would have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries
has extended to its customers any written non-uniform product warranties,
indemnifications or guarantees.
3.24 Legal Opinion. The Company has received a legal opinion of
Delaware counsel relating to the form of the consideration to be paid or
delivered in the Merger, a copy of which has been delivered to Buyer.
3.25 Opinion of Financial Advisor. The Company has received the
opinion of Smith Barney Inc., dated the date of this Agreement, to the
effect that, as of such date, the consideration to be received in the
Merger by the Non-Continuing Stockholders is fair to such stockholders,
from a financial point of view, a copy of which opinion will be delivered
to Buyer promptly after the Company's receipt thereof.
3.26 Full Disclosure. The Company has not knowingly failed to
disclose to Buyer any facts material to the Company's business, results
of operations, assets, liabilities or financial condition. No
representation or warranty by the Company in this Agreement and no
statement by the Company in any document referred to herein (including
the Schedules and Exhibits hereto), contains any untrue statement of a
material fact or omits to state any material fact necessary, in order to
make the statement made herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY
Buyer and Merger Subsidiary represent and warrant to the Company
and the Continuing Stockholders as follows:
4.1 Corporate Organization and Authority.
(a) Each of the Buyer and its Subsidiaries, including Merger
Subsidiary, is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has
all requisite corporate power and authority to own, lease and operate the
properties owned, leased and operated by it and to carry on the
operations of its business as now being conducted by it. Each of the
Buyer and its Subsidiaries, including Merger Subsidiary, is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it with
respect to its business or the nature of the business conducted by it
makes such licensing or qualification necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed or in
good standing would not have a material adverse effect on the assets,
business, results of operations or financial condition of Buyer and its
Subsidiaries, including Merger Subsidiary, taken as a whole (a "Buyer
Material Adverse Effect"). Buyer has heretofore made available to the
Company a complete and correct copy of the certificate of incorporation
and bylaws (or other organizational documents of like import), as
currently in effect, of Buyer and Merger Subsidiary.
(b) Each of Buyer and Merger Subsidiary has the requisite
corporate power and corporate authority to execute and deliver this
Agreement and the Registration Rights Agreement (as defined in Section
7.2(d)) and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the performance of its
obligations hereunder and under the Registration Rights Agreement have
been duly and validly authorized by the Board of Directors of each of
Buyer and Merger Subsidiary and no other corporate or stockholder
proceedings on the part of either Buyer or Merger Subsidiary are
necessary to authorize the execution, delivery and performance of this
Agreement or the Registration Rights Agreement. This Agreement and the
Registration Rights Agreement have been duly executed and delivered by
each of Buyer and Merger Subsidiary and constitute, assuming due
authorization, execution and delivery of this Agreement by the Company
and the Continuing Stockholders, a valid and binding obligation of each
of Buyer and Merger Subsidiary, enforceable against each of Buyer and
Merger Subsidiary in accordance with its terms, except as such
enforceability may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally or (2) general principles
of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
4.2 Capitalization. The authorized capital stock of the Buyer
consists of 200,000,000 Shares of Common Stock, par value $.01 per share
and 100,000,000 shares of Preferred Stock, par value $.01 per share
("Buyer Preferred Stock"). As of December 31, 1996, there were 42,250,152
shares of Buyer Common Stock issued and outstanding and no shares of
Buyer Preferred Stock issued and outstanding. All issued and outstanding
shares of capital stock of the Buyer are, and all Consideration Shares
will be, duly authorized, validly issued, fully paid and nonassessable.
As of December 31, 1996, there were (I) outstanding options in respect of
4,615,875 shares of Common Stock, which options were granted pursuant to
Buyer's 1994 Stock Option and Restricted Stock Plan, as amended (the
"1994 Plan"); (ii) up to 2,393,830 shares of Common Stock authorized for
possible future issuance pursuant to the 1994 Plan. Except as set forth
in this Section 4.2 and except for the Buyer Rights, and except for
changes since December 31, 1996 resulting from the exercise of Options
outstanding on such date, as of the date hereof there are outstanding (I)
no shares of capital stock or other voting securities of the Buyer, (ii)
no securities of the Buyer or any Subsidiary convertible into or
exchangeable for shares of capital stock or voting securities of the
Buyer and (iii) no options or other rights to acquire from the Buyer, and
no obligation of the Buyer to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or
voting securities of the Buyer (the items in clauses (I), (ii) and (iii)
being referred to collectively as the "Buyer Securities"). As of the date
hereof, there are no outstanding obligations of the Buyer or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Buyer
Securities.
4.3 Consents and Approvals; No Violations.
(a) Except as set forth in Section 4.3 of the disclosure
schedule delivered by Buyer and Merger Subsidiary to the Company
substantially concurrently with the execution and delivery by the Company
of this Agreement (the "Buyer Disclosure Schedule"), neither the
execution and delivery of this Agreement nor the performance by either
Buyer or Merger Subsidiary of its obligations hereunder will (I) conflict
with or result in any breach of any provision of the certificate of
incorporation or bylaws (or similar organizational documents) of either
Buyer or Merger Subsidiary; (ii) result in a violation or breach of, or
constitute a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or
provisions of any note, mortgage, letter of credit, other evidence of
indebtedness, guarantee, license, lease or agreement or similar
instrument or obligation relating to the business of Buyer or Merger
Subsidiary or to which either Buyer or Merger Subsidiary is a party or by
which either Buyer or Merger Subsidiary or any of the assets used or held
for use by Buyer or Merger Subsidiary may be bound or (iii) assuming that
the filings, registrations, notifications, authorizations, consents and
approvals referred to in subsection (b) below have been obtained or made,
as the case may be, violate any order, injunction, decree, statute, rule
or regulation of any Governmental Entity to which either Buyer or Merger
Subsidiary is subject, excluding from the foregoing clauses (ii) and
(iii) such requirements, defaults, breaches, rights or violations (A)
that would not in the aggregate have a Buyer Material Adverse Effect and
would not have a material adverse effect on the ability of either Buyer
or Merger Subsidiary to consummate the transactions contemplated hereby
or (B) that become applicable as a result of any acts or omissions by the
Company or the Continuing Stockholders.
(b) Except as set forth in Section 4.3 of the Buyer
Disclosure Schedule, no filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity is
required in connection with the execution and delivery of this Agreement
by either Buyer or Merger Subsidiary or the performance by either Buyer
or Merger Subsidiary of its obligations hereunder, except (I) the filing
of the Certificate of Merger in accordance with the DGCL and filings to
maintain the good standing of the Surviving Corporation; (ii) compliance
with any applicable requirements of the HSR Act; (iii) compliance with
any applicable requirements of the Exchange Act; (iv) compliance with any
applicable requirements of state blue sky or takeover laws; (v) filings
in connection with the financing of the Merger; and (vi) such other
consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings that (A) may be required to
novate, assign or transfer any contract or agreement with any
Governmental Entity, (B) the failure of which to be obtained or made
would not have a Buyer Material Adverse Effect and would not have a
material adverse effect on the ability of Buyer and Merger Subsidiary to
perform their obligations hereunder or (C) that become applicable as a
result of any acts or omissions by the Company.
4.4 SEC Documents. The Buyer and its Subsidiaries have filed all
required reports, proxy statements, forms and other documents with the
SEC since September 1, 1994. The Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements
filed by the Buyer since September 1, 1994 are hereinafter referred to as
the "Buyer SEC Documents." Except as set forth in Section 4.4 of the
Buyer Disclosure Schedule, as of their respective dates, and giving
effect to any amendments thereto, (a) the Buyer SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the applicable rules and
regulations of the SEC promulgated thereunder and (b) none of the Buyer
SEC Documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
4.5 Financial Statements. The financial statements of the Buyer and
its Subsidiaries (including, in each case, any notes and schedules
thereto) included in the Buyer SEC Documents (a) comply as to form in all
material respects with all applicable accounting requirements and the
rules and regulations of the SEC with respect thereto, (b) are in
conformity with GAAP, applied on a consistent basis (except in the case
of unaudited statements, as permitted by Form 10-Q as filed with the SEC
under the Exchange Act) during the periods involved (except as may be
indicated in the related notes and schedules thereto) and (c) fairly
present, in all material respects, the consolidated financial position of
the Buyer and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments which are not material in amount).
4.6 Absence of Material Adverse Changes, etc. Except as set forth
in Section 4.6 of the Buyer Disclosure Schedule or as otherwise
contemplated by this Agreement, since September 30, 1996, there has not
been any Buyer Material Adverse Effect.
4.7 Absence of Undisclosed Liabilities. Except as set forth in
Section 4.7 of the Buyer Disclosure Schedule or in the Buyer SEC
Documents filed prior to the date hereof, and except for liabilities and
obligations incurred in the ordinary course of business since the date of
the most recent consolidated balance sheet included in the Buyer SEC
Documents filed prior to the date hereof, neither the Buyer nor any of
its Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by GAAP to
be set forth on a consolidated balance sheet of the Buyer and its
consolidated Subsidiaries or in the notes thereto except for those that
would not in the aggregate have or be reasonably expected to have a Buyer
Material Adverse Effect.
4.8 Taxes.
(a) Except as set forth in Section 4.8 of the Buyer
Disclosure Schedule, (I) all Tax Returns required to be filed by or with
respect to Taxes (as defined hereafter) of the Buyer and its Subsidiaries
are accurate in all material respects and have been filed in a timely
manner (taking into account all lawful extensions of due dates), other
than those Tax Returns as to which the failure to file would not have a
Buyer Material Adverse Effect, and (ii) all Taxes shown to be due on such
filed Tax Returns have been paid or adequate provision in accordance with
GAAP with respect to the matters covered by such Tax Returns has been
made for the payment therefore. Except as set forth in Section 4.8 of the
Buyer Disclosure Schedule, to the knowledge of the Buyer, the Buyer and
its Subsidiaries have not received any formal written notice of
deficiency or assessment from any taxing authority with respect to
liabilities for income and other material Taxes of the Buyer or its
Subsidiaries that have not been fully paid or finally settled. To the
knowledge of the Buyer, there are no Liens with respect to Taxes upon any
of the properties or assets of the Buyer or its Subsidiaries other than
Liens for Taxes not yet due and payable or that are being contested in
good faith.
4.9 Employment Matters. Each employee benefit plan, program, policy
or arrangement maintained by Buyer has been operated and administered in
all material respects in accordance with applicable laws, including but
not limited to ERISA and the Code.
4.10 Legal Proceedings, etc. Except as set forth in Section 4.11 of
the Buyer Disclosure Schedule or in the SEC Documents, there are no
suits, actions, claims, proceedings or investigations pending, or, to the
knowledge of Buyer threatened against, relating to or involving Buyer or
any of its Subsidiaries (or any of their respective officers or directors
in connection with the business or affairs of Buyer and its Subsidiaries)
or any properties or rights of Buyer or any of its Subsidiaries, before
any court, arbitrator or administrative or governmental body, United
States or foreign which, if adversely determined, would have a Buyer
Material Adverse Effect. There are no such suits, actions, claims,
proceedings or investigations pending or, to the knowledge of the
officers of Buyer, threatened challenging the validity or propriety of
the transactions contemplated by this Agreement. Neither Buyer nor any of
its Subsidiaries is subject to any judgment, decree, injunction, rule or
order of any court or, to the knowledge of the officers of Buyer, any
governmental restriction applicable to the Buyer or any of its
Subsidiaries, which has or would be reasonably expected to have a Buyer
Material Adverse Effect.
4.11 Compliance with Applicable Law. Except as set forth in Section
4.12 of the Buyer Disclosure Schedule, the Buyer and its Subsidiaries are
in material compliance with all applicable laws, ordinances, rules and
regulations of any federal, state, local or foreign governmental
authority applicable to their respective businesses and operations. All
Permits required to conduct the business of the Buyer and its Active
Subsidiaries have been obtained, are in full force and effect and are
being complied with except for such violations and failures to have
Permits in full force and effect, if any, which, individually or in the
aggregate, would not have or be reasonably expected to have a Buyer
Material Adverse Effect.
4.12 Certain Fees. Except in connection with the retention of Peter
J. Solomon Company Limited (whose fees shall be the sole responsibility
of Buyer), (I) Buyer and Merger Subsidiary have not employed any
financial advisor or finder and (ii) neither Buyer nor Merger Subsidiary
has incurred any liability for any financial advisory or finders' fees in
connection with this Agreement or the transactions contemplated hereby.
4.13 Financing. Buyer and Merger Subsidiary have on the date of
execution of this Agreement and will have at the Closing sufficient
available funds (through existing credit arrangements, commitment letters
or otherwise) to pay the Merger Consideration, and all fees and expenses
required to be paid in connection with the Merger and the transactions
contemplated hereby.
4.14 Information Statement. None of the information supplied or to
be supplied by the Buyer to the Company for inclusion in the Information
Statement (as defined in Section 6.2(b) hereof) (and any amendments
thereof or supplements thereto) will, with respect to information
relating to the Buyer or Merger Subsidiary, at the time of the mailing of
the Information Statement to the stockholders of the Company, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE V
CONTINUING STOCKHOLDERS
Each Continuing Stockholder severally and not jointly represents
and warrants to Buyer and Merger Subsidiary as follows:
5.1 Authority, Binding Effect.
(a) Each Continuing Stockholder has the requisite power,
authority and right to execute and deliver this Agreement and 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 action on
the part of each Continuing Stockholder. This Agreement has been duly and
validly executed by each Continuing Stockholder, and, assuming this
Agreement has been duly authorized, executed and delivered by the
Company, Buyer and Merger Subsidiary, this Agreement constitutes a valid
and binding obligation of each Continuing Stockholder enforceable in
accordance with its terms, except as such enforceability may be limited
by (1) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally or (2) general principles or equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(b) Each Continuing Stockholder, other than Princes Gate,
Acorn Partnership, PGI, PGI Sweden and Opel (collectively, the "PGI
Holders") represent and warrant that all actions of the Continuing
Stockholders other than the PGI Holders, and the Board of Directors of
the Company in connection with the approval and authorization of this
Agreement and the transactions contemplated hereby and the implementation
thereof were effected in compliance with, and not in violation of,
applicable Delaware law. Each PGI Holder represents and warrants that all
actions of such PGI Holder in connection with the approval and
authorization of this Agreement and the transactions contemplated hereby
and the implementation thereof were efffected in compliance with, and not
in violation of, applicable Delaware law.
5.2 Title. Other than as contemplated by this Agreement, the
Continuing Stockholders are not parties to, or bound by, voting trusts,
stockholder agreements, proxies or other agreements and understandings in
effect with respect to the voting or the transfer of the Shares owned by
the Continuing Stockholders, except for (I) the Securityholders
Agreement, dated as of July 28, 1994, by and among the Company, Holdings,
the Kelso Parties, Princes Gate, Acorn Partnership, PGI, PGI Sweden, Opel
and PG Holdings, Inc., as agent (the "Securityholders Agreement"), (ii)
the Stockholders Agreement, dated August 27, 1993, by and among Holdings,
the Kelso Parties and the Management Shareholders listed on the Schedule
of Management Shareholders attached thereto (the "Stockholders
Agreement") (the Company assumed the rights and obligations of Holdings
pursuant to the Stockholders Agreement in the Assignment and Assumption
Agreement, dated as of January 23, 1995, by and among Holdings, the
Company and the Kelso Parties), (iii) the Stock Subscription Agreement,
dated August 31, 1994, by and among Holdings, the Company and CEA (the
"Stock Subscription Agreement"), and (iv) the subscription letters
pursuant to which the respective Continuing Stockholders acquired Shares,
copies of which have been made available to Buyer (the Company assumed
the rights and obligations of Holdings under such letters). There are no
existing options, warrants, calls, commitments or other securities or
agreements of any kind to which the Continuing Stockholders are parties
requiring the issuance, sale or transfer of any shares of capital stock
of the Company, except as provided under the Stockholders Agreement, the
Securityholders Agreement and the Stock Subscription Agreement.
5.3 Consents and Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement nor
the performance by the Continuing Stockholders of their obligations
hereunder will (I) conflict with or result in any breach of any provision
of the Certificate of Incorporation or Bylaws, partnership agreement or
other organizational documents of the Continuing Stockholders; (ii)
result in a violation or breach of, or default (or give rise to any right
of termination, cancellation or acceleration or result in the creation of
any Lien) under any of the terms, conditions or provisions of any note,
mortgage, letter of credit, other evidence of indebtedness, guarantee,
license, lease or agreement or similar instrument or obligation to which
the Continuing Stockholders are a party or by which any of them or any of
their assets may be bound, including, without limitation, the Stock
Agreements; or (iii) assuming that the filings, registrations,
notifications, authorizations, consents and approvals referred to in
subsection (b) below have been obtained or made, as the case may be,
violate any order, injunction, decree, statute, rule or regulation of any
governmental agency or authority or court to which the Continuing
Stockholder is subject, excluding from the foregoing clause (ii) and
(iii) such requirements, defaults, breaches, rights or violations that
become applicable as a result of (1) the business or activities in which
Buyer or Merger Subsidiary or any of their affiliates is or proposes to
be engaged, or (2) any acts or omissions by, or facts pertaining to,
Buyer or Merger Subsidiary.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity is
required in connection with the execution and delivery of this Agreement
by the Continuing Stockholders or the performance by the Continuing
Stockholders of their obligations hereunder, except (I) the filing of the
Certificate of Merger in accordance with the DGCL and filings to maintain
the good standing of the Surviving Corporation; (ii) compliance with any
applicable requirements of the HSR Act; (iii) compliance with any
applicable requirements of the Exchange Act; (iv) compliance with any
applicable requirements of state blue sky or takeover laws; (v) filings
in connection with the financing of the Merger; and (vi) such other
consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings that (A) may be required to
novate, assign or transfer any contract or agreement with any
Governmental Entity, (B) the failure of which to be obtained or made
would not have a Material Adverse Effect and would not have a material
adverse effect on the ability of the Continuing Stockholders to perform
their obligations hereunder or (c) that become applicable as a result of
(1) the business or activities in which Buyer or Merger Subsidiary is or
proposes to be engaged, or (2) any acts or omissions by Buyer or Merger
Subsidiary.
5.4 Investment Intention. Each Continuing Stockholder is acquiring
the Consideration Shares solely for such stockholder's own account for
investment and not with a view to, or for sale in connection with, any
distribution or other disposition thereof.
5.5 Federal Securities Laws Matters. Each Continuing Stockholder
acknowledges receipt of advice from Buyer that (I) the Consideration
Shares have not been registered under the Securities Act, (ii) the
Consideration Shares must be held indefinitely and each Continuing
Stockholder must continue to bear the economic risk of the investment in
the Consideration Shares, unless such Consideration Shares are
subsequently registered under the Securities Act, or an exemption from
such registration is available, (iii) if the exemption afforded by Rule
144 of the Securities Act is not available, sale of the Consideration
Shares without registration will require the availability of an exemption
under the Securities Act, (iv) an appropriate restrictive legend shall be
placed on the certificate(s) representing the Consideration Shares and
(v) a notation shall be made in the appropriate records of Buyer
indicating that the Consideration Shares are subject to restrictions on
transfer and, appropriate stop-transfer restrictions will be issued to
the transfer agent with respect to the Consideration Shares. In addition,
each Continuing Stockholder has been given access to and the opportunity
to examine all documents and ask questions of, and receive answers from,
Buyer and its representatives concerning the business, assets,
liabilities, results of operations and financial condition of Buyer and
its Subsidiaries and the terms and conditions of the Merger.
5.6 Investor Status. Either (I) each Continuing Stockholder is an
"accredited investor" as such term is defined in Rule 501(a) promulgated
under the Securities Act or (ii) (A) each Continuing Stockholder's
financial situation is such that the Continuing Stockholder can afford to
bear the economic risk of holding the Consideration Shares for an
indefinite period of time, (B) the Continuing Stockholder can afford to
suffer complete loss of his investment in the Consideration Shares, and
(c) the Continuing Stockholder's knowledge and experience in financial
and business matters are such that each Continuing Stockholder is capable
of evaluating the merits and risks of the Continuing Stockholder's
investment in the Consideration Shares.
ARTICLE VI
COVENANTS
6.1 Conduct of the Business.
(a) The Company agrees that, during the period from the date
hereof until the earlier of the Closing or the termination of this
Agreement in accordance with its terms, except as (I) otherwise expressly
contemplated hereby, (ii) set forth in Section 6.1 of the Company
Disclosure Schedule or (iii) consented to by Buyer, in writing:
(i) The Company and its Subsidiaries shall use their
reasonable efforts to (x) cause their business operations to be
conducted in the ordinary course consistent with past practice, (y)
preserve intact their business organization in all material
respects and relationships with suppliers, employees and customers
and (z) comply in all material respects with all laws;
(ii) The Company and its Subsidiaries shall not issue,
deliver, sell, pledge, dispose of or encumber, or authorize or
commit to the issuance, sale, pledge, disposition or encumbrance
of, except for the issuance of shares of Common Stock upon the
exercise of currently outstanding Options and the issuance of
107,889.50 shares of Common Stock pursuant to the Securities
Purchase Agreement, (x) any shares of capital stock of any class
(except upon the exercise of Options outstanding on the date
hereof), or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, any
other ownership interest (including, but not limited to, stock
appreciation rights or phantom stock), of the Company or any of its
Subsidiaries or (y) any assets of the Company or any of its
Subsidiaries, except for sales of products in the ordinary course
of business in a manner consistent with past practice;
(iii) The Company shall not declare, set aside, make or
pay any dividend or other distribution, payable in cash, stock
property or otherwise, with respect to any of its capital stock or
any security or right exchangeable or exercisable for, or
convertible into, its capital stock;
(iv) The Company shall not reclassify, combine, split,
subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock, or any security or right
exchangeable or exercisable for, or convertible into, its capital
stock; provided, the Company shall be entitled to purchase Shares
in connection with the retirement or termination of certain
employees pursuant to the terms of the Stockholders Agreement;
(v) The Company and its Subsidiaries shall not (w) make
any capital expenditures not authorized in the current capital
expenditures budget in excess of an aggregate of $1,000,000, (x)
sell or dispose of any of their material properties or assets,
except in the ordinary course of business; (y) except as may be
required by existing contracts, make any loans, advances (other
than advances in the ordinary course of business and consistent
with past practice) or capital contributions to, or investments in,
any other Person on behalf of the Company or any of its
Subsidiaries or (z) make any change in any of the present
accounting methods and practices of their business, except as
required by changes in GAAP;
(vi) Other than in the ordinary course of business and
consistent with past practice, neither the Company nor any
Subsidiary shall change the employment arrangements with its senior
executive officers (including hiring, termination, promotion or
relocation), make any change in the compensation payable or to
become payable to any of its officers, directors, employees, agents
or consultants, enter into or amend any employment, severance,
termination or other similar agreement, adopt any new plan,
program, agreement or arrangement that would otherwise constitute a
Plan, or make any loans to any of its officers, directors,
employees, agents or consultants or make any changes in its
existing borrowing or lending arrangements for or on behalf of any
of such persons, whether contingent on consummation of the Merger
or otherwise.
(vii) The Company and its Subsidiaries will not take
any action prohibited by clauses (b) through (k) of Section 3.7
hereof; and
(viii) The Company will not, and will not permit any
Subsidiary to, agree, commit, or adopt any plan or proposal to take
any of the actions set forth in clauses (ii) through (vii) above.
(b) Buyer and Merger Subsidiary each agree that, during the
period from the date hereof until the earlier of the Closing or the
termination of this Agreement in accordance with its terms, Buyer shall
not, and shall not permit any of its Subsidiaries to:
(i) A) declare, set aside, make or pay any dividends or
other distributions with respect to, any of its capital stock,
other than dividends and distributions by any direct or indirect
wholly-owned Subsidiary of Buyer to its parent and regular
quarterly dividends consistent with past practice of Buyer or (B)
combine, split, subdivide, redeem or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock. 6.2 Information Statement.
(a) The Company Board will deliver prompt notice of the
adoption of this Agreement and the Merger by the Company's stockholders
to those stockholders of the Company who have not consented to such
action in writing, and who, if such actions had been taken at a meeting,
would have been entitled to notice of the meeting of the Company's
stockholders if the record date for such meeting had been the date that
written consents signed by a sufficient number required to take the
actions were delivered to the Company.
(b) The Company shall promptly prepare and Buyer and Merger
Subsidiary shall cooperate with the Company in such preparation of an
information statement (the "Information Statement") relating to this
Agreement and the transactions contemplated hereby and the Company shall
as soon as practicable cause the Information Statement to be mailed to
the Company's stockholders. The Company will furnish Buyer and its
counsel drafts of the Information Statement for their review and comment
prior to its dissemination and will use all reasonable efforts to
incorporate all comments and suggestions made by Buyer and its counsel.
The Information Statement shall contain the recommendation of the Company
Board that stockholders of the Company approve and adopt this Agreement
and notice of the approval and adoption of this Agreement by the
stockholders of the Company by written consent in lieu of meeting
pursuant to DGCL Section 228.
(c) Buyer agrees that it will provide the Company with all
information concerning Buyer and Merger Subsidiary necessary or
appropriate to be included in the Information Statement.
6.3 Access to Information; Confidentiality.
(a) Upon reasonable advance notice, between the date hereof
and the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, each of Buyer and the Company
shall (I) give the other, its counsel, financial advisors, financing
sources, auditors and other authorized representatives (collectively,
"Representatives") reasonable access during normal business hours to the
offices, properties, books and records of the Company and its
Subsidiaries or the Buyer and its Subsidiaries, as the case may be, (ii)
furnish to the other and such Representatives such financial and
operating data and other information as such Persons may reasonably
request, and (iii) instruct its employees, counsel and financial advisors
to cooperate with the other in its investigation of the business of the
Company and its Subsidiaries or Buyer and its Subsidiaries, as the case
may be; provided that all requests for information, to visit plants or
facilities or to interview employees or agents should be directed to and
coordinated with an executive officer of the Company or Buyer, as the
case may be.
(b) Each of Buyer and the Company shall not disclose or use,
and each shall cause its officers, employees and Representatives not to
disclose or use, any confidential information with respect to the other
party hereto, furnished or to be furnished, by such other party or their
Representatives in connection herewith at any time or in any manner other
than in connection with the evaluation of the transactions contemplated
by this Agreement. If this Agreement is terminated for any reason, all
such confidential information, in whatever form shall be returned to the
originator by each party and its Representatives.
6.4 No Solicitation. From the date hereof until the termination of
this Agreement pursuant to the Article IX hereof, the Continuing
Stockholders, the Company and its Subsidiaries shall not, and the Company
shall use its reasonable efforts to ensure that the respective officers,
directors, employees or other agents of the Company and its Subsidiaries
will not, directly or indirectly, (a) solicit, initiate or encourage any
Acquisition Proposal (as defined hereafter) or (b) engage in substantive
discussions or negotiations with, or disclose any non-public information
relating to the Company or its Subsidiaries or afford access to the
properties, books or records of the Company or its Subsidiaries to, any
Person that has made an Acquisition Proposal. For purposes of this
Agreement, "Acquisition Proposal" means any offer or proposal for a
merger or other business combination involving the Company or any of its
Subsidiaries or the acquisition of any significant equity interest in, or
a substantial portion of the assets of, the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement.
"Person" means any natural Person, firm, individual, partnership, joint
venture, business trust, trust, association, corporation, company,
unincorporated entity or Governmental Entity.
6.5 Obligations of Merger Subsidiary. Buyer will take all action
necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions
set forth herein.
6.6 Director and Officer Liability; Indemnification.
(a) Buyer, Merger Subsidiary and the Company agree that all
rights to indemnification and all limitations on liability existing in
favor of any Indemnified Party (as defined below) as provided in the
Company's Certificate of Incorporation, Bylaws or an agreement between an
Indemnified Party and the Company and any of its Subsidiaries as in
effect as of the date hereof shall survive the Merger and continue in
full force and effect for six years after the Effective Time and for such
period, Buyer shall, and shall cause the Surviving Corporation to the
fullest extent permitted by law to, indemnify and hold harmless the
individuals who on or prior to the Effective Time were officers or
directors of the Company and any of its Subsidiaries (each, an
"Indemnified Party") against all losses, expenses (including, without
limitation, attorneys' fees and the cost of any investigation or
preparation incurred in connection thereof), claims, damages,
liabilities, judgments, or amounts paid in settlement (collectively,
"Costs") in respect to any threatened, pending or contemplated claim,
action, suit or proceeding, whether criminal, civil, administrative or
investigative arising out of acts or omissions occurring on or prior to
the Effective Time except for any Costs arising out of or related to any
Bernstein Claims and except as otherwise provided in subsection (e) below
(each, an "Indemnifiable Claim"). In the event any Indemnifiable Claim is
asserted or made within such six-year period, all rights to
indemnification and advancement of costs in respect of any such
Indemnifiable Claim shall continue until such Indemnifiable Claim is
disposed of or all judgments, orders, decrees or other rulings in
connection with such Indemnifiable Claim are fully satisfied. To the
extent permitted by the DGCL, advancement of expenses pursuant to this
Section 6.6 shall be mandatory rather than permissive and the Surviving
Corporation shall advance all Costs in connection with such
indemnification.
(b) For six years after the Effective Time, Buyer will cause
the Surviving Corporation, its successors and assigns to provide
officers' and directors' liability insurance in respect of acts or
omissions occurring at or prior to the Effective Time covering each such
Person currently covered by the Company's officers' and directors'
liability insurance policy on terms with respect to coverage and amount
no less favorable than those of such policy in effect on the date hereof;
provided that in satisfying its obligations under this Section 6.6(b),
Buyer shall not be obligated to pay premiums in excess of 150% of the
premium for the officers and directors liability insurance policy paid by
the Company as of the date hereof, which amount has been disclosed to
Buyer. Buyer shall cause the Surviving Corporation to continue to
indemnify in accordance with the Company's past practices each of the
employees listed in Section 6.6 of the Company Disclosure Schedule in
respect of the lawsuit set forth opposite such employee's name in such
Section.
(c) Notwithstanding any other provisions hereof, the
obligations of the Company, the Surviving Corporation and Buyer contained
in this Section 6.6 shall be binding upon the successors and assigns of
Buyer and the Surviving Corporation. In the event the Company or the
Surviving Corporation or any of their respective successors or assigns
(I) consolidates with or merges into any other Person or (ii) transfers
all or substantially all of its properties or assets to any Person, then,
and in each case, proper provision shall be made so that successors and
assigns of the Company or the Surviving Corporation, as the case may be,
honor the indemnification obligations set forth in this Section 6.6.
(d) The obligations of the Company, the Surviving Corporation
and Buyer under this Section 6.6 shall not be terminated or modified in
such a manner as to affect adversely any director or officer to whom this
Section 6.6 applies without the consent of such affected director or
officer (it being expressly agreed that the directors and officers to
whom this Section 6.6 applies shall be third party beneficiaries of this
Section 6.6).
(e) Each Continuing Stockholder agrees, severally and not
jointly, to indemnify and hold harmless Buyer and the Company and their
respective officers, directors and affiliates from and against all Costs
arising out of or attributable to a breach by such Continuing Stockholder
of the representations and warranties of such Continuing Stockholder
contained in Section 5.1(b).
6.7 Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions herein
provided, each of the parties hereto agrees to use its reasonable best
efforts to take or cause to be taken all action, to do or cause to be
done, and to assist and cooperate with the other party hereto in doing,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement,
including, but not limited to, (I) the satisfaction of the conditions
precedent to the obligations of any of the parties hereto, (ii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the performance of the
obligations hereunder, (iii) the execution and delivery of such
instruments, and the taking of such other actions as the other party
hereto may reasonably require in order to carry out the intent of this
Agreement and (iv) in the case of Buyer and Merger Subsidiary, the
obtaining of the funds referred to in the first sentence of Section 4.15
hereof and the listing of the Consideration Shares on the New York Stock
Exchange.
(b) The Company, Buyer and Merger Subsidiary agree to
cooperate with Buyer to effect the transfers of any permits or other
governmental authorizations under Environmental Laws that will be
required to permit the Surviving Corporation to conduct the business as
conducted by the Company and its Subsidiaries immediately prior to the
Closing Date.
6.8 Regulatory Compliance.
(a) The parties hereto shall make or cause to be made all
necessary filings, as promptly as practicable, including, without
limitation, those required under the HSR Act, the Exchange Act, and
applicable state laws, in order to facilitate prompt consummation of the
transactions contemplated hereby. In addition, Buyer, Merger Subsidiary
and the Company will each use its reasonable best efforts, and will
cooperate fully with each other to (I) comply as promptly as practicable
with all governmental requirements applicable to the transactions
contemplated hereby and (ii) obtain promptly all approvals, permits,
orders, qualifications or other consents of any applicable governmental
authorities necessary for the consummation of the transactions
contemplated by this Agreement. Each of the parties hereto will furnish
to the other party such necessary information and reasonable assistance
as such other party may reasonably request in connection with the
foregoing. Notwithstanding the foregoing, nothing in this Agreement shall
be deemed to require Buyer or its Subsidiaries to enter into any
agreement with any Governmental Entity or to consent to any order, decree
or judgment requiring Buyer or its Subsidiaries to hold separate or
divest, or to restrict the dominion or control of, any of the assets,
properties or businesses of the Company and any of its Subsidiaries or
Buyer and any of its Subsidiaries.
(b) Subject to the Confidentiality Agreement and applicable
law, the Company, Buyer and Merger Subsidiary will coordinate and
cooperate with each other in exchanging such information and providing
such assistance as the other may reasonably request in connection with
the foregoing and in seeking early termination of any applicable waiting
periods under the HSR Act or in connection with other regulatory
approvals and consents. Each of the Company, Buyer and Merger Subsidiary
agrees to (I) file the Notification and Report required by the HSR Act on
or before January 31, 1997 and (ii) respond promptly to and to comply
fully with any request for additional information or documents under the
HSR Act. Subject to the Confidentiality Agreement, the Company will
provide Buyer, and Buyer and Merger Subsidiary will provide the Company,
with copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between such party or any
of its representatives, on the one hand, and any governmental agency or
authority or members of their respective staffs, on the other hand, with
respect to this Agreement and the transactions contemplated hereby.
6.9 Public Announcements. Neither the Company, Buyer nor any of
their respective affiliates shall issue or cause the publication of any
press release or other public announcement with respect to the Merger,
this Agreement or the other transactions contemplated hereby without the
prior approval of the other party, except such disclosure as may be
required by law or by any listing agreement with a national securities
exchange; provided, if such disclosure is required by law, the Company,
Buyer or any of their respective affiliates may not make such disclosure
without prior consultation of the other party.
6.10 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to
take and do, in the name and on behalf of the Company or Merger
Subsidiary, any other actions to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title and
interest in, to or under any of the rights, properties or assets of the
Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with the Merger.
6.11 Employee Matters.
(a) General Medical has entered into the Employment
Agreements in substantially the form of Exhibit A attached hereto with
those Persons listed on Schedule 3.1(c) of the Company Disclosure
Schedule. Following the Effective Time, the Buyer shall cause the
Surviving Corporation to honor all obligations under the Employment
Agreements and any other Plan as to which the disclosure required
pursuant to Section 3.11(a) has been timely made and provide the
employees of the Company and its Subsidiaries with employee benefits
which are no less favorable in the aggregate than those currently
provided by the Company, provided that the foregoing shall not require
Buyer to maintain in effect any specific employee benefit plan, program
or policy of the Company or its Subsidiaries. In addition, subject to the
terms of any Company Plan or Buyer Plan, Buyer will, or will cause the
Surviving Corporation and its Subsidiaries to (I) waive all limitations
as to preexisting conditions, exclusions and waiting periods with respect
to participation and coverage requirements applicable to the employees of
the Company and its Subsidiaries under any welfare plan that such
employees may be eligible to participate in after the Effective Time,
other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the
Effective Time under any welfare plan maintained for such employees
immediately prior to the Effective Time, and (ii) provide each employee
of the Company and its Subsidiaries with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plan that such
employees may be eligible to participate in after the Effective Time.
6.12 Treatment of Public Debt. The Company will cooperate with
Buyer (i)to commence a debt tender offer to be made by the Company
(together with a solicitation of consents to eliminate certain
restrictive covenants) of the Company's 121/8% Series A Subordinated
Pay-In-Kind Debentures Due 2005 and the Company's 107/8% Series A Senior
Subordinated Notes due 2003 on conditions as to the timing of acceptance
for payment acceptable to the Company, and (ii) provided Buyer provides
the Company with financing on terms and conditions satisfactory to the
Company, in its sole discretion, to give the required notice of and
consummate the redemption at par, prior to the Effective Time, of all of
Holding's 12 1/2% Senior Notes due 2004 (the "Holdings Notes"), provided,
in each case, that prior to the Closing Date no funds or related
out-of-pocket transaction expenses necessary to effect any such
repurchase shall be provided or paid for by the Company. In connection
with such redemption of the Holdings Notes, the PGI Holders will waive
any applicable notice period with respect to such redemption.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Each Party's Obligations. The respective
obligations of the Company, Buyer and Merger Subsidiary to consummate the
Merger are subject to the satisfaction or, to the extent permitted by
applicable law, the waiver on or prior to the Effective Time of each of
the following conditions:
(a) HSR Act. Any waiting periods applicable to the
transactions contemplated by this Agreement under applicable U.S. and
foreign antitrust or trade regulation laws and regulations, including,
without limitation, under the HSR Act, shall have expired or been
terminated and all governmental authorizations or approvals required in
connection with the transactions contemplated by this Agreement shall
have been obtained or given (except such consents, approvals or other
actions that may be required to novate, assign or transfer any contract
or agreement with any Governmental Entity), other than those
authorizations and approvals, the failure of which to have been obtained,
would not, in the aggregate, have or be reasonably expected to have a
Material Adverse Effect or Buyer Material Adverse Effect;
(b) No Injunction. No temporary restraining order,
preliminary or permanent injunction or other order by any federal or
state court preventing the consummation of the Merger shall have been
issued and be continuing in effect, and no provision of any applicable
law or regulation shall prohibit the consummation of the Merger. There is
no claim, action or proceeding pending or, to the knowledge of the
Company or Buyer, threatened against the Company by any Governmental
Entity that challenges the validity of this Agreement or the Merger or
any material transaction contemplated hereby; and
(c) NYSE Listing. The Consideration Shares shall have been
approved for listing on the New York Stock Exchange subject to notice of
issuance.
7.2 Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger are further subject to the
satisfaction or, to the extent permitted by applicable law, the waiver on
or prior to the Effective Time of the following conditions:
(a) Performance of Obligations by Buyer and Merger
Subsidiary. Each of Buyer and Merger Subsidiary will have performed in
all material respects each of its respective agreements and covenants
contained in or contemplated by this Agreement that are required to be
performed by it at or prior to the Effective Time pursuant to the terms
hereof;
(b) Representations and Warranties. The representations and
warranties of Buyer continued in Article IV hereof shall be true and
correct in all material respects as of the Closing Date, except (I) to
the extent such representations and warranties speak as of an earlier
date, in which case they shall be true and correct in all material
respects as of such earlier date, and (ii) for such inaccuracies (without
giving effect to any materiality or Material Adverse Effect
qualifications or materiality exceptions contained therein) that do not
in the aggregate result in a Buyer Material Adverse Effect;
(c) Closing Certificate. The Company shall have received a
certificate signed by the chief executive officer of Buyer, dated the
Closing Date, to the effect that, to such officer's knowledge, the
conditions set forth in Section 7.2(a) and 7.2(b) hereof have been
satisfied of waived; and
(d) Registration Rights Agreement. Buyer shall have executed
and delivered the Registration Rights Agreement substantially in the form
attached hereto as Exhibit B (the "Registration Rights Agreement").
7.3 Conditions to the Obligations of Buyer and Merger Subsidiary.
The obligations of Buyer and Merger Subsidiary to consummate the Merger
are further subject to the satisfaction or, to the extent permitted by
applicable law, the waiver on or prior to the Effective Time of the
following conditions:
(a) Performance of Obligations the Company. The Company and
the Continuing Stockholders will have performed in all material respects
each of its agreements and covenants continued in or contemplated by this
Agreement that are required to be performed by it at or prior to the
Effective Time pursuant to the terms hereof;
(b) Representations and Warranties. The representations and
warranties of the Company contained in Article III hereof and the
representations and warranties of the Continuing Stockholders contained
in Article V shall be true and correct in all material respects as of the
Closing Date, except (I) to the extent such representations and
warranties speak as of an earlier date, in which case they shall be true
and correct in all material respects as of such earlier date, and (ii)
for such inaccuracies (without giving effect to any materiality or
Material Adverse Effect qualifications or materiality exceptions
contained therein) that do not in the aggregate result in a Material
Adverse Effect;
(c) Closing Certificate. Buyer and Merger Subsidiary shall
have received a certificate signed by the chief executive officer of the
Company, dated the Closing Date, to the effect that, to such officer's
knowledge, the conditions set forth in Section 7.3(a) and 7.3(b) hereof
have been satisfied or waived; and
(d) Registration Rights Agreement. Each of the Continuing
Stockholders shall have executed and delivered the Registration Rights
Agreement.
ARTICLE VIII
TERMINATION
8.1 Termination. Notwithstanding anything herein to the contrary,
this Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, whether before or after the Company has
obtained stockholder approval:
(a) by the mutual written consent of the Board of Directors
of each of the Company and Buyer;
(b) by either the Company or Buyer, if the Merger has not
been consummated by April 1, 1997, or such other date, if any, as the
Company and Buyer shall agree upon, provided, that if the Closing shall
not have occurred by such date solely as a result of the failure to
satisfy the condition relating to the expiration or termination of the
applicable waiting period under the HSR Act, then such date shall be
extended until May 1, 1997 ;
(c) by either the Company or Buyer, if there shall be any law
or regulation that makes consummation of the Merger illegal or if any
judgment, injunction, order or decree enjoining Buyer or the Company from
consummating the Merger is entered and such judgment, injunction, order
or decree shall become final and nonappealable; or
(d) by the Company if the Average Price is less than $45.55.
The party desiring to terminate this Agreement pursuant to
clauses (b), (c) or (d) shall give written notice of such termination to
the other party; provided, no party in breach of any of its obligations
under this Agreement may terminate this Agreement pursuant to this
Section 8.1.
8.2 Effect of Termination. If this Agreement is terminated pursuant
to Section 8.1 hereof, this Agreement shall become void and of no effect
with no liability on the part of any party hereto except for willful
breach; provided, that the agreements contained in Sections 3.17, 4.14,
6.3(b), 9.2 and 9.4 hereof shall survive the termination hereof.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement to
any party hereunder shall be in writing and deemed given upon (a)
personal delivery, (b) transmitter's confirmation of a receipt of a
facsimile transmission, (c) confirmed delivery by a standard overnight
carrier or when delivered by hand or (d) when mailed in the United States
by certified or registered mail, postage prepaid, addressed at the
following addresses (or at such other address for a party as shall be
specified by notice given hereunder):
If to Buyer or Merger Subsidiary, to:
McKesson Corporation
One Post Street
San Francisco, CA 94104
Fax: (415) 983-8826
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-9931
Fax: (212) 735-2000
Attention: Peter A. Atkins
If to the Company, to:
General Medical Inc.
8741 Landmark Road
Richmond, VA 23228
Fax: (804) 264-7586
Attention: Steven B. Nielsen, Chairman
and Chief Executive Officer
with a copy to:
Kelso & Company
320 Park Avenue, 24th Floor
New York, New York 10022
Fax: (212) 223-2379
Attention: James J. Connors, II, Esq.
with a copy to:
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
Fax: (804) 775-1061
Attention: Wellford L. Sanders, Jr.
9.2 No Survival of Representations and Warranties. The
representations and warranties, covenants and agreements contained herein
and in any certificate or other writing delivered pursuant hereto, other
than the representations and warranties contained in Sections 5.1, 5.4,
5.5 and 5.6, which shall survive indefinitely, shall not survive the
Effective Time or the termination of the Agreement, provided, that
covenants and agreements contained herein which by their terms are to be
performed in whole or in part subsequent to the Effective Time shall
survive the Merger in accordance with their terms.
9.3 Amendments, Modification and Waiver.
(a) Except as may otherwise be provided herein, any provision
of this Agreement may be amended, modified or waived by the parties
hereto, by action taken by or authorized by their respective Board of
Directors, prior to the Effective Time if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by the
Company, Buyer, Merger Subsidiary and the Continuing Stockholders and in
the case of a waiver, by the party against whom the waiver is to be
effective, provided however that Princes Gate, Acorn Partnership, PGI,
PGI Sweden and Opel agree that PG Investors, Inc. is authorized to act as
their agent and consent to any such amendment, modification or waiver on
their behalf; provided, further, that after the adoption of this
Agreement by the stockholders of the Company, no such amendment shall be
made except as allowed under applicable law.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
9.4 Expenses. Except as otherwise provided herein, all costs and
expenses incurred by the Company and the Continuing Stockholders in
connection with this Agreement, the Merger and the transactions
contemplated hereby, including legal fees and investment banking fees
(including, but not limited to, those fees listed in Section 3.17 of the
Company Disclosure Schedule), shall be paid by the Company and all such
costs and expenses incurred by the Buyer or Merger Subsidiary shall be
paid by the Buyer; provided that the amount, if any, by which the sum of
the costs and expenses paid or payable by the Company pursuant to this
Section 9.4 plus the out-of-pocket cash expenses paid or payable by the
Company in connection with the planned initial public offering of Common
Stock as described in the IPO Prospectus exceeds $6,000,000 shall be
deemed to be the "Excess Expense Amount" and shall be applied to reduce
the Equity Value pursuant to the provisions of Section 1.2(a) hereof. At
least one day prior to the Closing Date, the Company and the Continuing
Stockholders shall provide Buyer with a certificate, setting forth in
reasonable detail the calculation of the Excess Expense Amount. In the
event that the actual Excess Expense Amount is determined to be greater
than the amount set forth in such certificate, the parties agree that the
amount of such excess shall reduce, and be applied against, the Holdback
Amount.
9.5 Successors and Assigns; Binding Effect. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be
assigned, directly or indirectly, including, without limitation, by
operation of law, by any party hereto without the prior written consent
of the other parties hereto. Subject to the preceding sentence, this
Agreement and all of the provisions hereof shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
9.6 Governing Law. 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) as to all matters, including,
but not limited to, matters of validity, construction, effect,
performance and remedies.
9.7 Severability. If any term or other provision of the Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provision of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated herein are not affected
in any manner materially adverse to any party hereto. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner.
9.8 Third Party Beneficiaries. This Agreement is solely for the
benefit of the Company and its successors and permitted assigns and the
Continuing Stockholders and their successors and permitted assigns, with
respect to the obligations of Buyer and Merger Subsidiary under this
Agreement, and for the benefit of Buyer and Merger Subsidiary, and their
respective successors and permitted assigns with respect to the
obligations of the Company and the Continuing Stockholders under this
Agreement, and this Agreement shall not, except to the extent necessary
to enforce the provisions of Section 1.7 and 6.6 hereof be deemed to
confer upon or give to any other third party any remedy, claim,
liability, reimbursement, cause of action or other right.
9.9 Schedules.
(a) Disclosure of any fact or item in any Section of the
Company Disclosure Schedule or the Buyer Disclosure Schedule hereto
referenced by a particular paragraph or section in this Agreement shall,
should the existence of the fact or item or its contents be relevant to
any other paragraph or section, be deemed to be disclosed with respect to
that other paragraph or section whether or not an explicit
cross-reference appears.
(b) Certain of the representations and warranties set forth
in this Agreement contemplate that there will be included in the Company
Disclosure Schedule or the Buyer Disclosure Schedule setting forth
information that might be "material" or have a "Material Adverse Effect"
or a "Buyer Material Adverse Effect." The Company and the Buyer may, at
their option, include in such schedules items that are not material or
are not likely to have a Material Adverse Effect or a Buyer Material
Adverse Effect in order to avoid any misunderstanding, and any such
inclusion shall not be deemed to be an acknowledgment or representation
that such items are material or would have a material effect, to
establish any standard of materiality or material adverse effect, or to
define further the meaning of such terms for purposes of this Agreement.
9.10 Entire Agreement. This Agreement, including any exhibits or
schedules hereto constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and supersedes all other prior
agreements or understandings, both written and oral, between the parties
or any of them with respect to the subject matter hereof. The only
representations and warranties made by the parties hereto with respect to
the subject matter hereof are the representations and warranties
contained in or made pursuant to this Agreement.
9.11 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be deemed an original,
with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed by all of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the
date and year first above written.
GENERAL MEDICAL INC.
By: /s/ Steven B. Nielsen
Name: Steven B. Nielsen
Title:
MCKESSON CORPORATION
By: /s/ Ivan D. Meyerson
Name: Ivan D. Meyerson
Title: Vice President
SPIDER ACQUISITION CORPORATION
By: /s/ Ivan D. Meyerson
Name: Ivan D. Meyerson
Title: Vice President
KELSO INVESTMENT ASSOCIATES IV, L.P.
By: /s/ Thomas R. Wall, IV
Name: Thomas R. Wall, IV
Title: General Partner
KELSO EQUITY PARTNERS II, L.P.
By: /s/ Thomas R. Wall, IV
Name: Thomas R. Wall, IV
Title: General Partner
CHASE EQUITY ASSOCIATES, L.P.
By: /s/ Brian J. Richmand
Name: Brian J. Richmand
Title: Partner
JOHN RUTLEDGE PARTNERS, L.P.
By: /s/ John Rutledge
Name: John Rutledge
Title:
PRINCES GATE INVESTORS, L.P.
By: /s/ David R. Powers
Name: David R. Powers
Title: Vice President, PG Investors,
Inc., as General Partner
ACORN PARTNERSHIP I, L.P.
By: /s/ David R. Powers
Name: David R. Powers
Title: Vice President, PG Investors,
Inc., as General Partner
PGI INVESTMENTS LIMITED
By: /s/ David R. Powers
Name: David R. Powers
Title: Vice President, PG Investors,
Inc., as Attorney-In-Fact
PGI SWEDEN AB
By: /s/ David R. Powers
Name: David R. Powers
Title: Vice President, PG Investors,
Inc., as Attorney-In-Fact
/s/ David R. Powers - Attorney-In-Fact
GREGOR VON OPEL
THE LOUIS AND PATRICIA KELSO TRUST
By: /s/ Patricia H. Kelso
Name: Patricia H. Kelso
/s/ William A. Marquard
WILLIAM A. MARQUARD
THE FRANK T. NICKELL IRA
By: /s/ Annamarie Simonelli
Name: Annamarie Simonelli
Title: Assistant Vice President,
Fleet Bank
/s/ David M. Roderick
DAVID M. RODERICK
/s/ George L. Shinn
GEORGE L. SHINN
/s/ Steven B. Nielsen
STEVEN B. NIELSEN
/s/ F. De Wight Titus
F. De WIGHT TITUS
/s/ Donald B. Garber
DONALD B. GARBER
EXHIBIT 99.1
Press Release
Contact: Janet Bley
(415) 983-9357
or
Sandra Sternberg
Sitric And Company
415-983-8671 or 310-788-2850
SOLIDIFYING ITS POSITION IN HEALTH CARE SUPPLY MANAGEMENT,
McKESSON ACQUIRES GENERAL MEDICAL INC.
Acquisition Opens New Markets,
Higher Margin Businesses to McKesson
SAN FRANCISCO, Tuesday, January 28, 1997 -- Continuing on a
course of investments aimed at extending its leadership
position in health care supply management, improving gross
margins and broadening its market platform, McKesson Corp.
(NYSE:MCK), today announced that it has signed a definitive
agreement to acquire privately-held General Medical Inc.
The McKesson/General Medical business combination will
create the largest health care supply management company in
North America. The company expects the acquisition to be
accretive in the first year, effectively increasing
McKesson's overall operating margin and working capital
turnover.
General Medical is the nation's leading supplier to the
full range of alternate-site health care facilities,
including physicians and clinics, long-term care and home-
care sites, and is the third largest distributor of medical-
surgical supplies to hospitals.
Alan Seelenfreund, McKesson's chairman and chief
executive officer, said, "This acquisition, which extends
McKesson's position into the fast-growing alternate-site
market, is a major step forward in our goal to become the
world leader in health care supply management. The
combination of McKesson and General Medical will create a
strong new force for shaping the health care supply market,
addressing the increasingly complex clinical supply needs of
physicians, extended-care facilities and integrated health
care net works (IHNs).
"In today's fast changing health care environment,
McKesson will innovate to provide our health care partners,
which include customers and manufacturers alike, with
services that improve the quality of health care while
maintaining a focus on controlling costs," Mr. Seelenfreund
continued. "Through this acquisition, we are reaffirming
McKesson's leadership in pharmaceutical services and
entering the field of medical-surgical supply management.
McKesson's unique combination of a nationwide logistics
network, unparalleled information technology, and strong
financial resources equips us to meet this market challenge
successfully."
Under terms of the acquisition agreement,
* McKesson will pay approximately $775 million for
General Medical including $347 million for the equity,
half in McKesson common stock and half in cash, and the
assumption of approximately $428 million in debt.
* The number of shares to be issued will be based upon an
average of the company's common stock price shortly
prior to closing, but will be no more than
approximately 3.72 million or less than 2.75 million
shares. Based upon yesterday's closing price, the
number of shares issued would be approximately 3.16
million.
* General Medical will become a wholly-owned subsidiary
of McKesson.
* Members of General Medical's senior management team
will continue with the company in their current
positions.
The alternate-site market is the fastest growing market
for pharmaceutical and medical supplies. With the aging of
the U.S. population and the shift towards more cost-
effective locations for care delivery, the alternate-site
market is expected to continue to grow well into the 21st
century. General Medical distributes more than 130,000
products produced by more than 4,000 medical and surgical
product manufacturers through a 700-person sales force to
more than 200,000 care providers nationwide, including 500
account managers calling on physicians.
Mark A. Pulido, McKesson's president and chief
operating officer, said, "General Medical will enable
McKesson to build on its national scale, offering
unparalleled marketing services to pharmaceutical and
medical-surgical manufacturers, as well as products and
services to health care providers who are demanding well-
coordinated supply solutions.
"McKesson and General Medical are coming together at
exactly the right time," Pulido continued. "General Medical
is overhauling its distribution network, and has reorganized
its sales management structure and invested heavily in new
products and programs. Since 1991, General Medical sales
have grown at an annual compound rate of approximately 20%
reaching $1.7 billion in 1996. EBIT has increased approximately
65% during the last year and is expected to be approximately
$58 million for the fiscal year ended December 31, 1996.
Operating margins have increased to 3.4% of revenues.
"We are acquiring General Medical at just the point
that its turnaround is starting to pay off," he said.
"Given McKesson's significant growth in pharmaceutical
distribution, our combined momentum will lead to improved
gross margins, increased operating income and higher profit
margins."
General Medical's chairman and chief executive officer,
Steven B. Nielsen, said, "We are overwhelmingly confident
that McKesson's capital resources and industry position will
provide General Medical with the ability to realize our
vision -- to be the leading national supplier to integrated
health systems. The opportunity to build our business with
McKesson, the nation's leading health care supply management
company, and to join a team having considerable management
expertise in this field was more than enough to convince us
to terminate our initial public offering mid-stream."
Last Friday, McKesson reported that in the third
quarter ended December 31, 1996, net income was $38.0
million or 86 cents per fully diluted share. Revenues
increase to $3.5 billion from $2.6 billion in the comparable
quarter of fiscal 1996. For the nine-month period ending
December 31, 1996, the company reported net income of $96.2
million, or $2.16 per fully diluted share, versus $2.08 per
fully diluted share in the prior year. Revenues increased
to $8.9 billion from $7.4 billion in the comparable nine-
month period.
The General Medical acquisition is the latest in a
series of recent initiatives that have moved McKesson to the
forefront of the health care supply management business:
* In December 1996, as part of a program to focus
its businesses in health care, McKesson announced
the sale of its 55% stake in Armor All Products
Corp. for $220 million.
* In November 1996, the Company completed the
acquisition of FoxMeyer Drug, adding approximately
$3 billion to McKesson annual revenues and
expanding its lead as the largest distributor in
the pharmaceutical segment.
* In April 1996, McKesson purchased Automated
Healthcare (AHI), a company producing robotic drug
dispensing equipment offering unique
pharmaceutical handling technology to health care
facilities, including the RxOBOT automated
medication-retrieval system for hospitals.
* In February 1996, McKesson launched the OmniLink
centralized pharmacy technology platform, linking
independent pharmacies into a "virtual chain" for
contracting with pharmaceutical suppliers and
managed care customers.
* In 1995, the Company established McKesson Health
Systems to serve as the platform for the Company's
institutional strategy and initiatives.
This transaction is subject to customary conditions,
including expiration of the waiting period under the Hart-
Scott-Rodino Act. The company, which is being advised by
Peter J. Solomon Company Limited in the transaction,
anticipates that it will close within two months.
General Medical, headquartered in Richmond, Virginia,
operates through a network of 50 distribution centers, seven
sales offices and three product assembly centers throughout
the United States. The company was founded in 1950 and has
been privately held since. In 1994 and 1995, General
Medical acquired F.D. Titus & Son, the medical supplies
business of Foster Medical Supply, Randolph Medical Inc.,
and the assets of Denver Surgical Supply and Goetze-Niemer
Co.
Through McKesson's U.S. health care business, its
Canadian subsidiary, Media Health and Pharmaceutical
Services, and its minority interest in Mexico's Nadro, S.A.,
McKesson is the largest distributor of pharmaceutical and
health care products in North America. The company also
owns McKesson Water Products, one of the nation's largest
distributors of bottled drinking water.
Except for historical information contained herein, the
matters discussed in this release are forward-looking
statements that involve risks and uncertainties that could
cause actual results to differ materially from those
projected. These include the trends for continued growth of
McKesson's and General Medical's core health care businesses
and risks and uncertainties described in the company's SEC
reports. The company assumes no obligation to update
information contained in this release.
# # #
McKesson news releases are available at no charge through
McKesson's NewsOnDemand fax service. To immediately receive
an index of available releases, call 1-800-344-6495 and
press 2. On the Internet, visit us on the World Wide Web
at: http://www.McKesson.com
EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
Dated as of January 28, 1997
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of January 28, 1997,
among McKesson Corporation, a Delaware corporation (the "Company"), and
the other undersigned parties hereto.
1. Introduction; Term of Agreement. The Company is a party to the
separate Agreement and Plan of Merger (the "Merger Agreement"), dated as
of January __, 1997, among the Company, Spider Acquisition Corporation, a
Delaware corporation, General Medical Inc., a Delaware corporation
("GMI"), Kelso Investment Associates IV, L.P., a Delaware limited
partnership("KIA IV"), Kelso Equity Partners II, L.P., a Delaware limited
partnership ("KEP II"), Chase Equity Associates, a California limited
partnership ("CEA"), John Rutledge Partners, L.P., a Delaware limited
partnership ("Rutledge Partners"), Princes Gate Investors L.P., a
Delaware limited partnership ("Princes Gate"), Acorn Partnership I, L.P.,
a Delaware limited partnership ("Acorn Partnership"), PGI Investments
Limited, a British Virgin Islands corporation ("PGI"), PGI Sweden AB, a
Swedish corporation ("PGI Sweden"), Gregor Von Opel, The Lewis and
Patricia Kelso Trust, William A. Marquard, The Frank T. Nickell IRA,
David M. Roderick, George L. Shinn, Steven B. Nielsen, F. De Wight Titus
and Donald B. Garber, pursuant to which the Company has agreed, among
other things, to acquire through merger GMI and, in connection therewith,
to issue to the Investor Group cash and shares of common stock of the
Company (the "Common Stock") as specified in the Merger Agreement. This
Agreement shall become effective upon the Effective Time (as defined in
the Merger Agreement). This Agreement shall terminate and be of no
further force and effect on the earlier to occur of (i) the third
anniversary date of the Effective Time or (ii) such time as the holders
of Registrable Securities in the aggregate own less than 2% of the
outstanding shares of Common Stock. Certain capitalized terms used in
this Agreement are defined in section 3 hereof; references to sections
shall be to sections of this Agreement.
2. Registration under Securities Act, etc.
2.1 Registration on Request.
(a) Demand Request. Upon the written request of the
Initiating Holder (on its own and/or on behalf of the other members of
the Investor Group), requesting that the Company effect the registration
under the Securities Act of all or part of such Initiating Holder's
Registrable Securities or the Registrable Securities owned by other
members of the Investor Group and specifying the intended method or
methods of disposition thereof (a "Demand Request"), the Company will, as
promptly as reasonably practicable but in no event later than 20 days
after such request, give written notice of such requested registration to
all registered holders of Registrable Securities who would be entitled to
participate in such registration, and thereupon the Company will, subject
to the terms of this Agreement, use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such Initiating Holder (on its own
and/or on behalf of the other members of the Investor Group) for
disposition in accordance with the intended method or methods of
disposition stated in such request;
(ii) all other Registrable Securities the holders of
which shall have made a written request to the Company for
registration thereof within 30 days after the giving of such
written notice by the Company (which request shall specify the
intended method or methods of disposition of such Registrable
Securities);
(iii) all shares of Common Stock which the Company may
elect to register in connection with the offering of Registrable
Securities pursuant to this section 2.1; and
(iv) all shares of Common Stock which the Company may
be required to register in connection with "piggyback" or
incidental registration rights granted to any other Person;
all to the extent requisite to permit the disposition (in accordance with
the intended method or methods of distribution specified in the Demand
Request) of the Registrable Securities and the additional shares of
Common Stock, if any, so to be registered, provided, however, that each
such Demand Request shall be for a number of shares of Common Stock which
represent at least 2% of the then outstanding shares of Common Stock,
unless the Demand Request is the last Demand Request available hereunder,
in which event the Demand Request may cover the remainder of the
Registrable Securities even if such amount of Registrable Securities is
less than 2% of such then outstanding shares. Subject to the provisions
of section 2.1(d), the Initiating Holder (on its own and/or on behalf of
the other members of the Investor Group) will have the right pursuant to
this section 2.1(a) to make an aggregate of two Demand Requests.
Without limiting the generality of the foregoing, the Initiating
Holder shall have the right to request registration pursuant to this
section 2.1 and specify that one of the methods of disposition of
Registrable Securities shall be a block trade or trades involving
Registrable Securities held by the Initiating Holder and/or other members
of the Investor Group and that, in connection therewith, the Company
shall file with the Commission a registration statement under Rule 415
covering all of the Registrable Securities to be sold in the block trade
or trades. In such case, the Company shall file an appropriate shelf
registration statement with the Commission as promptly as reasonably
practicable and in accordance with the provisions of section 2.3. Subject
to the provisions of section 2.1(d), any shelf registration which
involves a block trade or block trades as an intended method of
disposition, whether or not any such block trade is made, shall be
considered as the exercise of one of the three Demand Requests permitted
by this section 2.1(a). Notwithstanding anything herein to the contrary,
it is understood and agreed that the Initiating Holder shall not be
entitled to make a Demand Request for registration pursuant to this
section 2.1(a) until the date which is the sixtieth day after the
Effective Time and, in the event the Initiating Holder makes such a
request, the Company shall use its best efforts to file a registration
statement with the Commission with respect to such request not later than
the thirtieth day following such request. It is furthermore understood
and agreed that if the Initiating Holder makes a Demand Request on or
within ten days after such sixtieth day, the provisions of section 2.1(g)
shall not apply and the Company shall not be entitled to initiate a Delay
Period as therein provided, except as required by applicable law arising
from events outside of the control of the Company.
(b) Registration Statement Form. Registrations under this section
2.1 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and, as shall be reasonably
acceptable to the Initiating Holder of the Registrable Securities so to
be registered and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods
of disposition specified in the request for such registration.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this section 2.1
(including any registration deemed not to be "effected" under section
2.1).
(d) Effective Registration Statement. A registration requested
pursuant to this section 2.1 shall not be deemed to have been effected
(and therefore not requested for purposes of the limitations in section
2.1(a) on the number of requests for registration that can be made
pursuant to section 2.1(a)) (i) unless a registration statement with
respect thereto has become effective, provided that a registration which
does not become effective after the Company has filed a registration
statement with respect thereto solely by reason of the refusal to proceed
of the Initiating Holder (other than a refusal to proceed based upon the
advice of counsel relating to a matter with respect to the Company) shall
be deemed to have been effected by the Company at the request of the
Initiating Holder unless the Initiating Holder shall have elected to pay
all Registration Expenses in connection with such registration, (ii) if,
after it has become effective, such registration becomes subject to any
stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason, or (iii) if the
conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not
satisfied, other than by reason of some act or omission by the Initiating
Holder or any other holder of Registrable Securities.
(e) Selection of Underwriters. If a requested registration pursuant
to this section 2.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Initiating Holder from a
list of underwriters to be agreed upon by the Initiating Holder and the
Company.
(f) Priority in Requested Registrations. If a requested
registration pursuant to this section 2.1 involves an underwritten
offering, and the managing underwriter shall advise the Company in
writing (with a copy to each holder of Registrable Securities requesting
registration) that, in its opinion, the number of securities requested to
be included in such registration (including securities of the Company
which are not Registrable Securities) exceeds the number which can be
sold in such offering within a price range acceptable to the holders of a
majority of the Registrable Securities requested to be included in such
registration, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in
such registration by any member of the Investor Group which is a holder
of Registrable Securities, pro rata among such holders requesting such
registration on the basis of the number of such securities then
beneficially owned by such holders, (ii) second, Registrable Securities
requested to be included in such registration by any other holder of
Registrable Securities, pro rata among such other holders requesting such
registration on the basis of the number of such securities requested to
be included by such holders and (iii) third, subject to section 2.1(a)
hereof, securities the Company proposes to sell and other securities of
the Company included in such registration by other holders who may have
"piggyback" or incidental registration rights.
(g) Delay Periods. The Company shall be entitled to postpone the
filing of any registration statement otherwise required to be prepared
and filed by the Company pursuant to this section 2, or suspend the use
of any effective registration statement under this section 2, for a
reasonable period of time, but not in excess of 90 days (a "Delay
Period"), if any executive officer of the Company determines that in such
executive officer's reasonable good faith judgment the registration and
distribution of the Registrable Securities covered or to be covered by
such registration statement would materially interfere with any pending
material financing, acquisition or corporate reorganization or other
material corporate development involving the Company or any of its
subsidiaries or would require premature disclosure thereof and promptly
gives the Initiating Holder written notice of such determination, and an
approximation of the period of the anticipated delay; provided, however,
that (i) the aggregate number of days included in all Delay Periods
during any consecutive 12 months shall not exceed the aggregate of 180
days and (ii) a period of at least 90 days shall elapse between the
termination of any Delay Period and the commencement of the immediately
succeeding Delay Period. Immediately upon receipt of a written notice of
suspension, each holder of Registrable Securities shall cease all
disposition efforts with respect to Registrable Securities held by such
holder. If the Company shall so postpone the filing of a registration
statement, the Holders of Registrable Shares to be registered shall have
the right to withdraw the request for registration by giving written
notice within 45 days after receipt of the notice of postponement or, if
earlier, the termination of such Delay Period (and, in the event of such
withdrawal, such request shall not be counted for purposes of determining
the number of Demand Requests for registration to which the Initiating
Holder of Registrable Shares is entitled pursuant to this section 2). The
time period for which the Company is required to maintain the
effectiveness of any registration statement shall be extended by the
aggregate number of days of all Delay Periods during such registration.
The Company shall not be entitled to initiate a Delay Period unless it
shall (A) to the extent permitted by agreements with other security
holders of the Company, concurrently prohibit sales by such other
security holders under registration statements covering securities held
by such other security holders and (B) in the case of a delay arising as
a result of premature disclosure, in accordance with the Company's
policies from time to time in effect, forbid purchases and sales in the
open market by senior executives of the Company.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at any
time proposes to register any of its shares of Common Stock (other than
in connection with a registration of securities which are convertible or
exchangeable into Common Stock) under the Securities Act (other than by a
registration on Form S-4 or S-8, or any successor or similar forms and
other than pursuant to section 2.1), whether or not for sale for its own
account, it will each such time give prompt written notice to all holders
of Registrable Securities of its intention to do so and of such holders'
rights under this section 2.2. Upon the written request of any such
holder made within 30 days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed
of by such holder and the intended method or methods of disposition
thereof), the Company will, subject to the terms of this Agreement, use
its best efforts to effect the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to
register by the holders thereof, to the extent requisite to permit the
disposition (in accordance with the intended method or methods of
distribution thereof specified in the requests of such holders) of the
Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the
securities which the Company proposes to register; provided that if, at
any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine
for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon,
(i) in the case of a determination not to register, shall be relieved of
its obligation to register any Registrable Securities in connection with
such registration (but not from its obligation to pay the Registration
Expenses in connection therewith), without prejudice, however, to the
rights of any holder or holders of Registrable Securities entitled to do
so to request that such registration be effected as a registration under
section 2.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. No registration effected under this section 2.2 shall relieve
the Company of its obligation to effect any registration upon request
under section 2.1, nor shall any such registration hereunder be deemed to
have been effected pursuant to section 2.1. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this section 2.2, and each Requesting
Holder whose Registrable Securities are included in a registration
requested pursuant to this section 2.2 will pay any underwriting
discounts and commissions and fees of such holder's counsel in connection
therewith.
(b) Priority in Incidental Registrations. If (i) a registration
pursuant to this section 2.2 involves an underwritten offering of the
securities so being registered, whether or not for sale for the account
of the Company, to be distributed (on a firm commitment basis) by or
through one or more underwriters of recognized standing under
underwriting terms appropriate for such a transaction, (ii) the
Registrable Securities so requested to be registered for sale for the
account of holders of Registrable Securities are not also to be included
in such underwritten offering (either because the Company has not been
requested so to include such Registrable Securities pursuant to section
2.4(b) or, if requested to do so, is not obligated to do so under section
2.4(b)), and (iii) the managing underwriter of such underwritten offering
shall inform the Company and holders of the Registrable Securities
requesting such registration by letter of its belief that the number of
securities requested to be included in such registration exceeds the
number which can be sold in (or during the time of) such offering, then
the Company will include in such registration:
(i) first, all the securities the Company proposes to
sell for its own account,
(ii) second all securities of any other holder who has
made a demand for registration, and
(iii) third, to the extent that the number of
securities which the Company and any such other holders proposed to
include pursuant to clauses (i) and (ii) is less than the number of
securities which the Company has been advised can be sold in such
offering, the number of such Registrable Securities requested to be
included in such registration by the Requesting Holders pursuant to
this section 2.2(a) hereof shall be allocated pro rata among all
such Requesting Holders on the basis of the relative number of
Registrable Securities each such holder has requested to be
included in such registration.
2.3 Registration Procedures. Subject to section 2.1(a), if and
whenever the Company is required to effect the registration of any
Registrable Securities under the Securities Act as provided in sections
2.1 and 2.2, the Company shall, as expeditiously as reasonably possible:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration (including such
audited financial statements as may be required by the Securities
Act or the rules and regulations promulgated thereunder) and
thereafter cause such registration statement to become and remain
effective ro a period of at least 120 days, provided however that
the Company may discontinue any registration of its securities
which are not Registrable Securities (and, under the circumstances
specified in section 2.2(a), its securities which are Registrable
Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for a period of at least 120
days and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement until the earlier of such time as all of
such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof
set forth in such registration statement or such other time as is
required by the Securities Act;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement and each Requesting Holder
and each underwriter, if any, of the securities being sold by such
seller such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed pursuant to Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such
other documents, as such seller and underwriter, if any, may
reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other state securities laws or
blue sky laws of such jurisdictions as any seller thereof and any
underwriter of the securities being sold by such seller and any
Requesting Holder shall reasonably request, to keep such
registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable such
seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that
the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
subsection (iv) be obligated to be so qualified or to consent to
general service or process in any such jurisdiction;
(v) furnish to each seller of Registrable Securities
and each Requesting Holder a signed counterpart, addressed to such
seller, such Requesting Holder and the underwriters, if any, of:
(X) an opinion of counsel for the Company
(which shall be outside counsel if outside counsel is
rendering such opinion in the transaction and otherwise
may be the Company's inside counsel), dated the
effective date of such registration statement (or, if
such registration includes an underwritten public
offering, an opinion dated the date of the closing
under the underwriting agreement), customary for a
transaction of such type, and
(Y) a "comfort" letter (or, in the case of any
such Person which does not satisfy the conditions for
receipt of a "comfort" letter specified in Statement on
Auditing Standards No. 72, an "agreed upon procedures"
letter), dated the effective date of such registration
statement (and, if such registration includes an
underwritten public offering, a letter of like kind
dated the date of the closing under the underwriting
agreement), signed by the independent public
accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and,
in the case of the accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in underwritten
public offerings of securities (with, in the case of an "agreed
upon procedure" letter, such modifications or deletions as may be
required under Statement on Auditing Standards No. 35) and, in the
case of the accountants' letter, such other financial matters
customarily covered in a transaction of such type;
(vi) notify the holders of Registrable Securities and
the managing underwriter or underwriters, if any, promptly:
(V) when the registration statement, the
prospectus or any prospectus supplement related thereto
or post-effective amendment to the registration
statement has been filed, and, with respect to the
registration statement or any post-effective amendment
thereto, when the same has become effective:
(W) of any request by the Commission for
amendments or supplements to the registration statement
or the prospectus or for additional information;
(X) of the issuance by the Commission of any
stop order suspending the effectiveness of the
registration statement or the initiation of any
proceedings by any Person for that purpose;
(Y) if at any time the representations and
warranties of the Company made as contemplated by
section 2.4 below cease to be true and correct; and
(Z) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of any Registrable Securities for sale
under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any
proceeding for such purpose;
(vii) notify each seller of Registrable Securities
covered by such registration statement and each Requesting Holder,
at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon the Company's discovery
that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any
such seller or Requesting Holder promptly prepare and furnish to
such seller or Requesting Holder and each underwriter, if any, a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made;
(viii) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
registration statement at the earliest possible moment;
(ix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and, if
required, make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period
of at least twelve months, but not more than eighteen months,
beginning with the first day of the Company's first full calendar
quarter after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder, and will use
its best efforts to furnish to each such seller and each Requesting
Holder at least one business day prior to the filing thereof a copy
of any amendment or supplement to such registration statement or
prospectus and shall not file any thereof to which any such seller
or any Requesting Holder shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or of
the rules or regulations thereunder;
(x) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement; and
(xi) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the securities of the same class as the
Registrable Securities are then listed.
The Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto to which the holders
of at least a majority of the Registrable Securities covered by such
registration statement or the underwriter or underwriters, if any, shall
reasonably object.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such securities
as the Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company
of the occurrence of any event of the kind described in paragraph (viii)
of this section 2.3, such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until such holder's
receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (viii) of this section 2.3 and, if so directed
by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such holder's
possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice. In the event the Company
shall give any such notice, the period mentioned in paragraph (ii) of
this section 2.3 shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered
by such registration statement shall have received such notice to the
date on which each such seller has received the copies of the
supplemented or amended prospectus contemplated by paragraph (viii) of
this section 2.3.
If any such registration statement refers to any holder of
Registrable Securities by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to
require (i) the insertion therein of language, in form and substance
satisfactory to such holder, to the effect that the holding by such
holder of such securities does not necessarily make such holder a
"controlling person" of the Company within the meaning of the Securities
Act is not to be construed as a recommendation by such holder of the
investment quality of the Company's securities covered thereby and that
such holding does not imply that such holder will assist in meeting any
future financial requirements of the Company, or (ii) in the event that
such reference to such holder by name or otherwise is not required by the
Securities Act or any similar federal statute then in force, the deletion
of the reference to such holder.
2.4 Underwritten Offerings:
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by holders of Registrable
Securities pursuant to a registration requested under section 2.1, the
Company will enter into an underwriting or similar agreement with such
underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Company, each such holder and
the underwriters, and to contain such representations and warranties by
the Company and such other terms as are generally prevailing in
agreements of this type, including, without limitation, indemnities to
the effect and to the extent provided in section 2.7. The holders of the
Registrable Securities will cooperate with the Company in the negotiation
of the underwriting or similar agreement and will give consideration to
the reasonable suggestions of the Company regarding the form thereof,
provided that nothing herein contained shall diminish the foregoing
obligations of the Company. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to
the obligations of such holders of Registrable Securities. No
underwriting or similar agreement shall require any holder of Registrable
Securities to make any representations or warranties to or agreements
with the Company or the underwriters other than representations and
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method or methods of distribution
and any other representation required by law or to make any agreements
with the Company or the underwriters with respect to indemnification of
any Person or the contribution obligations of any Person that would
impose any obligation which is broader than the indemnity furnished by
such holder pursuant to the provisions of section 2.7. In addition, the
Requesting Holders shall cooperate with the Company in an effort to
provide that any such agreement will contain a provision modifying the
indemnification of the underwriter to the effect that the Company will
not be liable to any Person who participates as an underwriter in the
offering or sale of Registrable Securities with respect to any
preliminary prospectus, to the extent that any such loss, claim, damage
or liability of such underwriter results from such underwriter having
sold Registrable Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of
the final prospectus, if the Company has previously furnished thereof to
such underwriter and such final prospectus as then amended or
supplemented, has corrected any such misstatement or omission.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by section 2.2 and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by
any holder of Registrable Securities as provided in section 2.2 and
subject to the provisions of section 2.2(b), use its best efforts to
arrange for such underwriters to include all the Registrable Securities
to be offered and sold by such holder among the securities to be
distributed by such underwriters. The holders of Registrable Securities
to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to
and for the benefit of such underwriters shall also be made to and for
the benefit of such holders of Registrable Securities and that any or all
of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of
such holders of Registrable Securities. Any such holder of Registrable
Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other
than representations, warranties or agreements regarding such holder,
such holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law or to make any
agreements with the Company or the underwriters with respect to
indemnification of any Person or the contribution obligations of any
Person that would impose any obligation which is broader than the
indemnity furnished by such holder pursuant to the provisions of section
2.7. In addition, the Requesting Holders shall cooperate with the Company
in an effort to provide that any such agreement will contain a provision
modifying the indemnification of the underwriter to the effect that the
Company will not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities with
respect to any preliminary prospectus, to the extent that any such loss,
claim, damage or liability of such underwriter results from such
underwriter having sold Registrable Securities to a person to whom there
was not sent or given, at or prior to the written confirmation of such
sale, a copy of the final prospectus, if the Company has previously
furnished thereof to such underwriter and such final prospectus as then
amended or supplemented, has corrected any such misstatement or omission.
(c) Holdback Agreements.
(i) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities, if and to the extent so
required by the managing underwriter, not to sell, make any short
sale of, loan, grant any option for the purchase of, effect any
public sale or distribution of or otherwise dispose of any
securities of the Company, during the 7 days prior to and the 90
days after any underwritten registration pursuant to section 2.1 or
2.2 has become effective, except as part of such underwritten
registration, whether or not such holder participates in such
registration, provided that the foregoing restrictions shall not
apply with regard to any member of the Investor Group in a
distribution of Registrable Securities to its partners or to the
transfer to any Affiliate of such Persons or to any other
transferee in a private transaction not requiring registration
under the Securities Act, or to any bona fide pledge of such
Registrable Securities, provided that such Affiliate or other
transferee and/or lender or creditor acknowledges in writing that
it is bound by the provisions of this section 2.4(c). Each holder
of Registrable Securities agrees that the Company may instruct its
transfer agent to place stop transfer notations in its records to
enforce this section 2.4(c).
(ii) The Company agrees (X) if so required by the
managing underwriter not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of its equity securities or
securities convertible into or exchangeable or exercisable for any
of such securities during the seven days prior to and the 90 days
after any underwritten registration pursuant to section 2.1 or 2.2
has become effective, except as part of such underwritten
registration and except pursuant to registrations on Form S-4,
S-8, or any successor or similar forms thereto, and (Y) to cause
each holder of its securities purchased from the Company at any
time after the date of this Agreement (other than in a public
offering) to agree not to sell, make any short sale of, loan, grant
any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of such securities during such
periods.
(d) Participation in Underwritten Offerings. No Person may
participate in any underwritten offering hereunder unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved, subject to the terms and conditions
hereof, by the Company and the holders of a majority of Registrable
Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting
agreements and other documents (other than powers of attorney) required
under the terms of such underwriting arrangements. Notwithstanding the
foregoing, no underwriting agreement (or other agreement in connection
with such offering) shall require any holder of Registrable Securities to
make any representations or warranties to or agreements with the Company
or the underwriters other than representations and warranties regarding
such holder, such holder's Registrable Securities and such holder's
intended method or methods of distribution and any other representation
required by law or to make any agreements with the Company or the
underwriters with respect to indemnification of any Person or the
contribution obligations of any Person that would impose any obligation
which is broader than the indemnity furnished by such holder pursuant to
the provisions of section 2.7.
2.5 Preparation: Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
holders of Registrable Securities registered under such registration
statement, their underwriters, if any, each Requesting Holder and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such reasonable access
during normal business hours to its books and records and such
opportunities to discuss the business of the Company with its officers
and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and
such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.6 Rights of Requesting Holders. The Company will not file any
registration statement relating to Common Stock under the Securities Act
(other than by a registration on Form S-4 or Form S-8 or in connection
with a registration of securities which are convertible into or
exchangeable for Common Stock), unless it shall first have given to each
holder of Registrable Securities (who would be entitled to participate in
such registration) at the time outstanding (other than any such Person
who acquired all such securities held by such Person in a public offering
registered under the Securities Act or as the direct or indirect
transferee of shares initially issued in such an offering), at least 30
days prior written notice thereof. Any such Person who shall so request
within 30 days after such notice (a "Requesting Holder") shall have the
rights of a Requesting Holder provided in sections 2.3, 2.5 and 2.7. In
addition, if any such registration statement refers to any Requesting
Holder by name or otherwise (other than through a document filed by or on
behalf of any Requesting Holder which is incorporated by reference) as
the holder of any securities of the Company, then such holder shall have
the right to require (a) the insertion therein of language, in form and
substance satisfactory to such holder, to the effect that the holding by
such holder of such securities does not necessarily make such holder a
"controlling person" of the Company within the meaning of the Securities
Act and is not to be construed as a recommendation by such holder of the
investment quality of the Company's debt or equity securities covered
thereby and that such holding does not imply that such holder will assist
in meeting any future financial requirements of the Company, or (b) in
the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such holder.
2.7 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act,
the Company will, and hereby does agree to, indemnify and hold harmless
(i) in the case of any registration statement filed pursuant to section
2.1 or 2.2, the holder of any Registrable Securities covered by such
registration statement and its partners, if any, its and their respective
directors, officers, partners, agents and Affiliates, each other Person
who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such holder or any
such underwriter within the meaning of the Securities Act, and (ii) in
the case of any registration statement of the Company, any Requesting
Holder and its partners, if any, its and their respective directors,
officers, partners, agents and Affiliates and each other Person, if any,
who controls such Requesting Holder within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or
several, to which such holder or Requesting Holder or partner thereof or
any such director or officer or partner or agent or Affiliate or
underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or
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, and the Company will reimburse such holder, such
Requesting Holder, their respective partners and each such director,
officer, partner, agent, Affiliate, underwriter and controlling person
for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any
such preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed
by such holder or Requesting Holder, as the case may be, specifically
stating that it is for use in the preparation thereof. Such indemnity
shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or such Requesting Holder or partner
thereof or any such director, officer, partner, agent, Affiliate,
underwriter or controlling person and shall survive the transfer of such
securities by such holder. The indemnity agreement contained in this
section 2.7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, action or proceeding if such settlement
is effected without the consent of the Company.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to section 2.3, that the Company shall have
received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities, to indemnify severally
and hold harmless (in the same manner and to the same extent as set forth
in subsection (a) of this section 2.7) the Company, each director of the
Company, each officer of the Company and each other person, if any, who
controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement. Any such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or
any such director, officer or controlling person and shall survive the
transfer of such securities by such seller. The indemnity agreement
provided for in this section 2.7(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, action or
proceeding if such settlement is effected without the consent of such
seller (which consent shall not be unreasonably withheld). The parties
hereto hereby acknowledge and agree that, unless otherwise expressly
agreed to in writing by holders of Registrable Securities to the
contrary, for all purposes of this Agreement the only information
furnished or to be furnished to the Company for use in any registration
statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto are
statements specifically relating to (i) transactions between such holder
and its Affiliates, on the one hand, and the Company, on the other hand,
(ii) the beneficial ownership of shares of Common Stock by such holders
and its Affiliates,(iii) the name and address of such holder and (iv)
solely in offerings that are underwritten offerings, the method or
methods of distribution of such holders. The indemnity provided for under
this section 2.7(b) shall be limited in amount to the net amount of
proceeds actually received by such seller from the sale of Registrable
Securities pursuant to such registration statement.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subsections of
this section 2.7, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action, provided that the
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the preceding
subsections of this section 2.7, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of
such claim, the indemnifying party shall be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying
party similarly notified, to the extent that the indemnifying party may
wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to
entry of any judgment or enter into any settlement of any such action
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all
liability, or a covenant not to sue, in respect to such claim or
litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has
been assumed by an indemnifying party without the consent of such
indemnifying party.
(d) Indemnification Payments. The indemnification required by this
section 2.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in the
preceding subsections of this section 2.7 is unavailable to an
indemnified party in respect of any expense, loss, claim, damage or
liability referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such expense, loss,
claim, damage or liability in such proportion as is appropriate to
reflect the relative benefits and the relative fault of the Company on
the one hand and the holder or underwriter, as the case may be, on the
other in connection with the distribution of the Registrable Securities
and the statements or omissions which result in any expense, loss, damage
or liability, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of the holder or
underwriter, as the case may be, on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the
underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this
subsection (e) were determined by pro rata allocation (even if the
holders, Requesting Holders and any underwriters were treated as one
entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth in the preceding
sentence and subsection (c) of this section 2.7, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (e), no holder of
Registrable Securities or underwriter shall be required to contribute any
amount in excess of the amount by which (i) in the case of any such
holder the net proceeds received by such holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total
price at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case, the
amount of any damages that such holder or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission. 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. No party shall be liable for contribution under this
section 2.7 except to the extent and under such circumstances as such
party would have been liable to indemnify under this section 2.7 if such
indemnification were enforceable under applicable law.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings.
Affiliate: As defined in Rule 12b-2 promulgated under the Exchange
Act.
Beneficially Own or Beneficial Ownership: With respect to any
securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to rule 13d-3 under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities
Beneficially Owned by a person shall include securities
Beneficially Owned by all Affiliates of such Person and all other
Persons with whom such person would constitute a "group" within the
meaning of Section 13 (d) of the Exchange Act and the rules
promulgated thereunder.
Commission: The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
Common Stock: As defined in section 1.
Company: As defined in the introductory paragraph of this
Agreement.
Delay Period: As defined in section 2.1(g).
Demand Request: As defined in section 2.1(a).
Effective Time: As defined in the Merger Agreement.
Exchange Act: The Securities Exchange Act of 1934, or any similar
Federal Statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of
1934 shall include a reference to the comparable Section, if any,
of any such similar federal statute.
Initiating Holder: KIA IV.
Investor Group: Collectively, KIA IV, KEP II, CEA, Rutledge
Partners, Princes Gate, Acorn Partnership, PGI, PGI Sweden, Gregor
Von Opel, The Lewis and Patricia Kelso Trust, William A. Marquard,
The Frank T. Nickell IRA, David M. Roderick, George L. Shinn,
Steven B. Nielsen, F. De Wight Titus and Donald B. Garber.
KIA IV: As defined in section 1.
Merger Agreement: As defined in section 1.
Person: A corporation, an association, a partnership, an
organization, business, an individual, a governmental or political
subdivision thereof or a governmental agency.
Purchase Notice: As defined in section 15.
Registrable Securities: The Common Stock issued pursuant to the
transactions contemplated by the Merger Agreement and any
securities issued or issuable with respect to any Common Stock by
way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. As to any particular Registrable
Securities, once issued, such securities shall cease to be
Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective
under the Securities Act and such securities have been disposed of
in accordance with such registration statement, (b) they shall have
been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act, (c) a disposition of
all of them by the holder thereof shall not require registration or
qualification of them under the Securities Act or shall be eligible
for disposition under Rule 144, or (d) they shall have ceased to be
outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with section 2, including, without
limitation, all registration, filing and NASD fees, all stock
exchange listing fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance
and compliance, and any fees and disbursements of underwriters
customarily paid by issuers or sellers or securities, but excluding
underwriting discounts and commissions and transfer taxes, if any.
Requesting Holder: As defined in section 2.6.
Sale Notice: As defined in section 15.
Securities Act: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission
thereunder, all as of the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933
shall include a reference to the comparable Section, if any, of any
such similar Federal Statute.
Standstill Period: As defined in section 16.
Transfer: A transfer, sale, pledge, hypothecation, encumbrance,
assignment or other conveyance or disposition except an assignment
by operation of law.
4. Rule 144. The Company shall timely file the reports required to
be filed by it under the Securities Act and the Exchange Act (including
but not limited to the reports under sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder and will take such further action as
any holder of Registrable Securities may reasonably request, all to the
extent required from time to time to enable such holder to sell
Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under
the Securities Act, as such Rule may be amended form time to time, or (b)
any similar rule or regulation hereafter adopted by the Commission. Upon
the request of any holder of Registrable Securities, the Company will (a)
deliver to such holder a written statement as to whether it has complied
with the requirements of this section 4 or (b) take such action as is
necessary to allow transfer of such Registrable Securities in accordance
with the provisions of Rule 144(k) (or any successor provision) under the
Securities Act including without limitation, if necessary, the issuance
of new certificates for such Registrable Securities bearing a legend
restricting further transfer.
5. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have
obtained the written consent to such amendment, action or omission to
act, of the holder or holders of more than 50% of the shares of
Registrable Securities and in the case of any such amendment, action or
omission to act in respect of the first sentence of Section 4, the
written consent of each holder affected thereby; provided however, for so
long as any shares of Common Stock are held by any member of the Investor
Group, any amendment, action or omission to act is also subject to the
prior written consent of KIA IV. Each holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any
consent authorized by this section 5, whether or not such Registrable
Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated as
the holder of such Registrable Securities for purposes of any request or
other action by any holder or holders of Registrable Securities pursuant
to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of
Registrable Securities contemplated by this Agreement. If the beneficial
owner of any Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any Person provided for
hereunder shall be in writing and shall be given to such Person (a) in
the case of any member of the Investor Group, addressed to such party
care of Kelso & Company, 320 Park Avenue, 24th Floor, New York, New York
10022 to the attention of James J. Connors, III, Esquire or at such other
address as such party shall have furnished to the Company in writing, (b)
in the case of any other holder of Registrable Securities, at the address
that such holder shall have furnished to the Company in writing, or,
until any such other holder so furnishes to the Company an address, then
to and at the address of the last holder of such Registrable Securities
who has furnished an address to the Company or (c) in the case of the
Company, at McKesson Corporation, One Post Street, San Francisco,
California 94104, to the attention of its General Counsel, or at such
other address, or to the attention of such other officer, as the Company
shall have furnished to each holder of Registrable Securities at the time
outstanding. Each such notice, request or other communication shall be
effective (i) if given by mail, 72 hours after such communication is
deposited in the mail with first class postage prepaid, addressed as
aforesaid or (ii) if given by any other means (including without
limitation, by air courier), when delivered at the address specified
above, provided that any such notice, request or communication to any
holder of Registrable Securities shall not be effective until received.
8. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. No holder of Registrable Securities
shall assign this Agreement or any rights hereunder without the prior
written consent of the Company (which consent may be withheld for any
reason in the sole discretion of the Company), except that this Agreement
and any rights hereunder may be assigned by operation of law.
9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only
and shall not limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO THE PRINCIPLES OF
CONFLICTS OF LAWS.
11. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original,
but all such counterparts shall together constitute one and the same
instrument.
12. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the Company and each other party hereto
relating to the subject matter hereof and supersedes all prior agreements
and understandings relating to such subject matter.
13. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
DELAWARE OR OF THE UNITED STATES OF AMERICA FOR THE STATE OF DELAWARE
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND APPELLATE
COURTS FROM ANY THEREOF. EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF TO SUCH PARTY BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED,
TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 7. THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVE TRIAL BY JURY AND ANY OBJECTION, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENCE WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
14. Severability. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance, shall be
held invalid, the remainder of this Agreement, or the application of such
provisions to Persons or circumstances other than those to which it is
held invalid, shall not be affected thereby.
15. Restrictions on Transfer; Disposition of Shares. (a) Registered
Offerings. In the event of any public sales or distribution of the
Registrable Securities effected pursuant to Section 2 of this Agreement,
the Investor Group shall use their reasonable best efforts to effect, or
cause to be effected, such public sale or distribution, so that, without
the prior written consent of the Company (which shall not be unreasonably
withheld), no participant or purchaser would Beneficially Own in the
aggregate 4% or more of all outstanding Common Stock of the Company. The
Investor Group agrees to use their respective reasonable efforts in
cooperation with the Company to effect as broad a disposition in any such
public sale or distribution as is reasonably practicable.
(b) Limitations on Dispositions. The Investor Group agrees that
during the Standstill Period (as defined), they will not, and will cause
their Affiliates not to, directly or indirectly, without the prior
written consent of the Company (which consent shall not be unreasonably
withheld), transfer, sell, pledge, hypothecate, encumber, assign or
otherwise dispose of or convey a legal or beneficial interest
("Transfer") (A) to any Person, an aggregate of 2% or more of the Common
Stock of the Company then outstanding; or (B) to any person, any of the
Common Stock of the Company if, to the knowledge of the Investor Group or
any of their Affiliates, after due inquiry which is reasonable in the
circumstances, immediately following such transaction the acquiror of
such Common Stock of the Company, together with its Affiliates, would
Beneficially Own in the aggregate 4% or more of the Common Stock of the
Company then outstanding; provided, however, the foregoing limitations on
Transfer shall not apply to any Transfer to a passive institutional
investor such as (x) a "qualified institutional buyer" (as such term is
defined in Rule 144A of the Securities Act) or (y) an "accredited"
investor (within the meaning of Rule 501(a)(1), (2), (3) or (7) of the
Securities Act) which, in each case, would be eligible to file a Schedule
13G with respect to the shares of Common Stock owned by such Person and
provided, further, that such person has not disclosed, pursuant to Item 4
of Schedule of 13D, an intent, or reserved the right, to engage in any
change in control transaction or to engage in a contested proxy or
consent solicitation or to otherwise seek to control or influence the
business, management or policies of the Company.
(c) Right of First Refusal; Procedures. The Investor Group shall,
prior to effecting any Transfer of the Common Stock of the Company
representing more than 1% of the outstanding shares of Common Stock to
any Person, offer the Company a right of first refusal to purchase the
shares proposed to be Transferred on the following terms. The Investor
Group shall provide the Company with written notice (the "Sale Notice")
of any proposed sale, which Sale Notice shall contain the identity of the
purchaser, the number of shares of the Common Stock of the Company
proposed to be Transferred to such purchaser, the purchase price for such
shares and the form of consideration payable for such shares. The Sale
Notice shall also contain an irrevocable offer to sell the shares subject
to such Sale Notice to the Company for cash at a price equal to the price
contained in such Sale Notice. The Company shall have the right and
option, by written notice delivered to the Investor Group (the "Purchase
Notice") within 15 days of receipt of the Sale Notice, to accept such
offer as to all, but not less than all, of the Common Stock of the
Company subject to such Sale Notice. The Company shall have the right to
assign to any Person such right to purchase the shares subject to the
Sale Notice. In the event the Company (or its assignee) elects to
purchase the shares subject to the Sale Notice, the closing of the
purchase of the Common Stock of the Company shall occur at the principal
office of the Company (or its assignee) on or before the 10th day
following such Shareholder's receipt of the Purchase Notice. In the event
the Company does not elect to purchase the shares subject to the Sale
Notice, such Shareholder shall be free, for a period of 60 days following
the receipt of notice from the Company of its election not to purchase
such shares or, in the absence of any such notice, for a period of 60
days following the 15th day after receipt by the Company of the Sale
Notice, to sell the shares subject to the Sale Notice in accordance with
the terms of, and to the person identified in, the Sale Notice. If such
sale is not effected within such 60 day period such shares shall remain
subject to the provisions of this Agreement.
Notwithstanding the foregoing, the right of first refusal set forth
in this Section shall not apply to the sale by the Investor Group of the
Common Stock of the Company (i) made pursuant to section 2 of this
Agreement, or (ii) made in a tender offer, merger or other similar
business combination transaction, whether or not approved by the Board of
Directors of the Company.
16. Standstill and Related Provisions. The Investor Group agrees
that for a period commencing on the date of this Agreement and
terminating on the third anniversary of the Effective Time (the
"Standstill Period"), without the prior written consent of the Board of
Directors of the Company specifically expressed in a resolution adopted
by a majority of the directors of the Company, the Investor Group will
not, directly or indirectly, alone or in concert with others:
(a) acquire, offer or propose to acquire, or agree to acquire any
additional shares of Common Stock of the Company (or its rights to
acquire such Common Stock), except, in any case, by way of stock
dividends or other distributions or rights offerings made available to
holders of any shares of the Common Stock of the Company generally,
share-splits, reclassifications, recapitalizations, reorganizations and
any other similar action taken by the Company;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" (as such term is used in the proxy rules of the Securities
and Exchange Commission as in effect on the date hereof) of proxies or
consents (whether or not relating to the election or removal of
directors), seek to advise, encourage or influence any Person with
respect to the voting of any of the Common Stock of the Company,
initiate, propose or otherwise "solicit" (as such term is used in the
proxy rules of the Commission as in effect on the date hereof)
shareholders of the Company for the approval of shareholder proposals,
whether made pursuant to Rule 14a-8 of the Exchange Act or otherwise, or
induce or attempt to induce any other Person to initiate any such
shareholder proposal or otherwise communicate generally with the
Company's shareholders;
(c) otherwise act, alone or in concert with others, to control or
seek to control or influence or seek to influence the management, Board
of Directors or policies of the Company;
(d) seek, propose, or make any public statement with respect to,
any merger, consolidation, business combination, tender or exchange
offer, sale or purchase of assets, sale or purchase of securities,
dissolution, liquidation, reorganization, restructuring,
recapitalization, change in capitalization, change in corporate structure
or business or similar transaction involving the Company or its
subsidiaries;
(e) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any of
the Common Stock of the Company, other than groups consisting solely of
members of the Investor Group; and
(f) request or cause to be requested for any purpose, the Company's
stock ledger, a list of the Company's shareholders, or the Company's
other books and records; or to call or seek to have called any meeting of
the shareholders of the Company or execute any written consent with
respect to the Common Stock of the Company.
Notwithstanding the foregoing, Affiliates of the Investor Group in the
ordinary course of the conduct of such Affiliates' business may engage in
investment banking activities and purchases and sales of Common Stock and
other securities of the Company as broker-dealers or otherwise.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
MCKESSON CORPORATION
By: /s/ Ivan D. Meyerson
KELSO INVESTMENT ASSOCIATES IV, L.P.
By: /s/ Thomas R. Wall, IV
KELSO EQUITY PARTNERS II, L.P.
By: /s/ Thomas R. Wall, IV
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners
By: /s/ Brian Richmond, Partner
JOHN RUTLEDGE PARTNERS, L.P.
By: /s/ John Rutledge
PRINCES GATE INVESTORS, L.P.
By: /s/ David R. Powers
PG Investors, Inc. as General
Partner
ACORN PARTNERSHIP I, L.P.
By: /s/ David R. Powers
PG Investors, Inc. as General
Partner
PGI INVESTMENTS LIMITED
By: /s/ David R. Powers
PG Investors, Inc. as
Attorney-in-Fact
PGI SWEDEN AB
By: /s/ David R. Powers
PG Investors, Inc. as
Attorney-in-Fact
/s/ David R. Powers, Attorney-in-Fact
Gregor Von Opel
THE LOUIS AND PATRICIA KELSO TRUST
By: /s/ Patricia H. Kelso, Trustee
/s/ William A. Marquard
William A. Marquard
THE FRANK T. NICKELL IRA
By: /s/ Annamarie Simonelli
Assistant V.P.- Fleet Bank
/s/ David M. Roderick
David M. Roderick
/s/ George L. Shinn
George L. Shinn
/s/ Steven B. Nielsen
Steven B. Nielsen
/s/ F. De Wight Titus
F. De Wight Titus
/s/ Donald B. Garber
Donald B. Garber
