\n Section 4.16. Opinion of Financial Advisor……………………………. 20
\n Section 4.17. Rights Plan…………………………………………… 20
\n Section 4.18. Fees and Commissions…………………………………… 20
\n Section 4.19. Compliance; Permits……………………………………. 20
\n Section 4.20. Contracts…………………………………………….. 20
\n Section 4.21. Affiliate Transactions…………………………………. 21
\n Section 4.22. Working Capital……………………………………….. 21<\/p>\nARTICLE 5 COVENANTS……………………………………………………. 22
\n Section 5.01. Conduct of Business of the Company………………………. 22
\n Section 5.02. Acquisition Proposals………………………………….. 22
\n Section 5.03. Access to Information………………………………….. 23
\n Section 5.04. Commercially Reasonable Efforts…………………………. 25
\n Section 5.05. Indemnification Exculpation and Insurance………………… 25
\n Section 5.06. Employee Plans and Benefits and Employment Contracts………. 27
\n Section 5.07. Meeting of the Company’s Stockholders……………………. 29
\n Section 5.08. De-registration……………………………………….. 30
\n Section 5.09. Certain Actions……………………………………….. 31
\n Section 5.10. Affiliate Transactions…………………………………. 31
\n Section 5.11. Public Announcements…………………………………… 32
\n Section 5.12. Performance by Merger Subsidiary………………………… 32<\/p>\n
ARTICLE 6 CONDITIONS TO THE MERGER………………………………………. 33
\n Section 6.01. Conditions to Each Party’s Obligation to Effect the Merger…. 33<\/p>\n
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER…………………………………. 33
\n Section 7.01. Termination…………………………………………… 33
\n Section 7.02. Effect of Termination………………………………….. 33
\n Section 7.03. Amendment…………………………………………….. 34
\n Section 7.04. Extension; Waiver……………………………………… 35
\n Section 7.05. Procedure for Termination, Extension or Waiver……………. 36<\/p>\n
ARTICLE 8 MISCELLANEOUS………………………………………………… 36
\n Section 8.01. Non-Survival of Representations and Warranties……………. 36
\n Section 8.02. Entire Agreement; Assignment……………………………. 36
\n Section 8.03. Validity……………………………………………… 38
\n Section 8.04. Notices………………………………………………. 38
\n Section 8.05. Governing Law…………………………………………. 38
\n Section 8.06. Jurisdiction………………………………………….. 38
\n Section 8.07. Descriptive Headings…………………………………… 38
\n Section 8.08. Parties in Interest……………………………………. 38
\n Section 8.09. Counterparts………………………………………….. 38
\n Section 8.10. Fees and Expenses……………………………………… 38
\n Section 8.11. Enforcement of Agreement……………………………….. 39
\n Section 8.12. Waiver of Jury Trial…………………………………… 39
\n Section 8.13. Certain Definitions……………………………………. 39
\n<\/c><\/s><\/table>\n
– ii –<\/p>\n
AGREEMENT AND PLAN OF MERGER<\/p>\n
AGREEMENT AND PLAN OF MERGER (the “Agreement’), dated as of May 4,
\n2000, among Merck & Co., Inc., New Jersey corporation (“Parent”), PV Acquisition
\nCorp., a Delaware corporation and an indirect wholly-owned subsidiary of Parent
\n(“Merger Subsidiary”), and ProVantage Health Services, Inc., a Delaware
\ncorporation (the “Company”).<\/p>\n
WHEREAS, the Boards of Directors of Parent, Merger Subsidiary and the
\nCompany deem it advisable and in the best interests of their respective
\nstockholders that Parent acquire the Company upon the terms and subject to the
\nconditions provided for in this Agreement;<\/p>\n
WHEREAS, in furtherance thereof, it is proposed that the acquisition
\nbe accomplished by Merger Subsidiary commencing a cash tender offer (as it may
\nbe amended from time to time as permitted by this Agreement, the “Offer”) to
\npurchase all of the issued and outstanding shares of common stock, par value
\n$.01 per share, of the Company (the “Common Stock”), and the associated Rights
\n(as defined in Section 4.05) (the shares of Common Stock and any associated
\nRights are referred to herein as “Shares”), for $12.25 per Share (such amount or
\nany greater amount per Share paid pursuant to the Offer being hereinafter
\nreferred to as the “Offer Price”), net to the seller in cash, upon the terms and
\nsubject to the conditions set forth in this Agreement;<\/p>\n
WHEREAS, the Board of Directors of the Company has approved the Offer
\nand the Merger and resolved to recommend that holders of Shares tender their
\nShares pursuant to the Offer and approve and adopt this Agreement and the
\nMerger;<\/p>\n
WHEREAS, the Boards of Directors of Parent (on its own behalf and as
\nthe sole stockholder of Merger Subsidiary), Merger Subsidiary and the Company
\nhave each approved this Agreement and the merger of Merger Subsidiary with and
\ninto the Company (the “Merger”) in accordance with the General Corporation Law
\nof the State of Delaware (the “DGCL”), in the case of each of the Company and
\nMerger Subsidiary, and in accordance with the New Jersey Business Corporation
\nAct, in the case of Parent, and upon the terms and conditions set forth in this
\nAgreement;<\/p>\n
WHEREAS, Parent has required, as a condition to its willingness to
\nenter into this Agreement, that SKO Holdings, Inc., a wholly-owned subsidiary of
\nShopKo Stores, Inc. (collectively, the “Majority Stockholder”), enter into a
\nStockholder Agreement (the “Stockholder Agreement”) with Parent, substantially
\nin the form attached hereto as Exhibit A, concurrently with the execution of
\nthis Agreement;<\/p>\n
WHEREAS, Parent has required, as a condition to its willingness to
\nenter into this Agreement, that the Majority Stockholder enter into a letter
\nwith the Company, providing for certain changes in their existing contractual
\narrangements upon the Majority Shareholder ceasing to own a majority of the
\noutstanding Common Stock (the “Side Letter”); and<\/p>\n
WHEREAS, Parent has required, as a condition to its willingness to
\nenter into this Agreement, that Merck-Medco Managed Care, L.L.C. enter into new
\nemployment contacts (the <\/p>\n
-1-<\/p>\n
“Employment Contracts”) with certain employees, providing for the terms and
\nconditions of their employment with Merck-Medco Managed Care, L.L.C. after the
\nconsummation of the Offer.<\/p>\n
NOW, THEREFORE, in consideration of the representations, warranties,
\ncovenants and agreements contained in this Agreement, and intending to be
\nlegally bound hereby, Parent, Merger Subsidiary and the Company agree as
\nfollows:<\/p>\n
ARTICLE 1<\/p>\n
OFFER<\/p>\n
Section 1.01. The Offer.
\n ——— <\/p>\n
(a) Within a reasonable period of time after the date of the execution
\nof this Agreement, Parent shall cause Merger Subsidiary to commence (within the
\nmeaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
\n“Exchange Act”)), and Merger Subsidiary shall commence, the Offer. Parent shall
\nuse its best efforts to cause Merger Subsidiary to commence the Offer no later
\nthan the fifth business day after the execution of this Agreement. The
\nobligation of Merger Subsidiary to accept for payment and pay for Shares
\ntendered pursuant to the Offer shall be subject to only those conditions set
\nforth in Annex A (any of which may be waived by Merger Subsidiary in its sole
\ndiscretion; provided, however, that, without the consent of the Company, except
\nas contemplated by Section 1.01(e), Merger Subsidiary shall not waive the
\nMinimum Tender Condition (as defined in Annex A)). Subject to the terms of the
\nOffer and this Agreement and the satisfaction or earlier waiver of all the
\nconditions of the Offer set forth in Annex A as of any expiration date of the
\nOffer, Merger Subsidiary shall accept for payment and pay for all Shares validly
\ntendered and not withdrawn pursuant to the Offer as soon as practicable after it
\nis permitted to do so under applicable law.<\/p>\n
(b) As soon as practicable on the date of commencement of the Offer,
\nParent and Merger Subsidiary shall file with the Securities and Exchange
\nCommission (the “SEC”) with respect to the Offer a Tender Offer Statement on
\nSchedule TO (together with all amendments and supplements thereto, the “Schedule
\nTO”), which will comply in all material respects with the provisions of
\napplicable federal securities laws and will contain an offer to purchase
\nrelating to the Offer (the “Offer to Purchase”) and forms of related letters of
\ntransmittal and summary advertisement (which documents, together with any
\nsupplements or amendments thereto, are referred to herein collectively as the
\n“Offer Documents”). Parent and Merger Subsidiary shall make all filings
\nrequired by applicable state law relating to the Offer (the “State Filings”) as
\nand when required by applicable state law. Parent and Merger Subsidiary will
\ndeliver copies of the proposed forms of the Schedule TO, the Offer Documents and
\nthe State Filings (as well as any change thereto) to the Company within a
\nreasonable time prior to the commencement of the Offer for prompt review and
\ncomment by the Company and its counsel. Parent and Merger Subsidiary will
\nprovide the Company and its counsel in writing any comments that Merger
\nSubsidiary, Parent or their counsel may receive from the SEC or its staff or any
\napplicable state authority with respect to the Offer Documents or the State
\nFilings promptly after the receipt thereof. Parent and Merger Subsidiary shall
\npromptly correct any information in the Schedule TO, the Offer Documents or the
\nState Filings that shall have become false or misleading in any material respect
\nand take all steps necessary to cause such Schedule TO, Offer Documents or State
\nFilings as so corrected to be filed <\/p>\n
-2-<\/p>\n
with the SEC and any applicable state authority and disseminated to the
\nstockholders of the Company, as and to the extent required by applicable law.
\nParent and Merger Subsidiary will provide copies of any amendments or
\nsupplements to the Offer Documents, the Schedule TO or the State Filings prior
\nto any filing of such amendments or supplements with the SEC or any applicable
\nstate authority in order to provide the Company and its counsel with a
\nreasonable opportunity to review and comment.<\/p>\n
(c) Each of Parent and Merger Subsidiary expressly reserves the right
\nto modify the terms of the Offer, except that neither Parent nor Merger
\nSubsidiary shall, without the prior written consent of the Company, decrease the
\nprice per Share payable in the Offer, change the form of consideration payable
\nin the Offer, decrease the number of Shares sought pursuant to the Offer (except
\nas contemplated by Section 1.01(e)), change or modify the conditions to the
\nOffer in a manner adverse to the Company or holders of Shares, impose additional
\nconditions to the Offer, or amend any term of the Offer in any manner adverse to
\nthe Company or holders of Shares. Notwithstanding the foregoing, Merger
\nSubsidiary, without the consent of the Company, (i) shall extend the Offer, if
\nat the then scheduled expiration date of the Offer any of the conditions to
\nMerger Subsidiary’s obligation to accept for payment and pay for Shares shall
\nnot have been satisfied, until such time as such condition is satisfied, if such
\ncondition may in the reasonable judgment of Merger Subsidiary be satisfied in a
\ntime period reasonable for such satisfaction, and (ii) may extend the Offer for
\nany period required by any rule, regulation, interpretation or position of the
\nSEC or the staff thereof applicable to the Offer. Each extension, if any, of
\nthe Offer pursuant to clause (i) of the preceding sentence shall not exceed the
\nlesser of ten business days or such fewer number of days that Merger Subsidiary
\nreasonably believes are necessary to cause the conditions of the Offer set forth
\nin Annex A to be satisfied. Merger Subsidiary may provide for a “subsequent
\noffering period” in accordance with Rule 14d-11 under the Exchange Act with the
\nprior consent of the Company (such consent not to be unreasonably withheld).
\nNotwithstanding the foregoing, Merger Subsidiary shall have no obligation to
\nextend the Offer if the condition to the Offer set forth in Section (c)(x) of
\nthe Annex A is not satisfied at the scheduled expiration date of the Offer.<\/p>\n
(d) On or prior to the date that Merger Subsidiary becomes obligated
\nto accept for payment and pay for Shares pursuant to the Offer, Parent will
\nprovide or cause to be provided to Merger Subsidiary the funds necessary to pay
\nfor all Shares that Merger Subsidiary becomes obligated to accept for payment
\nand pay for pursuant to the Offer.<\/p>\n
(e) Notwithstanding anything to the contrary in this Agreement, Merger
\nSubsidiary may waive the Minimum Tender Condition (as defined in Annex A)
\nwithout the consent of the Company as long as Merger Subsidiary is permitted by
\napplicable law to and does exercise the Option (as defined in the Stockholder
\nAgreement) immediately following the consummation of the Offer and acquires
\ntitle to all of the Shares subject thereto and thereafter promptly consummates
\nthe Merger.<\/p>\n
(f) The parties hereby agree that the initial scheduled expiration
\ndate of the Offer shall be June 14, 2000. The parties further agree that any
\nextension of the expiration date of the Offer shall result in the Offer expiring
\non the twelfth business day after the end of a Company<\/p>\n
-3-<\/p>\n
Fiscal Period. For purposes of this Agreement, Company Fiscal Period shall mean
\nany of April 29, 2000; May 27, 2000; July 1, 2000; July 29, 2000; August 26,
\n2000; September 30, 2000; October 28, 2000; November 25, 2000; or December 30,
\n2000.<\/p>\n
Section 1.02. Company Actions.
\n ————— <\/p>\n
(a) The Company hereby consents to the Offer and represents that the
\nCompany’s Board of Directors, at a meeting duly called and held, has adopted
\nresolutions approving the Offer, the Merger and this Agreement, determining that
\nthe terms of the Offer and the Merger are fair to, and in the best interests of,
\nthe Company’s stockholders and recommending acceptance of the Offer and approval
\nof the Merger and this Agreement by the stockholders of the Company; provided,
\nhowever, that the Board of Directors of the Company may modify, withdraw or
\nchange such recommendation solely to the extent that the Company and the Board
\nof Directors are permitted to do so under Section 5.02 of this Agreement.
\nSubject to the foregoing and Section 5.02, the Company hereby consents to the
\ninclusion in the Offer Documents of the recommendations of the Company’s Board
\nof Directors described in this Section.<\/p>\n
(b) The Company will file with the SEC on the date of the commencement
\nof the Offer a Solicitation\/Recommendation Statement on Schedule 14D-9 (together
\nwith all amendments and supplements thereto, the “Schedule 14D-9”) containing
\nsuch recommendations of the Board in favor of the Offer and the Merger;
\nprovided, however, that the Board of Directors of the Company may modify,
\nwithdraw or change such recommendation solely to the extent that the Board of
\nDirectors and the Company are permitted to do so under Section 5.02 of this
\nAgreement. The Company will deliver the proposed forms of the Schedule 14D-9
\nand the exhibits thereto to Parent within a reasonable time prior to the
\ncommencement of the Offer for prompt review and comment by Parent and its
\ncounsel. Parent and its counsel shall be given a reasonable opportunity to
\nreview any amendments and supplements to the Schedule 14D-9 prior to their
\nfiling with the SEC or dissemination to stockholders of the Company. The
\nCompany will provide Parent and its counsel in writing any comments that the
\nCompany or its counsel may receive from the SEC or its staff with respect to the
\nSchedule 14D-9 promptly after receipt thereof, and shall disseminate the
\nSchedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act.
\nThe Company shall promptly correct any information in the Schedule 14D-9 that
\nshall have become false or misleading in any material respect and take all steps
\nnecessary to cause such Schedule 14D-9 as so corrected to be filed with the SEC
\nand disseminated to the stockholders of the Company, as and to the extent
\nrequired by applicable federal securities laws.<\/p>\n
(c) In connection with the Offer, the Company shall furnish to, or
\ncause to be furnished to, Parent mailing labels, security position listings and
\nany available listing or computer file containing the names and addresses of the
\nrecord holders and non-objecting beneficial owners of the Shares as of a recent
\ndate and shall furnish Parent with such information and assistance as Parent or
\nits agents may reasonably request in communicating the Offer to the stockholders
\nof the Company. Subject to the requirements of applicable law, and except for
\nsuch steps as are necessary to disseminate the Offer Documents and any other
\ndocuments necessary to consummate the Offer or the Merger, Parent and Merger
\nSubsidiary shall, and shall cause each of their affiliates to, hold the
\ninformation contained in any of such labels and lists in confidence, use such
\ninformation only in connection with the Offer and the Merger, and, if this
\nAgreement is terminated, promptly deliver to the Company all copies of such
\ninformation, labels, listings and <\/p>\n
-4-<\/p>\n
files or extracts therefrom then in their possession, in the possession of their
\nagents or representatives or under their control.<\/p>\n
Section 1.03. Directors of the Company. Promptly upon the acceptance
\n ————————
\nfor payment of and payment for any Shares by Merger Subsidiary pursuant to the
\nOffer (and, to the extent the Minimum Tender Condition is waived pursuant to
\nSection 1.01(e), the exercise of the Option as contemplated by Section 1.01(e)),
\nMerger Subsidiary shall be entitled to designate such number of directors,
\nrounded up to the next whole number, on the Board of Directors of the Company as
\nwill give Merger Subsidiary, subject to compliance with Section 14(f) of the
\nExchange Act, representation on the Board of Directors of the Company equal to
\nthe product of (a) the number of directors on the Board of Directors of the
\nCompany and (b) the percentage that such number of votes represented by Shares
\nso purchased and Shares otherwise held by Parent and its affiliates, if any,
\nbears to the number of votes represented by Shares outstanding, and the Company
\nshall at such time, subject to applicable law, cause Merger Subsidiary’s
\ndesignees to be so elected by its existing Board of Directors. Subject to
\napplicable law, the Company shall take all action requested by Parent necessary
\nto effect any such election, including mailing to its stockholders the
\ninformation statement (the “Information Statement”) containing the information
\nrequired by Section 14(f) of the Exchange Act and Rule 14(f)-1 promulgated
\nthereunder, and the Company shall make such mailing with the mailing of the
\nSchedule 14D-9 (provided that Parent and Merger Subsidiary shall have provided
\nto the Company on a timely basis all information required to be included in the
\nInformation Statement with respect to Merger Subsidiary’s designees). In
\nconnection with the foregoing, the Company will, subject to applicable law,
\npromptly either increase the size of the Board of Directors of the Company
\nand\/or obtain the resignation of such number of its current directors as is
\nnecessary to enable Merger Subsidiary’s designees to be elected or appointed to
\nthe Company’s Board of Directors as provided above; provided, however, that
\nprior to the Effective Time (as defined in Section 2.03) the Board of Directors
\nof the Company shall always have at least two (2) members who are neither
\nofficers, directors, stockholders or designees of Merger Subsidiary or any of
\nits affiliates (“Merger Subsidiary Insiders”) and each committee of the Board of
\nDirectors of the Company shall have at least one (1) member who is not a Merger
\nSubsidiary Insider. If the number of directors who are not Merger Subsidiary
\nInsiders is reduced below two (2) for any reason prior to the Effective Time,
\nthen the remaining director who is not a Merger Subsidiary Insider shall be
\nentitled to designate a person to fill such vacancy who is not a Merger
\nSubsidiary Insider and who shall be a director not deemed to be a Merger
\nSubsidiary Insider for all purposes of this Agreement. Following the election of
\nMerger Subsidiary’s designees to the Company’s Board of Directors pursuant to
\nthis Section 1.03 and prior to the Effective Time (i) any amendment or
\ntermination of this Agreement by the Company, (ii) any extension or waiver by
\nthe Company of the time for the performance of any of the obligations or other
\nacts of Parent or Merger Subsidiary under this Agreement or (iii) any waiver of
\nthe Company’s rights hereunder shall, in any such case, require the concurrence
\nof a majority of the directors of the Company then in office who are not Merger
\nSubsidiary Insiders.<\/p>\n
-5-<\/p>\n
ARTICLE 2<\/p>\n
THE MERGER<\/p>\n
Section 2.01. The Merger. Upon the terms and subject to the
\n ———-
\nconditions hereof, and in accordance with the relevant provisions of the DGCL,
\nMerger Subsidiary shall be merged with and into the Company as soon as
\npracticable following the satisfaction or waiver of the conditions set forth in
\nArticle 6. Following the Merger, the Company shall continue as the surviving
\ncorporation (the “Surviving Corporation”) and shall continue its existence under
\nthe laws of the State of Delaware, and the separate corporate existence of
\nMerger Subsidiary shall cease.<\/p>\n
Section 2.02. Closing. The closing of the Merger (the “Closing”) will
\n ——-
\ntake place at 9:00 a.m. on a date to be specified by the parties, which shall be
\nno later than the second business day after satisfaction or waiver of the
\nconditions set forth in Article 6, unless another time or date, or both, are
\nagreed to in writing by the parties hereto. The Closing will be held at the
\noffices of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin,
\nunless another place is agreed to by the parties.<\/p>\n
Section 2.03. Effective Time. Upon the terms and subject to the
\n ————–
\nconditions hereof, as soon as possible after consummation of the Offer and, to
\nthe extent required by the DGCL, after the vote of the stockholders of the
\nCompany in favor of the approval of the Merger and this Agreement has been
\nobtained, the Merger shall be consummated by filing with the Secretary of State
\nof the State of Delaware, as provided in the DGCL, a certificate of merger or
\nother appropriate documents (in any such case, the “Certificate of Merger”) and
\nthe parties hereto shall make all other filings or recordings required under the
\nDGCL (the later of the time of such filing or the time specified in the
\nCertificate of Merger being the “Effective Time”).<\/p>\n
Section 2.04. Effects of the Merger. The Merger shall have the
\n ———————
\neffects set forth in Section 259 of the DGCL. As of the Effective Time, the
\nCompany, as the Surviving Corporation, shall be a wholly-owned subsidiary of
\nParent.<\/p>\n
Section 2.05. Certificate of Incorporation and Bylaws.
\n ————————————— <\/p>\n
(a) The certificate of incorporation of Merger Subsidiary in effect
\nimmediately prior to the Effective Time shall be the certificate of
\nincorporation of the Surviving Corporation (the “Charter”) from and after the
\nEffective Time; provided, however, that Article FIRST of the Charter shall be
\namended to provide that the name of the Surviving Corporation shall be the name
\nof the Company and as so amended shall be the Charter until amended in
\naccordance with applicable law and this Agreement.<\/p>\n
(b) The bylaws of Merger Subsidiary in effect at the Effective Time
\nshall be the bylaws of the Surviving Corporation from and after the Effective
\nTime until amended in accordance with applicable law and this Agreement.<\/p>\n
Section 2.06. Directors and Officers. The directors of Merger
\n ———————-
\nSubsidiary and the officers of the Company immediately prior to the Effective
\nTime shall be the directors and<\/p>\n
-6-<\/p>\n
officers of the Surviving Corporation until their respective successors are duly
\nelected and qualified.<\/p>\n
Section 2.07. Conversion of Shares. At the Effective Time, by virtue
\n ——————–
\nof the Merger and without any action on the part of Parent, Merger Subsidiary,
\nthe Company or the holders of any of the following securities:<\/p>\n
(a) each Share held by the Company as treasury stock and each issued
\nand outstanding Share owned by Parent, Merger Subsidiary or any other subsidiary
\nof Parent shall be cancelled and retired and no payment made with respect
\nthereto;<\/p>\n
(b) each issued and outstanding Share, other than those Shares
\nreferred to in Section 2.07(a) or Dissenting Shares (as defined in Section
\n2.08), shall be converted into the right to receive from the Surviving
\nCorporation an amount of cash equal to the Offer Price (the “Merger
\nConsideration”); and<\/p>\n
(c) each share of common stock of Merger Subsidiary issued and
\noutstanding immediately prior to the Effective Time shall be converted into one
\nshare of common stock of the Surviving Corporation.<\/p>\n
Section 2.08. Dissenting Shares. Notwithstanding anything in this
\n —————–
\nAgreement to the contrary, any issued and outstanding Shares held by a Person (a
\n“Dissenting Stockholder”) who does not vote in favor of the Merger and complies
\nwith all the provisions of Delaware law concerning the right of holders of
\nShares to require appraisal of their Shares (“Dissenting Shares”) shall not be
\nconverted as described in Section 2.07(b), but shall become the right to receive
\nsuch consideration as may be determined to be due to such Dissenting Stockholder
\npursuant to the laws of the State of Delaware. If, after the Effective Time,
\nsuch Dissenting Stockholder withdraws its demand for appraisal or fails to
\nperfect or otherwise loses such Dissenting Stockholder’s right of appraisal, in
\nany case pursuant to the DGCL, such Dissenting Stockholder’s Shares shall be
\ndeemed to be converted as of the Effective Time into the right to receive the
\nMerger Consideration. The Company shall give Parent (a) prompt notice of any
\ndemands for appraisal of Shares received by the Company and (b) the opportunity
\nto participate in and direct all negotiations and proceedings with respect to
\nany such demands. The Company shall not, without the prior written consent of
\nParent, make any payment with respect to, or settle, offer to settle or
\notherwise negotiate, any such demands.<\/p>\n
Section 2.09. Payments for Shares.
\n ——————- <\/p>\n
(a) Prior to the commencement of the Offer, Parent shall appoint a
\ncommercial bank or trust company reasonably acceptable to the Company to act as
\nexchange agent for the Offer and the Merger (the “Exchange Agent”). Parent will
\nenter into an exchange agent agreement with the Exchange Agent, in form and
\nsubstance reasonably acceptable to the Company, and shall deposit or cause to be
\ndeposited with the Exchange Agent in trust for the benefit of the Company’s
\nstockholders cash at such times as shall be necessary to make the payments
\npursuant to the Offer and Section 2.07 to holders of Shares (such amounts being
\nhereinafter referred to as the “Exchange Fund”). The Exchange Agent shall,
\npursuant to irrevocable instructions, make the payments provided for in the
\npreceding sentence out of the Exchange Fund.<\/p>\n
-7-<\/p>\n
(b) Promptly after the Effective Time, Parent and the Surviving
\nCorporation shall cause the Exchange Agent to mail to each record holder, as of
\nthe Effective Time, of an outstanding certificate or certificates that
\nimmediately prior to the Effective Time represented Shares (the “Certificates”)
\na form of letter of transmittal (which shall specify that delivery shall be
\neffected, and risk of loss and title to the Certificates shall pass, only upon
\nproper delivery of the Certificates to the Exchange Agent) and instructions for
\nuse in effecting the surrender of the Certificate or payment therefor. Upon
\nsurrender to the Exchange Agent of a Certificate, together with such letter of
\ntransmittal duly executed, the holder of such Certificate shall be paid in
\nexchange therefor cash in an amount equal to the product of the number of Shares
\nrepresented by such Certificate multiplied by the Merger Consideration, less any
\napplicable withholding taxes, and such Certificate shall forthwith be cancelled.
\nNo interest will be paid or accrued on the cash payable upon the surrender of
\nthe Certificates. If payment is to be made to a Person other than the Person in
\nwhose name the Certificate surrendered is registered, it shall be a condition of
\npayment that the Certificate so surrendered be properly endorsed or otherwise in
\nproper form for transfer and that the Person requesting such payment pay any
\ntransfer or other taxes required by reason of the payment to a Person other than
\nthe registered holder of the Certificate surrendered or established to the
\nsatisfaction of the Surviving Corporation that such tax has been paid or is not
\napplicable. Until surrendered in accordance with the provisions of this Section
\n2.09, each Certificate (other than Certificates representing Shares owned by
\nParent, Merger Subsidiary or any other subsidiary of Parent or Dissenting
\nShares) shall represent for all purposes only the right to receive the Merger
\nConsideration in cash multiplied by the number of Shares evidenced by such
\nCertificate, without any interest thereon.<\/p>\n
(c) After the Effective Time, there shall be no further registration
\nof transfers of Shares. If, after the Effective Time, Certificates are
\npresented to the Surviving Corporation, they shall be cancelled and exchanged
\nfor cash as provided in this Section 2.09.<\/p>\n
(d) Any portion of the Exchange Fund (including the proceeds of any
\ninvestments thereof) that remains unclaimed by the stockholders of the Company
\nfor twelve months after the Effective Time shall be repaid to the Surviving
\nCorporation. Any stockholders of the Company who have not theretofore complied
\nwith this Section 2.09 shall thereafter look only to Parent and the Surviving
\nCorporation for payment of their claim for the Merger Consideration per Share,
\nwithout any interest thereon.<\/p>\n
(e) To the fullest extent permitted by applicable law, none of Parent,
\nMerger Subsidiary, the Company or the Exchange Agent shall be liable to any
\nPerson in respect of any cash delivered to a public official pursuant to any
\napplicable abandoned property, escheat or similar law.<\/p>\n
(f) In the event that, subsequent to the date of this Agreement but
\nprior to the Effective Time, the outstanding Shares shall have been changed into
\na different number of Shares or a different class as a result of a stock split,
\nreverse stock split, stock dividend, subdivision, reclassification, split,
\ncombination, exchange, recapitalization or other similar transaction, the Merger
\nConsideration shall be appropriately adjusted.<\/p>\n
-8-<\/p>\n
Section 2.10. Stock Option and Other Plans.
\n —————————- <\/p>\n
(a) Effective as of the Effective Time, Parent shall assume each
\noutstanding option to acquire Common Stock (each, a “Company Option”), under any
\nstock option or similar plan of the Company (each, a “Stock Plan”) in accordance
\nwith this Section 2.10 and with the terms of the Stock Plan under which such
\nCompany Option was granted and the stock option agreement by which such Company
\nOption is evidenced. Parent acknowledges and agrees that each Company Option,
\nto the extent currently not exercisable, will become exercisable in accordance
\nwith its terms upon the acceptance for payment of and payment for the Shares by
\nMerger Subsidiary pursuant to the Offer and, if applicable, the exercise of the
\nOption as contemplated by Section 1.01(e). The proceeds from the exercise of
\nany Company Option shall be excluded from the calculation of Company Net Working
\nCapital.<\/p>\n
(b) Effective as of the Effective Time, each Company Option shall be
\ndeemed to constitute an option (a “New Parent Option”) to purchase, on the same
\nterms and conditions as were applicable to such Company Option, the number of
\nshares of Parent common stock (rounded to the nearest whole number) equal to the
\nproduct of (A) and (B), where (A) is the number of shares of Common Stock
\nsubject to such Company Option and (B) is the Offer Price divided by the average
\nof the closing sales prices of Parent common stock on the New York Stock
\nExchange for the ten (10) consecutive days immediately prior to and including
\nthe day preceding the Effective Time, at an exercise price per share of Parent
\ncommon stock (rounded to the nearest whole cent) equal to (x) divided by (y),
\nwhere (x) is the aggregate exercise price for the shares of Common Stock subject
\nto such Company Option and (y) is the aggregate number of shares of Parent
\ncommon stock purchasable pursuant to the New Parent Option (as calculated
\nimmediately above); provided, however, that in the case of any Company Option to
\nwhich Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”),
\napplies, the option price, the number of shares purchasable pursuant to such
\noption and the terms and conditions of exercise of such option shall be
\ndetermined in accordance with the foregoing, subject to such adjustments as are
\nnecessary in order to satisfy the requirements of Section 424(a) of the Code.
\nAt or prior to the Effective Time, the Company shall take all necessary actions
\nto permit the assumption of the unexercised Company Options by Parent pursuant
\nto this Section. Section 2.10(b) of the Company Disclosure Schedule sets forth
\ntwo examples of the calculations contemplated by this paragraph.<\/p>\n
(c) Not later than twenty-one calendar days after the Effective Time,
\nParent shall file a registration statement under the Securities Act of 1933, as
\namended (the “Securities Act”) on Form S-8 or other appropriate form covering
\nshares of Parent common stock subject to issuance upon the exercise of the New
\nParent Options.<\/p>\n
(d) All Stock Plans shall terminate as of the Effective Time and the
\nCompany shall use commercially reasonable efforts to ensure that following the
\nEffective Time no holder of a Company Option or any participant in any Stock
\nPlans shall have any right thereunder to acquire any capital stock of the
\nCompany or any Subsidiary or the Surviving Corporation.<\/p>\n
-9-<\/p>\n
ARTICLE 3<\/p>\n
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY<\/p>\n
Except as set forth in the disclosure schedule of Parent and Merger
\nSubsidiary hereto (the “Parent Disclosure Schedule”), Parent and Merger
\nSubsidiary represent and warrant to the Company as follows:<\/p>\n
Section 3.01. Corporate Existence and Power. Each of Parent and
\n —————————–
\nMerger Subsidiary is a corporation duly organized, validly existing and in good
\nstanding under the laws of the jurisdiction of its incorporation and has the
\nrequisite corporate power to carry on its business as it is now being conducted.
\nEach of Parent and Merger Subsidiary is duly qualified to do business as a
\nforeign corporation, and is in good standing in each jurisdiction where the
\ncharacter of its properties owned or leased or the nature of its activities
\nmakes such qualification necessary, except for those jurisdictions where the
\nfailure to be so qualified would not or reasonably be expected to materially
\ndelay or materially impair the ability of Parent or Merger Subsidiary to perform
\ntheir obligations under this Agreement or to consummate the transactions
\ncontemplated by this Agreement (a “Parent Material Adverse Effect”). Merger
\nSubsidiary is a wholly-owned subsidiary of Parent.<\/p>\n
Section 3.02. Corporate Authority. Each of Parent and Merger
\n ——————-
\nSubsidiary has the requisite corporate power and authority to execute and
\ndeliver this Agreement and the Stockholder Agreement and to consummate the
\ntransactions contemplated hereby and thereby. The execution and delivery by
\nParent and Merger Subsidiary of this Agreement and the Stockholder Agreement,
\nand the consummation by Parent and Merger Subsidiary of the transactions
\ncontemplated hereby and thereby, have been duly authorized by their respective
\nBoard of Directors and the sole stockholder of Merger Subsidiary, and no other
\ncorporate action on the part of Parent or Merger Subsidiary is necessary to
\nauthorize the execution and delivery of this Agreement and the Stockholder
\nAgreement and the consummation by each of Parent and Merger Subsidiary of the
\ntransactions contemplated hereby (including the Offer) and thereby. Each of this
\nAgreement and the Stockholder Agreement has been duly executed and delivered by
\neach of Parent and Merger Subsidiary and constitutes a valid and binding
\nagreement of each of Parent and Merger Subsidiary, enforceable against each of
\nParent and Merger Subsidiary in accordance with its terms except as
\nenforceability may be limited by bankruptcy, insolvency, reorganization,
\nmoratorium and other similar laws affecting creditors’ rights generally.<\/p>\n
-10-<\/p>\n
Section 3.03. Governmental Authorization. No consent, approval, order or
\n ————————–
\nauthorization of, or registration, declaration or filing with, any federal,
\nstate or local government or any court, administrative or regulatory agency or
\ncommission or other governmental authority or agency, domestic or foreign (a
\n“Governmental Entity”) is required by Parent or Merger Subsidiary in connection
\nwith the execution and delivery of this Agreement and the Stockholder Agreement
\nby Parent or Merger Subsidiary or the consummation by Parent and Merger
\nSubsidiary of the transactions contemplated by this Agreement and the
\nStockholder Agreement, except for (a) the filing of a premerger notification and
\nreport form by Parent under the Hart-Scott-Rodino Antitrust Improvements Act of
\n1976, as amended (the “HSR Act”); (b) requirements under the Exchange Act; (c)
\nthe filing of the Certificate of Merger pursuant to the DGCL and appropriate
\ndocuments with the relevant authorities of other states in which Parent or any
\nof its subsidiaries is qualified to do business; and (d) such other consents,
\napprovals, orders, authorizations, registrations, declarations and filings the
\nfailure of which to be obtained or made would not, individually or in the
\naggregate, have or reasonably be expected to have a Parent Material Adverse
\nEffect.<\/p>\n
Section 3.04. Non-contravention. The execution, delivery and
\n —————–
\nperformance by Parent and Merger Subsidiary of this Agreement and the
\nStockholder Agreement and the consummation by Parent and Merger Subsidiary of
\nthe transactions contemplated hereby and thereby do not and will not (with or
\nwithout notice, lapse of time or both) (a) contravene or conflict with the
\ncertificate of incorporation or bylaws or other equivalent organizational
\ndocument, in each case as amended, of Parent or any of its subsidiaries; (b)
\nassuming compliance with the matters referred to in Section 3.03, contravene or
\nconflict with or constitute a violation of any provision of any federal, state,
\nforeign or local law, regulation, judgment, injunction, order or decree binding
\nupon or applicable to Parent or any of its subsidiaries; (c) constitute a
\ndefault under or give rise to a right of termination, cancellation or
\nacceleration of any obligation of Parent or any of its subsidiaries or require
\nconsent of any third party or to a loss of a material benefit to which Parent or
\nany of its subsidiaries is entitled under any provision of any agreement,
\ncontract or other instrument binding upon Parent or any of its subsidiaries or
\nany license, franchise, permit or other similar authorization held by Parent or
\nany of its subsidiaries; or (d) result in the creation or imposition of any Lien
\non any asset of Parent or any of its subsidiaries, other than, in the case of
\nclauses (b), (c) and (d), any such conflict violation, default, right, loss or
\nLien that, individually or in the aggregate, would not reasonably be expected to
\nhave a Parent Material Adverse Effect.<\/p>\n
Section 3.05. Offer Documents; Proxy Statement; Schedule 14D-9.
\n ———————————————— <\/p>\n
None of the Offer Documents, the Schedule TO or the State Filings nor any
\ninformation supplied by Parent or Merger Subsidiary for inclusion in the
\nSchedule 14D-9 will, at the time the Offer Documents, the Schedule TO, the State
\nFilings, the Schedule 14D-9 or any amendments or supplements thereto, are filed
\nwith the SEC or any applicable state authority or are first published, sent or
\ngiven to stockholders of the Company, as the case may be, contain any untrue
\nstatement of a material fact or omit to state any material fact required to be
\nstated therein or necessary in order to make the statements made therein, in the
\nlight of the circumstances under which they are made, not misleading. The
\ninformation supplied by Parent and Merger Subsidiary for inclusion in the letter
\nto stockholders, notice of meeting, proxy statement and form of proxy, or the
\ninformation statement, as the case may be, to be distributed to stockholders in
\nconnection with the Merger, or any schedule required to be filed with the SEC in
\nconnection therewith (collectively, the “Proxy Statement”), will not, on the
\ndate the Proxy Statement (or any amendment or supplement thereto) <\/p>\n
-11-<\/p>\n
is first mailed to stockholders of the Company, contain any untrue statement of
\na material fact or omit to state any material fact required to be stated therein
\nor necessary in order to make the statements therein, in the light of the
\ncircumstances under which they are made, not misleading, or shall, at the time
\nof the meeting of the Company’s stockholders (the “Company Stockholder
\nMeeting”), omit to state any material fact necessary to correct any statement in
\nany earlier communication with respect to the solicitation of proxies for the
\nCompany Stockholder Meeting which shall have become false or misleading.
\nNotwithstanding the foregoing, Parent and Merger Subsidiary make no
\nrepresentation or warranty with respect to any information supplied by or on
\nbehalf of the Company which is contained in any of the Offer Documents, the
\nSchedule TO, the State Filings, the Proxy Statement or any amendment or
\nsupplement thereto. The Offer Documents and the Schedule TO shall comply as to
\nform in all material respects with the requirements of the Exchange Act and the
\nrules and regulations thereunder.<\/p>\n
Section 3.06. Financing. At each of (a) the time that Merger
\n ———
\nSubsidiary becomes obligated to accept for payment and pay for Shares pursuant
\nto the Offer and, if applicable, the exercise of the Option and (b) the
\nEffective Time, Parent will have, and will make available to Merger Subsidiary,
\nthe funds necessary to consummate the Offer and, if applicable, the exercise of
\nthe Option and the Merger and the transactions contemplated thereby, and to pay
\nrelated fees and expenses.<\/p>\n
Section 3.07. Finders’ Fees. Except for J. P. Morgan & Co., whose
\n ————-
\nfees will be paid by Parent, there is no investment banker, broker, finder or
\nother intermediary who might be entitled to any fee or commission in connection
\nwith the transactions contemplated by this Agreement based upon arrangements
\nmade by or on behalf of Parent or Merger Subsidiary.<\/p>\n
Section 3.08. Delaware Law. As of the time immediately prior to the
\n ————
\nexecution of this Agreement, neither Parent nor any of its subsidiaries was an
\n“interested stockholder” as such term is defined in Section 203 of the DGCL.<\/p>\n
ARTICLE 4<\/p>\n
REPRESENTATIONS AND WARRANTIES OF THE COMPANY<\/p>\n
Except as set forth in the disclosure schedule of the Company hereto
\n(the “Company Disclosure Schedule”), the Company hereby represents and warrants
\nto Parent and Merger Subsidiary as follows:<\/p>\n
Section 4.01. Corporate Existence and Power. The Company is a
\n —————————–
\ncorporation duly organized, validly existing and in good standing under the laws
\nof the Stare of Delaware, and has the requisite corporate power to carry on its
\nbusiness as it is now being conducted. The Company is duly qualified to do
\nbusiness as a foreign corporation and is in good standing in each jurisdiction
\nwhere the character of the property owned or leased by it or the nature of its
\nactivities makes such qualification necessary, except for those jurisdictions
\nwhere the failure to be so qualified would not have or reasonably be expected to
\nhave a material adverse effect on the <\/p>\n
-12-<\/p>\n
financial condition, assets (including intangible assets), liabilities
\n(contingent or otherwise), business or results of operations of the Company and
\nits Subsidiaries taken as a whole, or materially delay or materially impair the
\nability of the Company to perform its obligations under this Agreement or to
\nconsummate the transactions contemplated by this Agreement (a “Company Material
\nAdverse Effect”). For purposes of this Agreement, any payments made by the
\nMajority Stockholder or its affiliates pursuant to Section 5.13 of this
\nAgreement shall be ignored in determining whether there has been or is
\nreasonably likely to be a Company Material Adverse Effect. The Company has
\nheretofore delivered to Parent true and complete copies of the Company’s
\ncertificate of incorporation and bylaws as currently in effect.<\/p>\n
Section 4.02. Corporate Authority. The Company has the requisite
\n ——————-
\ncorporate power and authority to execute and deliver this Agreement and, subject
\nto any required approval of the Merger by the Company’s stockholders, to
\nconsummate the transactions contemplated hereby. The execution and delivery by
\nthe Company of this Agreement, and the consummation by the Company of the
\ntransactions contemplated hereby, have been duly authorized by its Board of
\nDirectors, and except for any required approval of the Merger by the Company’s
\nstockholders, no other corporate action on the part of the Company is necessary
\nto authorize the execution and delivery of this Agreement by the Company and the
\nconsummation by it of the transactions contemplated hereby. This Agreement has
\nbeen duly executed and delivered by the Company and constitutes a valid and
\nbinding agreement of the Company, enforceable against the Company in accordance
\nwith its terms except as enforceability may be limited by bankruptcy,
\ninsolvency, reorganization, moratorium and other similar laws affecting
\ncreditors’ rights generally.<\/p>\n
Section 4.03. Governmental Authorization. No consent, approval, order
\n ————————–
\nor authorization of or registration, declaration or filing with, any
\nGovernmental Entity is required by the Company or any Subsidiary in connection
\nwith the execution and delivery of this Agreement by the Company or the
\nconsummation by the Company of the transactions contemplated by this Agreement,
\nexcept for (a) the filing of a premerger notification and report form by the
\nCompany under the HSR Act; (b) requirements under the Exchange Act; (c) the
\nfiling of the Certificate of Merger pursuant to the DGCL and appropriate
\ndocuments with the relevant authorities of other states in which the Company is
\nqualified to do business; and (d) such other consents, approvals, orders,
\nauthorizations, registrations, declarations and filings the failure of which to
\nbe obtained or made would not, individually or in the aggregate, reasonably be
\nexpected to have a Company Material Adverse Effect.<\/p>\n
Section 4.04. Non-contravention. The execution, delivery and
\n —————–
\nperformance by the Company of this Agreement and the consummation by the Company
\nof the transactions contemplated hereby do not and will not (with or without
\nnotice, lapse of time or both) (a) contravene or conflict with the certificate
\nof incorporation or bylaws of the Company or the comparable charter or
\norganizational documents of any Subsidiary; (b) assuming compliance with the
\nmatters referred to in Section 4.03, contravene or conflict with or constitute a
\nviolation of any provision of any federal, state, foreign or local law,
\nregulation, judgment, injunction, order or decree binding upon or applicable to
\nthe Company or any Subsidiary; (c) constitute a default under or give rise to a
\nright of termination, cancellation or acceleration of any obligation of the
\nCompany or any Subsidiary or require consent of any third party or to a loss of
\na material benefit to which the Company or any Subsidiary is entitled under any
\nprovision of any agreement, contract or other instrument binding upon the
\nCompany or any Subsidiary or any license, franchise, permit or other <\/p>\n
-13-<\/p>\n
similar authorization held by the Company or any Subsidiary; or (d) result in
\nthe creation or imposition of any Lien on any asset of the Company or any
\nSubsidiary, other than, in the case of clauses (b), (c) and (d), any such
\nconflict, violation, default, right, loss or Lien that, individually or in the
\naggregate, would not reasonably be expected to have a Company Material Adverse
\nEffect.<\/p>\n
Section 4.05. Capitalization. The authorized capital stock of the
\n ————–
\nCompany consists of 50,000,000 shares of Common Stock and 5,000,000 shares of
\nPreferred Stock, par value $.01 per share (the “Preferred Stock”), of which
\n100,000 shares have been designated as Series B Junior Participating Preferred
\nStock and reserved for issuance in connection with the Rights Agreement, dated
\nas of March 12, 1999, between the Company and Norwest Bank Minnesota, National
\nAssociation (the “Rights Agreement”). As of the date hereof, there were
\noutstanding 18,150,000 shares of Common Stock, no shares of Preferred Stock and
\nStock Options to purchase an aggregate of 873,309 Shares (none of which were
\nexercisable). All outstanding shares of capital stock of the Company have been
\nduly authorized and validly issued and are fully paid and non-assessable (except
\nfor certain statutory liabilities that may be imposed by Section 180.0622(2)(b)
\nof the Wisconsin Business Corporation Law (the “WBCL”) for unpaid employee
\nwages). Except as set forth in this Section and except for the Company’s
\nobligations under the Rights Agreement (including with respect to the preferred
\nshare purchase rights issued thereunder (the “Rights”)), there are outstanding
\n(a) no shares of capital stock or other voting securities of the Company, (b) no
\nsecurities of the Company convertible into or exchangeable for shares of capital
\nstock or voting securities of the Company, and (c) no preemptive rights, options
\nor other rights to acquire from the Company, and no obligation of the Company to
\nissue, any capital stock, voting securities or securities convertible into or
\nexchangeable for capital stock or voting securities of the Company (the
\nsecurities in clauses (a), (b) and (c) being referred to collectively as the
\n“Company Securities”). There are no outstanding (i) stock appreciation rights or
\nphantom stock units or (ii) obligations of the Company or any Subsidiary to
\nrepurchase, redeem or otherwise acquire any Company Securities. The Company and
\nits Subsidiaries do not have any bonds, debentures, notes or other obligations
\noutstanding that would give the holders of which the right to vote (or
\nconvertible into or exercisable for securities having the right to vote) with
\nthe stockholders of the Company on any matter (“Voting Debt”). No Shares,
\nPreferred Stock or other securities of the Company, the Surviving Corporation,
\nParent or any of their respective affiliates will be subject to issuance
\npursuant to the Rights Agreement as a result of the Offer, the Merger or the
\nother transactions contemplated by this Agreement and the Stockholder Agreement
\nand no Distribution Date (as such term is defined in the Rights Agreement) shall
\nhave occurred as a result of the Offer, the Merger or the other transactions
\ncontemplated by this Agreement or the Stockholder Agreement.<\/p>\n
Section 4.06. Subsidiaries. The Company Disclosure Schedule sets forth
\n ————
\na list of each material Subsidiary of the Company. Each Subsidiary of the
\nCompany is a corporation or limited liability company duly incorporated or
\norganized, as the case may be, validly existing and in good standing under the
\nlaws of its jurisdiction of incorporation or organization, has all requisite
\npower and authority to carry on its business as now conducted and is duly
\nqualified to do business as a foreign corporation or foreign limited liability
\ncompany and is in good standing in each jurisdiction where the character of the
\nproperty owned or leased by it or the nature of its activities makes such
\nqualification necessary, except for those jurisdictions where failure to be so
\nqualified would not have a Company Material Adverse Effect. All of the
\noutstanding shares of capital stock or other ownership interests in each of the
\nSubsidiaries have been validly issued, and are fully <\/p>\n
-14-<\/p>\n
paid, non-assessable (except for certain statutory liabilities that may be
\nimposed by Section 180.0622(2)(b) of the WBCL for unpaid employee wages) and are
\nowned by the Company or another Subsidiary free and clear of all Liens.<\/p>\n
Section 4.07. Company SEC Documents and Financial Statements.
\n ———————————————-
\nSince July 14, 1999, the Company has filed all required forms, reports,
\nregistration statements, information statements and documents with the SEC
\nrequired to be filed by it pursuant to the federal securities laws and the SEC
\nrules and regulations thereunder (collectively, the “Company SEC Documents”),
\nall of which have complied as of their respective filing dates in all material
\nrespects with all applicable requirements of the Securities Act, and the
\nExchange Act, and the rules promulgated thereunder in effect as of the date of
\nfiling. None of the Company SEC Documents required by the Exchange Act at the
\ntime filed, nor any of the Company SEC Documents required by the Securities Act
\nas of the date of their effectiveness, contained any untrue statement of a
\nmaterial fact or omitted to state a material fact required to be stated therein
\nor necessary in order to make the statements therein, in light of the
\ncircumstances under which they were made, not misleading, except to the extent
\nthat information contained in any Company SEC Document has been revised or
\nsuperseded by a later-filed Company SEC Document filed and publicly available
\nprior to the date hereof. The financial statements of the Company included in
\nthe Company SEC Documents comply as to form in all material respects with
\napplicable accounting requirements and the published rules and regulations of
\nthe SEC with respect thereto, have been prepared in accordance with generally
\naccepted accounting principles (except, in the case of unaudited statements, as
\npermitted by Form l0-Q of the SEC) applied on a consistent basis during the
\nperiods involved (except as may be indicated in the notes thereto) and fairly
\npresent the consolidated financial position of the Company and its consolidated
\nSubsidiaries as of the dates thereof and the consolidated results of their
\noperations, retained earnings, changes in financial position and cash flows for
\nthe periods then ended (subject, in the case of unaudited statements, to normal
\nyear-end audit adjustments). Except for (a) liabilities incurred in the
\nordinary course of business since January 29, 2000, (b) liabilities accrued or
\nreserved against in the Company SEC Documents, or (c) liabilities disclosed
\nherein or in the Company Disclosure Schedule, the Company does not have any
\nliabilities (whether, direct, indirect, accrued or contingent), except for such
\nliabilities, individually or in the aggregate, that would not have a Company
\nMaterial Adverse Effect.<\/p>\n
Section 4.08. Schedule 14D-9; Offer Documents; and Proxy Statement.
\n —————————————————- <\/p>\n
Neither the Schedule 14D-9 nor any information supplied by the Company for
\ninclusion in the Offer Documents, the Schedule TO or the State Filings will, at
\nthe respective times the Schedule 14D-9, the Offer Documents, the Schedule TO,
\nthe State Filings or any amendments or supplements thereto are filed with the
\nSEC or any applicable state authority are first published, sent or given to
\nstockholders of the Company, as the case may be, contain any untrue statement of
\na material fact or omit to state any material fact required to be stated therein
\nor necessary in order to make the statements made therein, in the light of the
\ncircumstances under which they are made, not misleading. The Proxy Statement
\nwill not, on the date the Proxy Statement (or any amendment or supplement
\nthereto) is first mailed to the stockholders of the Company, contain any untrue
\nstatement of a material fact, or omit to state any material fact required to be
\nstated therein or necessary in order to make the statements made therein, in the
\nlight of the circumstances under which they are made, not misleading or will, at
\nthe time of the Company Stockholder Meeting, omit to state any material fact
\nnecessary to correct any statement in any earlier communication with respect to
\nthe solicitation of proxies for the Company Stockholder Meeting which shall be
\nbecome <\/p>\n
-15-<\/p>\n
false or misleading in any material respect. The Schedule 14D-9 and the Proxy
\nStatement will, when filed by the Company with the SEC, comply as to form in all
\nmaterial respects with the applicable provisions of the Exchange Act and the
\nrules and regulations thereunder. Notwithstanding the foregoing, the Company
\nmakes no representation or warranty with respect to information supplied by or
\non behalf of Parent or Merger Subsidiary which is contained in any of the
\nforegoing documents.<\/p>\n
Section 4.09. Absence of Certain Changes. Except as disclosed in the
\n ————————–
\nCompany SEC Documents or as contemplated by this Agreement, since January 29,
\n2000, there has not been any event, occurrence or development that has had or
\nwould be reasonably likely to result in a Company Material Adverse Effect,
\nexcept for general economic changes or changes that affect the industry of the
\nCompany or any Subsidiary generally (collectively, “General Changes”) and
\nchanges in the Company’s business after the date hereof attributable primarily
\nto actions taken by Parent or Merger Subsidiary, which shall include without
\nlimitation any disruptions to the business of the Company and its Subsidiaries
\nprimarily as a result of the execution of this Agreement or the announcement of
\nthe transactions contemplated by this Agreement (collectively, the “Transaction
\nChanges”). Except as disclosed in the Company SEC Documents, since January 29,
\n2000, there has not been (a) any declaration, setting aside or payment of any
\ndividend or other distribution in respect of the capital stock of the Company or
\nany redemption or other acquisition by the Company of any Shares, (b) any split,
\ncombination, or reclassification of the Company’s capital stock or any issuance
\nor the authorization of any issuance of any other securities in respect of, in
\nlieu of or in substitution for shares of its capital stock, (c) any granting by
\nthe Company or any of the Subsidiaries to any officer or key employee of the
\nCompany or any of the Subsidiaries of any increase in compensation, except in
\nthe ordinary course of business consistent with past practice or as was required
\nunder employment agreements in effect as of the date of the most recent
\nfinancial statements included in the Company SEC Documents, (d) any entry by the
\nCompany or any Subsidiary into any employment, severance or termination
\nagreement with any such officer or key employee or granting by the Company or
\nany Subsidiary to any such officer or key employee of any increase in severance
\nor termination pay, except as was required under employment, severance or
\ntermination agreements in effect as of the date of the most recent financial
\nstatements included in the Company SEC Documents, (e) any damage, destruction or
\nloss, whether or not covered by insurance, that has or would be reasonably
\nlikely to have a Company Material Adverse Effect or (f) any change in accounting
\nmethods, principles or practices by the Company or any Subsidiary materially
\naffecting its assets, liabilities or business, except insofar as may have been
\nrequired by a change in generally accepted accounting principles.<\/p>\n
Section 4.10. Litigation. Except as disclosed in the Company SEC
\n ———-
\nDocuments, as of the date hereof, there is no civil, criminal, administrative or
\nregulatory action, suit, claim, investigation or proceeding pending or, to the
\nknowledge of the Company, threatened against the Company or any Subsidiary
\nbefore any court or arbitrator or before or by any governmental body, agency or
\nofficial that would have or be reasonably likely to have a Company Material
\nAdverse Effect.<\/p>\n
Section 4.11. Proprietary Rights. The Company and its Subsidiaries
\n ——————
\npossess or have adequate rights to use all material trademarks, service marks,
\nbrand marks, brand names, trade names, trade dress, domain names, inventions
\n(whether patentable or unpatentable), patents, databases, computer software and
\nrelated documents and data, and copyrights, and all applications <\/p>\n
-16-<\/p>\n
and registrations therefor (collectively, the “Proprietary Rights”), necessary
\nfor the operation of the businesses of each of the Company and its Subsidiaries
\nas currently conducted free and clear of all Liens with such exceptions as would
\nnot have a Company Material Adverse Effect. The use of such Proprietary Rights
\nby the Company or its Subsidiaries does not conflict with, infringe upon or
\nviolate the Proprietary Rights of any other Person, except where such conflict,
\ninfringement or violation would not have a Company Material Adverse Effect. The
\nCompany has received no written notice that the use of any Proprietary Rights by
\nthe Company or its Subsidiaries conflicts with, infringes upon or violates any
\nProprietary Rights of any other Person. Neither the Company nor any of its
\nSubsidiaries is in default under the terms of any third party license or other
\nright to use any Proprietary Rights, except where such default would not have a
\nCompany Material Adverse Effect. To the Company’s knowledge, no third party has
\ninfringed upon, violated or otherwise come into conflict with the Proprietary
\nRights possessed or used by the Company or its Subsidiaries, except where such
\nconflict, infringement or violation would not have a Company Material Adverse
\nEffect.<\/p>\n
Section 4.12. Benefit Plans; ERISA.
\n ——————– <\/p>\n
(a) The Company Disclosure Schedule sets forth a complete list of all
\n“employee benefit plans” (as defined in Section 3(3) of the Employee Retirement
\nIncome Security Act of 1974, as amended (“ERISA”)), bonus, pension, profit
\nsharing, deferred compensation, incentive compensation, excess benefit, stock,
\nstock option, severance, termination pay, change in control or other material
\nemployee benefit plans, programs, arrangements or agreements currently
\nmaintained, or contributed to, or required to be maintained or contributed to,
\nby the Company, the Majority Stockholder or any Person that, together with the
\nCompany, is treated as a single employer under Section 414 of the Code for the
\nbenefit of any current or former employees, officers, directors or independent
\ncontractors of the Company or any Subsidiary and with respect to which the
\nCompany or any Subsidiary has any liability (collectively, the “Benefit Plans”).
\nThe Company has delivered or made available to Parent true, complete and correct
\ncopies of each Benefit Plan.<\/p>\n
(b) Each Benefit Plan has been administered in accordance with its
\nterms and in compliance with the applicable provisions of ERISA, the Code and
\nother applicable law, except where the failure to so administer or comply would
\nnot have a Company Material Adverse Effect.<\/p>\n
(c) All Benefit Plans intended to be qualified under Section 401(a) of
\nthe Code have been the subject of determination letters from the Internal
\nRevenue Service to the effect that such Benefit Plans are qualified and exempt
\nfrom federal income taxes under Section 401(a) and 501(a), respectively, of the
\nCode as amended at least through the statutory changes implemented under the Tax
\nReform Act of 1986, and no such determination letter has been revoked nor, to
\nthe knowledge of the Company, has revocation been threatened, nor has any such
\nBenefit Plan been amended since the date of its most recent determination letter
\nor application therefor in any respect that would adversely affect its
\nqualification.<\/p>\n
(d) No Benefit Plan is subject to Title IV of ERISA or Section 412 of
\nthe Code and no Benefit Plan is a “multiemployer plan” (as defined in Section
\n3(37) of ERISA).<\/p>\n
-17-<\/p>\n
(e) No Person has incurred any material liability under Title IV of
\nERISA or Section 412 of the Code during the time such Person was required to be
\ntreated as a single employer with the Company under Section 414 of the Code that
\nwould have a Company Material Adverse Effect.<\/p>\n
(f) With respect to any Benefit Plan that is an employee welfare
\nbenefit plan (as defined in Section 3(l) of ERISA), (i) no such Benefit Plan
\nprovides benefits, including without limitation, death or medical benefits,
\nbeyond termination of employment or retirement other than (A) coverage mandated
\nby law or (B) death or retirement benefits under a Benefit Plan qualified under
\nSection 401(a) of the Code, and (ii) each such Benefit Plan (including any such
\nPlan covering retirees or other former employees) may be amended or terminated
\nwithout liability that would have a Company Material Adverse Effect.<\/p>\n
(g) The execution of, and performance of the transactions contemplated
\nin, this Agreement will not (either alone or upon the occurrence of any
\nadditional or subsequent events) (i) constitute an event under any Benefit Plan
\nthat will or may result in any payment (whether of severance pay or otherwise),
\nacceleration, forgiveness of indebtedness, vesting, distribution, increase in
\nbenefits or obligation to fund benefits with respect to any employee of the
\nCompany or any of its Subsidiaries, or (ii) result in the triggering or
\nimposition of any restrictions or limitations on the right of the Company or
\nParent to cause any such Benefit Plan to be amended or terminated (or which
\nwould result in any materially adverse consequence for so doing). No payment or
\nbenefit that will or may be made by the Company, Parent, or any of their
\nrespective subsidiaries or affiliates with respect to any employee of the
\nCompany or any of its Subsidiaries under any Benefit Plan in connection with the
\nOffer and the Merger will be characterized as an “excess parachute payment,”
\nwithin the meaning of Section 280G(b)(1) of the Code. The parties hereby agree
\nto use their commercially reasonable efforts to limit the application of Section
\n280G(b)(1) of the Code to the transactions contemplated hereby.<\/p>\n
Section 4.13. Environmental Matters. Except as set forth in the
\n ———————-
\nCompany SEC Documents, to the Company’s knowledge, (a) the Company and each
\nSubsidiary is and has been in material compliance with, and has no material
\nliability under, any and all laws relating to the protection of human health or
\nthe environment (“Environmental Laws”), and (b) neither the Company nor any
\nSubsidiary is the subject of any federal, state, local or foreign investigation,
\nand neither the Company nor any Subsidiary has received any written notice or
\nclaim, or entered into any negotiations or agreements with any Person, relating
\nto any material liability or material remedial action or potential material
\nliability or material remedial action under any Environmental Laws.<\/p>\n
Section 4.14. Taxes. The Company and each of its Subsidiaries, and
\n —–
\nany consolidated, combined or unitary group for tax purposes of which the
\nCompany or any of its Subsidiaries is or has been a member, has timely filed,
\ntaking into account all extensions of time to file, all Tax Returns required to
\nbe filed by it in the manner provided by law, except any Tax Return with respect
\nto which no material Taxes were due. All such filed Tax Returns are true,
\ncorrect and complete in all material respects. The Company and each of its
\nSubsidiaries have timely paid all Taxes shown as due on such Tax Returns, except
\nand, for Taxes that are adequately reserved for on the Company financial
\nstatements in accordance with generally accepted accounting principles, for
\nwhich a notice of deficiency has been received. The Company and each of its<\/p>\n
-18-<\/p>\n
Subsidiaries have timely withheld and paid over to the appropriate taxing
\nauthority where due all Taxes required to be withheld from amounts owing to any
\nemployee, creditor or third party. Except as set forth in the Company Disclosure
\nSchedule, (a) no claim for material unpaid Taxes has become a Lien against the
\nproperty of the Company or any of its Subsidiaries or is being asserted against
\nthe Company or any of its Subsidiaries; (b) no audit, examination, investigation
\nor other proceeding is pending, being conducted, or to the knowledge of the
\nCompany, threatened by a Tax authority in connection with any examination of
\nTaxes paid by or on behalf of, or Tax Returns filed by or on behalf of, the
\nCompany and its Subsidiaries; (c) no extension or waiver of the statute of
\nlimitations on the assessment of any Taxes has been granted by the Company or
\nany of its Subsidiaries and is currently in effect; (d) neither the Company nor
\nany of its Subsidiaries is a party to, is bound by, or has any obligation under,
\nor potential liability with regards to, any Tax sharing agreement, Tax
\nindemnification agreement or similar contract or arrangement and neither the
\nCompany nor any Subsidiary has any liability for Taxes under Treasury Regulation
\nSection 1.1502-6 (or an analogous provision of state, local or foreign law),
\nother than Taxes of the Company and its Subsidiaries; (e) no power of attorney
\nhas been granted by or with respect to the Company or any of its Subsidiaries
\nwith respect to any matter relating to Taxes; (f) neither the Company nor any of
\nits Subsidiaries has any material deferred intercompany gain or loss arising as
\na result of a deferred intercompany transaction within the meaning of Treasury
\nRegulation Section 1.1502-13 (or similar provision under state, local or foreign
\nlaw) or any excess loss accounts within the meaning of Treasury Regulation
\nSection 1.1502-19; and (g) neither the Company nor any of its Subsidiaries has
\nbeen the subject of a Tax ruling or determination that has continuing effect.<\/p>\n
Section 4.15. Certain Approvals. Except for Chapter 552 of the WBCL
\n —————–
\nand Section 203 of the DGCL, no “fair price,” “moratorium,” “control share
\nacquisition” or other similar antitakeover statute or regulation (“Antitakeover
\nStatutes”) is applicable to the Company, the Shares, the Offer, the Merger, this
\nAgreement, the Stockholder Agreement or the transactions hereby or thereby. The
\nBoard of Directors of the Company has approved the Offer, the Merger and the
\nother transactions contemplated by this Agreement in accordance with the
\nprovisions of Section 203 of the DGCL.<\/p>\n
Section 4.16. Opinion of Financial Advisor. The Board of Directors of
\n —————————-
\nthe Company has received the opinion of Merrill Lynch, Pierce, Fenner & Smith
\nIncorporated (“Merrill Lynch”), dated the date of this Agreement, to the effect
\nthat the consideration to be received by the holders of Shares pursuant to this
\nAgreement is fair to such stockholders from a financial point of view.<\/p>\n
Section 4.17. Rights Plan. The Board of Directors of the Company has
\n ———–
\nirrevocably and unconditionally amended the Rights Agreement to provide that so
\nlong as this Agreement has not been terminated pursuant to Section 7.01, a
\nDistribution Date (as such term is defined in the Rights Agreement) shall not
\noccur or be deemed to occur, and neither Parent nor Merger Subsidiary shall
\nbecome an Acquiring Person (as such term is defined in the Rights Agreement), as
\na result of the execution, delivery or performance of this Agreement, the
\nannouncement, making or consummation of the Offer, the acquisition of the Shares
\npursuant to the Offer or the Merger, the consummation of the Merger or any other
\ntransaction contemplated by this Agreement.<\/p>\n
-19-<\/p>\n
Section 4.18. Fees and Commissions. Other than fees payable to
\n ——————–
\nMerrill Lynch, no Person is entitled to receive from the Company or any
\nSubsidiary any investment banking, brokerage or finder’s fee or commissions in
\nconnection with this Agreement or the transactions contemplated hereby. Parent
\nhas been provided with a true and correct copy of the Merrill Lynch engagement
\nletter.<\/p>\n
Section 4.19. Compliance; Permits. Neither the Company nor any of its
\n ——————-
\nSubsidiaries is in default or violation of any federal, state, foreign or local
\nlaw, regulation, judgment, injunction, order or decree binding or applicable to
\nthe Company or any of its Subsidiaries or by which its or any of their
\nrespective properties are bound or affected (except, in each case, with respect
\nto environmental matters, which are governed by Section 4.13), except, with
\nrespect to laws and regulations, for any such defaults or violations that,
\nindividually or in the aggregate, would not have or reasonably be expected to
\nhave a Company Material Adverse Effect. Each of the Company and its Subsidiaries
\nis in possession of all franchises, grants, authorizations, licenses, permits,
\neasements, variances, exemptions, consents, certificates, approvals and orders
\nnecessary to own, lease and operate its and their respective properties and to
\ncarry on its and their respective businesses as such are now being conducted
\n(collectively, the “Company Permits”), except where the failure to possess such
\nCompany Permits, individually or in the aggregate, would not have a Company
\nMaterial Adverse Effect.<\/p>\n
Section 4.20. Contracts. (a) Each contract that is material to the
\n ———-
\nbusiness of the Company and the Subsidiaries (a “Company Material Contract”) is
\nin full force and effect, other than as would not have, individually or in the
\naggregate, a Company Material Adverse Effect. Neither the Company nor any
\nSubsidiary, nor, to the knowledge of the Company, any other party, is in default
\nunder any Company Material Contract, except for such defaults which would not
\nhave, individually or in the aggregate, a Company Material Adverse Effect and,
\nto the knowledge of the Company, no event has occurred which, with the passage
\nof time or the giving of notice or both, would constitute such a default.<\/p>\n
(b) During the twelve months immediately prior to the date hereof, no
\nSignificant Customer (as defined below) has cancelled or otherwise terminated or
\nthreatened in writing to terminate its relationship with the Company or its
\nSubsidiaries. For purposes of this Section 4.20 “Significant Customer” means
\nany customer of the Company’s pharmacy management business that, individually or
\nin the aggregate, accounted for 10.0% or more of the consolidated revenues of
\nthe Company during the fiscal year ended January 29, 2000.<\/p>\n
Section 4.21. Affiliate Transactions.
\n ———————- <\/p>\n
(a) The Company Disclosure Schedule sets forth a complete and correct
\nlist as of the date hereof of (A) all written contracts and agreements to which
\nthe Company or any of its Subsidiaries, on the one hand, and the Majority
\nStockholder or any of its affiliates (other than the Company or its
\nSubsidiaries), on the other hand, are a party that are in effect as of the date
\nhereof and (B) all material non-cash and non-cash equivalent assets, properties
\nand services of the Company or its Subsidiaries used by the Majority Stockholder
\nor any of its affiliates (other than the Company or its Subsidiaries) at any
\ntime since January 29, 2000.<\/p>\n
-20-<\/p>\n
(b) The Company Disclosure Schedule sets forth (i) a description of
\nall intercompany payables or receivables (whether long term or short term, all
\nof which will be deemed short term for purposes of this Agreement) as of the
\ndate hereof between the Majority Stockholder and its affiliates (other than the
\nCompany and its Subsidiaries), on the one hand, and the Company and its
\nSubsidiaries, on the other hand, and (ii) the net amount of such intercompany
\npayables and\/or receivables (the “Intercompany Balance”) as of April 1, 2000.<\/p>\n
Section 4.22. Working Capital. The Company Disclosure Schedule sets
\n —————
\nforth the amount of Company Net Working Capital as of April 1, 2000. For
\npurposes of this Agreement, “Company Net Working Capital” shall mean current
\nassets less current liabilities. Current assets include without limitation cash
\nand cash equivalents, receivables (less allowance for losses), pharmaceutical
\ninventories, deferred tax benefits and other current assets. Current liabilities
\ninclude without limitation short-term debt, accounts payable, accrued
\nliabilities and all intercompany amounts due to and\/or from the Majority
\nStockholder and its affiliates other than the Company (whether short term or
\nlong term). Except as expressly required to the contrary by this definition, the
\naccounting policies that are used in the definition of Company Net Working
\nCapital shall be consistent with those applied to the financial statements of
\nthe Company as of and for the year ended January 29, 2000 (the “January 29, 2000
\nFinancial Statements”). Company Net Working Capital on any particular date shall
\nbe calculated as if such date were the Company’s normal year-end.<\/p>\n
ARTICLE 5<\/p>\n
COVENANTS<\/p>\n
Section 5.01. Conduct of Business of the Company. Except as
\n ———————————-
\ncontemplated by this Agreement or as approved in writing by Parent, during the
\nperiod from the date of this Agreement to the Effective Time (unless (i) Parent,
\nas controlling shareholder, directs the Company to the contrary or (ii) Parent’s
\ndesignees on the Company’s Board of Directors vote in favor of a contrary
\naction), the Company and the Subsidiaries will each conduct its operations
\naccording to its ordinary and usual course of business and, to the extent
\nconsistent therewith, will use their respective commercially reasonable efforts
\nto preserve its business organization substantially intact and substantially
\nmaintain its existing relations and goodwill with customers, suppliers,
\ndistributors, creditors, lessors, employees and business associates. Without
\nlimiting the generality of the foregoing, and except as otherwise expressly
\nprovided in this Agreement, neither the Company nor any Subsidiary, without the
\nprior written consent of Parent, will:<\/p>\n
(a) issue, sell or pledge, or authorize or propose the issuance, sale
\nor pledge of (i) additional shares of capital stock of any class (including the
\nShares), or securities convertible into any such shares, or any rights, warrants
\nor options to acquire any such shares or other convertible securities, or grant
\nor accelerate any right to convert or exchange any securities of the Company for
\nshares, other than (A) Shares issuable pursuant to the terms of outstanding
\nCompany Options and commitments disclosed in Section 4.05, or (B) the issuance
\nof shares of capital stock to the Company by a wholly-owned Subsidiary, or (ii)
\nany other securities in respect of, in lieu of or in substitution for Shares
\noutstanding on the date thereof or split, combine or reclassify any of the
\nCompany’s capital stock or (iii) any Voting Debt or any other property or
\nassets;<\/p>\n
-21-<\/p>\n
(b) purchase, redeem or otherwise acquire, or propose to purchase or
\notherwise acquire, any of its outstanding securities (including the Shares)
\nother than pursuant to the Stock Plans;<\/p>\n
(c) declare, set aside or pay any dividend or other distribution on
\nany shares of capital stock of the Company, except that a direct or indirect
\nwholly-owned Subsidiary may pay a dividend or distribution to its parent;<\/p>\n
(d) make (i) any acquisition of a material amount of assets or
\nsecurities, any disposition (including by way of any Lien) of a material amount
\nof assets or securities, or enter into a material contract or release or
\nrelinquish any material contract rights, or make any amendments, or
\nmodifications thereto, except in all instances for actions in the ordinary
\ncourse of business, or (ii) for the initial ninety days after the date hereof,
\nany individual capital expenditures in excess of $350,000 and $3.0 million in
\nthe aggregate; provided, however, if the Offer has not been consummated within
\nninety days of the date hereof, the parties will negotiate in good faith to
\nestablish a reasonable capital expenditure budget.<\/p>\n
(e) except in the ordinary course of business, (i) incur any
\nindebtedness for borrowed money or guarantee any such indebtedness of another
\nPerson or (ii) make any loans, advances of capital contributions to, or
\ninvestments in, any other Person, other than to the Company or any direct or
\nindirect wholly-owned Subsidiary;<\/p>\n
(f) propose or adopt any amendments to the certificate of
\nincorporation or bylaws of the Company;<\/p>\n
(g) except as provided in Section 5.01(g) of the Company Disclosure
\nSchedule, enter into any new employment, severance or termination agreements
\nwith, or grant any increase in severance or termination pay to, any officers,
\ndirectors or key employees or grant any material increases in the compensation
\n(except in the ordinary course of business consistent with past practice) or
\nbenefits to officers, directors and key employees or adopt any new employee
\nbenefit plan, program, policy or arrangement;<\/p>\n
(h) change any accounting methods, principles or practices materially
\naffecting their assets, liabilities or business, except insofar as may be
\nrequired by a change in generally accepted accounting principles;<\/p>\n
(i) settle or compromise any material claims or litigation or modify,
\namend or terminate any of its material contracts or waive, release or assign any
\nmaterial rights or claims; or permit any insurance policy naming it as a
\nbeneficiary or loss-payable payee to be canceled or terminated except in the
\nordinary and usual course of business;<\/p>\n
(j) make any material tax election or settle or compromise any
\nmaterial income tax liability; or<\/p>\n
(k) agree in writing or otherwise to take any of the foregoing
\nactions.<\/p>\n
-22-<\/p>\n
Section 5.02. Acquisition Proposals.
\n ——————— <\/p>\n
The Company shall, and shall use its best efforts to cause its
\nnonstockholder affiliates and the officers, directors and employees of the
\nCompany and its Subsidiaries to, and shall instruct its stockholder affiliates
\nand the representatives and agents of the Company and its Subsidiaries
\n(including, without limitation, any investment banker, attorney or accountant
\nretained by the Company or any of its Subsidiaries) to, immediately cease and
\nterminate any existing activities, discussions or negotiations, if any, with any
\nparties (other than Parent and Merger Subsidiary, any affiliate or associate of
\nParent and Merger Subsidiary or any designees of Parent and Merger Subsidiary)
\nconducted heretofore with respect to any acquisition or exchange of all or any
\nmaterial portion of the assets of, or more than 20% of the equity interest in,
\nthe Company or any of its Subsidiaries (by direct purchase from the Company,
\ntender or exchange offer or otherwise) or any business combination, merger or
\nsimilar transaction (including an exchange of stock or assets) with or involving
\nthe Company or any Subsidiary or division of the Company (an “Acquisition
\nTransaction”), other than the Offer and the Merger. Except as set forth in this
\nSection 5.02, the Company shall not, and shall use its best efforts to cause its
\nnonstockholder affiliates and the officers, directors and employees of the
\nCompany and its Subsidiaries not to, and shall instruct its stockholder
\naffiliates and the representatives and agents of the Company and its
\nSubsidiaries (including, without limitation, any investment banker, attorney or
\naccountant retained by the Company or any of its Subsidiaries) not to, directly
\nor indirectly, knowingly encourage, solicit, participate in or initiate
\ndiscussions or negotiations with, or provide any nonpublic information or data
\n(other than the Company’s standard public information package) to, any Person or
\ngroup of Persons (other than Parent and Merger Subsidiary, any affiliate or
\nassociate of Parent and Merger Subsidiary or any designees of Parent and Merger
\nSubsidiary) with respect to any inquiries or the making of any offer or proposal
\n(including, without limitation, any offer or proposal to the stockholders of the
\nCompany) concerning an Acquisition Transaction (an “Acquisition Proposal”) or
\notherwise knowingly facilitate any effort or attempt to make or implement an
\nAcquisition Proposal; provided, however, that prior to the date of acceptance
\nfor payment of and payment for Shares by Merger Subsidiary pursuant to the
\nOffer, or, to the extent the Minimum Tender Condition is waived pursuant to
\nSection 1.01(e), the date on which the Option is exercised (the earliest of such
\ndates is referred to as the “Closing Date”), the Company may furnish information
\nand access, but only in response to a request for information or access, to any
\nPerson making a bona fide written fully-financed (which for the purposes of this
\nAgreement shall mean the receipt of a commitment letter, from a reputable Person
\ncapable of financing the transaction, subject only to normal and customary
\nexceptions) all-cash Acquisition Proposal to the board of directors of the
\nCompany after the date hereof which was not knowingly encouraged, solicited or
\ninitiated by the Company or any of its affiliates or any director, employee,
\nrepresentative or agent of the Company or any of its Subsidiaries (including,
\nwithout limitation, any investment banker, attorney or accountant retained by
\nthe Company or any of its Subsidiaries) on or after the date hereof and may
\nparticipate in discussions and negotiate with such Person concerning any such
\nbona fide written fully-financed all-cash Acquisition Proposal and the board of
\ndirectors of the Company may modify, amend or withdraw its recommendation
\nrelative to the Offer or the Merger or authorize the Company, subject to Section
\n7.02(b), to enter into a binding written agreement concerning a Superior
\nProposal (as defined below), if and only if, in any such case, (i) the board of
\ndirectors of the Company determines in good faith, (A) taking into account the
\nreasoned advice of outside counsel to the Company to the effect that failing to
\nprovide such information or access or to participate in such discussions or
\nnegotiations or so to authorize or modify, to amend or withdraw <\/p>\n
-23-<\/p>\n
such recommendation, as the case may be, is more likely than not to constitute a
\nbreach of such board’s fiduciary duties under applicable law, and (B) taking
\ninto account the advice of financial advisors to the Company to such effect,
\nthat such bona fide written all-cash fully-financed Acquisition Proposal, if
\naccepted, is reasonably likely to be consummated, taking into account all
\nfinancial aspects of the proposal and the Person making the proposal and would,
\nif consummated, result in a transaction more favorable to the Company’s
\nstockholders from a financial point of view than the transaction contemplated by
\nthis Agreement (any such more favorable bona fide written fully-financed all-
\ncash Acquisition Proposal as to which both of the determinations referred to in
\nsubclauses (A) and (B) above have been made being referred to in this Agreement
\nas a “Superior Proposal”), and (ii) the board of directors of the Company
\nreceives from the Person making such bona fide written all-cash fully-financed
\nAcquisition Proposal an executed confidentiality agreement the terms of which
\nare (without regard to the terms of such Acquisition Proposal) (A) no less
\nfavorable to the Company, and (B) no less restrictive to the Person making such
\nbona fide written all-cash fully-financed Acquisition Proposal than those
\ncontained in the Confidentiality Agreement, dated as of December 28, 1999
\nreferring to Parent as the “Recipient” (the “Company Confidentiality
\nAgreement”), between the Company and Parent. The Company will notify Parent
\nwithin 48 hours if any such inquiries or proposals are received by, any such
\ninformation is requested from, or any such negotiations or discussions are
\nsought to be initiated or continued with the Company and shall in such notice
\nindicate the identity of the offeror and the material terms and conditions of
\nany such proposal and thereafter shall keep Parent reasonably informed, on a
\ncurrent basis, of the status and material terms of such proposals and the status
\nof such negotiations or discussions, providing copies to Parent of any
\nAcquisition Proposals made in writing. The Company shall provide Parent with
\nfour business days advance notice of, in each and every case, its intention to
\neither enter into any agreement with or to provide any information to any Person
\nmaking any such inquiry or proposal. Subject to the provisions of Section 5.02,
\nthe Company agrees not to release any third party from, or waive any provisions
\nof, any confidentiality or standstill agreement to which the Company is a party
\nand will use its best efforts to enforce any such agreements at the request of
\nand on behalf of Parent. The Company will inform the individuals or entities
\nreferred to in the first sentence of this Section 5.02 of the obligations
\nundertaken in this Section 5.02. The Company also will, at the request of
\nParent, promptly request each person or entity which has executed, within 12
\nmonths prior to the date of this Agreement, a confidentiality agreement in
\nconnection with its consideration of acquiring the Company to return or destroy
\nall confidential information heretofore furnished to such person or entity by or
\non behalf of the Company.<\/p>\n
Section 5.03. Access to Information.
\n ——————— <\/p>\n
(a) Except for competitively sensitive information or as limited by
\napplicable law, between the date of this Agreement and the Effective Time, the
\nCompany will upon reasonable notice (i) give Parent and its authorized
\nrepresentatives reasonable access during regular business hours to the Company’s
\nand each Subsidiary’s offices and other facilities and to its books and records,
\n(ii) permit Parent to make such inspections as it may require and (iii) cause
\nits officers and those of the Subsidiaries to furnish Parent with such financial
\nand operating data and other information with respect to the business and
\nproperties of the Company and the Subsidiaries as Parent may from time to time
\nreasonably request (including any request related to implementation of Section
\n5.13 hereof). Parent and Merger Subsidiary will use their commercially
\nreasonable <\/p>\n
-24-<\/p>\n
efforts to minimize any disruption to the businesses of the Company and the
\nSubsidiaries that may result from the requests for data and information
\nhereunder.<\/p>\n
(b) Information obtained by Parent pursuant to this Section 5.03 shall
\nbe subject to the provisions of the Company Confidentiality Agreement, which
\nremains in full force and effect.<\/p>\n
Section 5.04. Commercially Reasonable Efforts.
\n ——————————- <\/p>\n
(a) Subject to the terms and conditions of this Agreement and
\napplicable law, each of the parties shall act in good faith and use commercially
\nreasonable efforts to take, or cause to be taken, all actions, and to do, or
\ncause to be done, all things necessary, proper or advisable to consummate and
\nmake effective the transactions contemplated by this Agreement as soon as
\npracticable. Without limiting the foregoing, the parties shall use commercially
\nreasonable efforts to (and shall use commercially reasonable efforts to cause
\ntheir respective subsidiaries, and use commercially reasonable efforts to cause
\ntheir respective affiliates, directors, officers, employees, agents, attorneys,
\naccountants and representatives, to) (i) consult and cooperate with and provide
\nassistance to each other in the preparation and filing with the SEC of the Offer
\nDocuments, the Schedule TO, the State Filings, the Schedule 14D-9 and the Proxy
\nStatement and all necessary amendments or supplements thereto; (ii) obtain all
\nconsents, approvals, waivers, licenses, permits, authorizations, registrations,
\nqualifications or other permissions or actions by, and give all necessary
\nnotices to, and make all filings with and applications and submissions to, any
\nGovernmental Entity or other Person necessary in connection with the
\nconsummation of the transactions contemplated by this Agreement as soon as
\nreasonably practicable; (iii) provide all such information concerning such
\nparty, its subsidiaries and its officers, directors, employees, partners and
\naffiliates as may be necessary or reasonably requested in connection with any of
\nthe foregoing and (iv) avoid the entry of, or have vacated or terminated, any
\ndecree, order or judgment that would restrain, prevent, or delay the
\nconsummation of the Offer or the Merger. Prior to making any application to or
\nfiling with a Governmental Entity or other entity in connection with this
\nAgreement (other than filing under the HSR Act), each party shall provide the
\nother party with drafts thereof and afford the other party a reasonable
\nopportunity to comment on such drafts.<\/p>\n
(b) Parent shall take any and all commercially reasonable steps
\nnecessary to avoid or eliminate every applicable impediment under any antitrust,
\ncompetition or trade regulation law that is asserted by any Governmental Entity
\nwith respect to the Offer or the Merger so as to enable the consummation of the
\nOffer or the Merger to occur as expeditiously as possible. The parties agree
\nthat such commercially reasonable efforts of Parent shall include (1) the
\nobligation of Parent to litigate with any Governmental Entity for a period from
\nthe date hereof through and including December 31, 2000 and (2) the obligation
\nof Parent to divest assets or businesses of the Company as may be required in
\norder to facilitate the expiration of any applicable waiting period under any
\nantitrust, competition or trade regulation law, to secure the termination of any
\ninvestigation by any Governmental Entity or to avoid the filing of litigation by
\nany Governmental Entity seeking to enjoin the purchase of Shares pursuant to the
\nOffer or the consummation of the Merger, or to the entry of, or to effect the
\ndissolution of, any injunction, temporary restraining order or other order in
\nany suit or proceeding, which would otherwise have the effect of preventing or
\ndelaying the purchase of Shares pursuant to the Offer or the consummation of the
\nMerger; provided, however, the parties further agree that nothing in this
\n ——– ——-
\nsection shall require that Parent (i) <\/p>\n
-25-<\/p>\n
divest, sell or hold separate any of its assets or properties other than assets
\nor properties of the Company, (ii) consent to Parent or the Company doing any of
\nthe foregoing if any proposed divestiture of assets or businesses would have or
\nbe reasonable likely to have a Company Material Adverse Effect, (iii) enter into
\na consent decree or assume any other obligations with respect to the ongoing
\noperations of Parent, its subsidiaries or the Company or (iv) litigate with any
\nGovernmental Entity for a period beyond December 31, 2000.<\/p>\n
(c) Notwithstanding anything to the contrary in the foregoing
\nparagraph (b), Parent agrees that it will enter into a consent order if the sole
\npurpose of such order is to cause the Company to become subject to the existing
\nFederal Trade Commission consent order, In the Matter of Merck & Co., Inc. And
\nMerck-Medco Managed Care, L.L.C., File No. 951-0097, to the same extent that
\nMerck-Medco Managed Care, L.L.C. is currently subject to such consent order.<\/p>\n
(d) The Company, Parent and Merger Subsidiary shall keep the other
\nreasonably apprised of the status of matters relating to completion of the
\ntransactions contemplated hereby, including promptly furnishing the other with
\ncopies of notices or other communications received by Parent, Merger Subsidiary
\nor the Company, as the case may be, or any of their respective Subsidiaries,
\nfrom any third party and\/or any Governmental Entity with respect to the
\ntransactions contemplated by this Agreement.<\/p>\n
(e) The Company shall give prompt notice to Parent of any change that
\nhas resulted in or would be reasonably likely to have a Company Material Adverse
\nEffect and Parent shall give the Company prompt notice of any change that has
\nresulted in or would be reasonably likely to have a Parent Material Adverse
\nEffect.<\/p>\n
(f) If any Antitakeover Statute shall or may become applicable to the
\nOffer or the Merger or the other transactions contemplated by this Agreement or
\nthe Stockholder Agreement, each of Parent and the Company and their respective
\nBoard of Directors shall grant such approvals and take such lawful actions as
\nare necessary so that such transactions may be consummated as promptly as
\npracticable on the terms contemplated by this Agreement or the Stockholder
\nAgreement or by the Offer or the Merger and otherwise act to eliminate or
\nminimize the effects of such statute or regulation on such transactions.<\/p>\n
Section 5.05. Indemnification Exculpation and Insurance.
\n —————————————– <\/p>\n
(a) In the event of any threatened or actual claim, action, suit,
\nproceeding or investigation, whether civil, criminal or administrative,
\nincluding, without limitation, any such claim, action, suit, proceeding or
\ninvestigation in which any person who is now, or has been at any time prior to
\nthe date of this Agreement, or who becomes prior to the Effective Time, a
\ndirector, officer or employee of the Company or any of its Subsidiaries
\n(including in his or her role as a fiduciary of the employee benefit plans of
\nthe Company, if applicable) (the “Indemnified Parties”) is, or is threatened to
\nbe, made a party based in whole or in part on, or arising in whole or in part
\nout of, or pertaining to (i) the fact that he or she is or was a director,
\nofficer or employee of the Company, any of its Subsidiaries or any of their
\nrespective predecessors or (ii) this Agreement or any of the transactions
\ncontemplated hereby, whether in any case asserted or arising before or after the
\nEffective Time, the parties hereto agree to cooperate and use their commercially
\nreasonable efforts to defend against and respond thereto. It is understood and
\nagreed that after the <\/p>\n
-26-<\/p>\n
Effective Time, Parent shall indemnify and hold harmless, to the fullest extent
\npermitted by law, each such Indemnified Party against any losses, claims,
\ndamages, liabilities, costs, expenses (including reasonable attorney’s fees and
\nexpenses in advance of the final disposition of any claim, suit, proceeding or
\ninvestigation to each Indemnified Party to the fullest extent permitted by law
\nupon receipt of any undertaking required by applicable law), judgments, fines
\nand amounts paid in settlement in connection with any such threatened or actual
\nclaim, action, suit, proceeding or investigation, and in the event of any such
\nthreatened or actual claim, action, suit, proceeding or investigation (whether
\nasserted or arising before or after the Effective Time), the Indemnified Parties
\nmay retain counsel satisfactory to them after consultation with Parent;
\nprovided, however, that (A) Parent shall have the right to assume the defense
\nthereof and upon such assumption Parent shall not be liable to any Indemnified
\nParty for any legal expenses of other counsel or any other expenses subsequently
\nincurred by any Indemnified Party in connection with the defense thereof, except
\nthat if Parent elects not to assume such defense or counsel for the Indemnified
\nParties reasonably advises that there are issues which raise conflicts of
\ninterest between Parent and the Indemnified Parties, the Indemnified Parties may
\nretain counsel satisfactory to them after consultation with Parent, and Parent
\nshall pay the reasonable fees and expenses of such counsel for the Indemnified
\nParties, (B) Parent shall in all cases be obligated pursuant to this Section
\n5.05(a) to pay for only one firm of counsel for all Indemnified Parties, (C)
\nParent shall not be liable for any settlement effected without its prior written
\nconsent (which consent shall not be unreasonably withheld) and (D) Parent shall
\nhave no obligation hereunder to any Indemnified Party when and if a court of
\ncompetent jurisdiction shall ultimately determine, and such determination shall
\nhave become final and nonappealable, that indemnification of such Indemnified
\nParty in the manner contemplated hereby is prohibited by applicable law. Any
\nIndemnified Party wishing to claim indemnification under this Section 5.05(a),
\nupon learning of any such claim, action, suit, proceeding or investigation,
\nshall promptly notify Parent thereof, provided that the failure to so notify
\nshall not affect the obligations of Parent under this Section 5.05(a) except to
\nthe extent such failure to notify materially prejudices Parent. Upon written
\nrequest by an Indemnified Party, Parent shall advance all expenses incurred by
\nsuch Indemnified Party in connection with any such claim, action, suit,
\nproceeding or investigation to which such Indemnified Party is a party or is
\nentitled to indemnification pursuant to this Section 5.05(a). The right to
\nindemnification and the advancement of expenses conferred by this Section
\n5.05(a) shall not be exclusive of any other rights that any Indemnified Party
\nseeking indemnification or advancement of expenses may be entitled to or
\nhereafter acquire under any statute, agreement or provision of the Company’s or
\nthe Surviving Corporation’s certificate of incorporation or bylaws or otherwise.
\nParent’s obligations under this Section 5.05(a) shall continue in full force and
\neffect for a period of six (6) years from the Effective Time; provided, however,
\nthat all rights to indemnification in respect of any claim (a “Claim”) asserted
\nor made within such period shall continue until the final disposition of such
\nClaim.<\/p>\n
(b) Without limiting the foregoing, Merger Subsidiary and Parent agree
\nthat (i) the certificate of incorporation and bylaws of the Surviving
\nCorporation shall contain the provisions with respect to indemnification and
\nlimitation of liability set forth in the Company’s certificate of incorporation
\nand bylaws on the date hereof, which provisions shall not be amended, repealed
\nor otherwise modified for a period of six (6) years after the Effective Time in
\nany manner that would adversely affect the rights thereunder of individuals who
\nat any time prior to the Effective Time were directors or officers of the
\nCompany, and (ii) all rights to indemnification and exculpation from liabilities
\nfor acts or omissions occurring at or prior to the Effective Time now <\/p>\n
-27-<\/p>\n
existing in favor of the current or former directors or officers of the Company
\nand the Subsidiaries as provided in any indemnification agreements of the
\nCompany shall be assumed by the Surviving Corporation in the Merger, without
\nfurther action, as of the Effective Time and shall survive the Merger and shall
\ncontinue in full force and effect (to the extent consistent with applicable law)
\nin accordance with their terms. In the event that Parent or the Surviving
\nCorporation or any of their respective successors or assigns (A) consolidates
\nwith or merges into any other Person and is not the continuing or surviving
\ncorporation or entity of such consolidation or merger or (B) transfers or
\nconveys all or substantially all of its properties and assets to any Person,
\nthen, and in each such case, proper provision will be made so that the
\nsuccessors and assigns of Parent or the Surviving Corporation, as the case may
\nbe, assume the obligations set forth in this Section 5.05.<\/p>\n
(c) For six (6) years after the Effective Time, the Surviving
\nCorporation shall provide officers’ and directors’ liability insurance in
\nrespect of acts or omissions occurring prior to the Effective Time, including
\nbut not limited to the transactions contemplated by this Agreement, covering
\neach person currently covered by the Company’s officers’ and directors’
\nliability insurance policy, or who becomes covered by such policy prior to the
\nEffective Time, on terms with respect to coverage and amount no less favorable
\nthan those of such policy in effect on the date hereof, provided, however, that
\nin satisfying its obligation under this Section 5.05 the Surviving Corporation
\nshall not be obligated to pay annual premiums in excess of 200% of the amount
\nper annum the Company is currently paying for such coverage (the “Insurance
\nAmount”); provided further, that if the Insurance Amount is insufficient to
\nmaintain or procure the coverage contemplated by this Section 5.05(c), then the
\nSurviving Corporation shall use commercially reasonable efforts to obtain as
\nmuch comparable insurance as is available for the Insurance Amount.<\/p>\n
(d) For six (6) years after the Effective Time, Parent shall cause the
\nSurviving Corporation to honor its commitments and obligations pursuant to this
\nSection 5.05. The provisions of this Section 5.05 are (i) intended to be for
\nthe benefit of, and will be enforceable by, each indemnified party, his or her
\nheirs and his or her representatives and (ii) in addition to, and not in
\nsubstitution or, any other rights to indemnification or contribution that any
\nsuch person may have by contract or otherwise.<\/p>\n
Section 5.06. Employee Plans and Benefits and Employment Contracts.
\n —————————————————- <\/p>\n
(a) From and after the Effective Time, Parent shall cause the
\nSurviving Corporation to honor in accordance with their terms all existing
\nemployment, severance, consulting or other compensation agreements, plans or
\ncontracts between the Company or any Subsidiary and any officer, director or
\nemployee of the Company or any Subsidiary set forth on Section 5.06 of the
\nCompany Disclosure Schedule.<\/p>\n
(b) Parent agrees that, on and following the Effective Time, all
\nemployees of the Company and its subsidiaries as of the Effective Time (whether
\nor not on disability or leave of absence) (the “Current Employees”) shall be
\nimmediately eligible to participate in employee benefit plans and programs of
\nParent and its Affiliates on substantially the same terms and conditions as are
\napplicable to similarly situated non-bargained employees (i) with crediting of
\nprior employment with the Company and the Majority Stockholder, to the extent
\ncredited by either of them, for purposes of eligibility waiting periods and
\nvesting requirements, (ii) with recognition <\/p>\n
-28-<\/p>\n
of all co-payments and deductibles so that Current Employees are not treated as
\nnew employees of Parent and its affiliates but as if they had been employees of
\nsuch entitles throughout the period that they were employed with the Company and
\nthe Majority Stockholder and (iii) without application of preexisting condition
\nand similar exclusion provisions that did not apply to the Current Employees
\nprior to the Effective Time, but, in the case of each of (i) and (ii) only to
\nthe extent that employment, co-payments and deductibles are recognized in
\nrespect of employees of Parent and its affiliates other than the Current
\nEmployees; and provided, that this Section 5.06(b) shall not apply to (x)
\n ——–
\neligibility to receive retiree medical benefits, (y) the application of the
\ncost-sharing features applicable to such retiree medical benefits and (z)
\napplication of the provisions of all stock option programs of Parent and its
\naffiliates relating to retirement.<\/p>\n
(c) The Company will take all action necessary such that, effective as
\nof the Closing Date, the Company shall cease to participate in the employee
\nbenefit plans, programs, policies and arrangements sponsored and maintained by
\nthe Majority Stockholder (collectively, the “ShopKo Plans”).<\/p>\n
(d) Except as provided in Section 5.06(e), the Company shall use
\ncommercially reasonable efforts to cause the Majority Stockholder to retain,
\nbear and be responsible for all liabilities and obligations under the ShopKo
\nPlans. Without limiting the generality of the foregoing sentence, the Company
\nshall use commercially reasonable efforts to cause the Majority Stockholder to
\nbear and be responsible for all liabilities and obligations under the ShopKo
\nStores, Inc. Deferred Compensation Plan. Prior to the Closing Date, the Company
\nshall cause any accrued liabilities applicable to the Shopko Plans to be removed
\nfrom its and its Subsidiaries’ books.<\/p>\n
(e) Prior to the Closing Date, the Company shall take all action
\nnecessary such that, immediately prior to the Closing Date, all Current
\nEmployees of the Company and its subsidiaries who participate in the ShopKo
\nStores, Inc. Profit Sharing and Super Saver Plan (the “401(k) Plan”) shall
\nbecome fully vested in any unvested portion of their accounts under the 401(k)
\nPlan. The Company shall cause the trustee of any trust in which the 401(k) Plan
\nparticipates (the “Trust”), as of the Trust’s valuation date on or next
\nfollowing the Effective Time (the “Valuation Date”), to value, in a manner
\nconsistent with its prior practice, the account balances under the 401(k) Plan
\nof the Current Employees (collectively the “Account Balances”). As soon as
\npracticable after the determination of the Account Balances, the Company shall
\ncause the trustee of the Trust to transfer to a successor tax-qualified trust
\ndesignated by Parent an amount in cash equal to the Account Balances and
\noutstanding participant loans, if any (i) increased by interest during the
\nperiod from the Valuation Date to the date of transfer (the “Interim Period”) at
\nan interest rate equal to the interest rate credited on short-term investments
\nheld in the Trust (the “Short-Term Rate”) and (ii) reduced by benefit payments
\nto employees or their beneficiaries made in accordance with the provisions of
\nthe 401(k) Plan during the Interim Period plus interest on such benefit payments
\nat the Short-Term Rate from the date of payment until the transfer date.<\/p>\n
Section 5.07. Meeting of the Company’s Stockholders.
\n ————————————- <\/p>\n
(a) After consummation of the Offer, to the extent required by
\napplicable law, the Company shall promptly take all action necessary in
\naccordance with the DGCL and the Company’s certificate of incorporation and
\nbylaws to convene the Company Stockholder Meeting to consider and vote on the
\nMerger and this Agreement. At the Company Stockholder Meeting, all <\/p>\n
-29-<\/p>\n
of the Shares then owned by Parent, Merger Subsidiary or any other subsidiary of
\nParent shall be voted to approve the Merger and this Agreement. Subject to
\nSection 5.02, the Board of Directors of the Company shall recommend that the
\nCompany’s stockholders vote to approve the Merger and this Agreement if such
\nvote is sought, shall use commercially reasonable efforts to solicit from
\nstockholders of the Company proxies in favor of the Merger and shall take all
\nother reasonable action in its judgment necessary and appropriate to secure the
\nvote of stockholders required by the DGCL to effect the Merger.<\/p>\n
(b) If required under applicable law, the Company and Parent shall
\nprepare the Proxy Statement, file it with the SEC under the Exchange Act as
\npromptly as practicable after Merger Subsidiary purchases Shares pursuant to the
\nOffer, and use all reasonable efforts to have it cleared by the SEC. As
\npromptly as practicable after the Proxy Statement has been cleared by the SEC,
\nthe Company shall mail the Proxy Statement to the stockholders of the Company as
\nof the record date for the Company Stockholder Meeting.<\/p>\n
(c) Parent and Merger Subsidiary shall not, and they shall cause their
\nsubsidiaries not to, sell, transfer, assign, encumber or otherwise dispose of
\nthe Shares acquired pursuant to the Offer or otherwise prior to the Company
\nStockholder Meeting; provided, however, that this Section 5.07(c) shall not
\napply to the sale, transfer, assignment, encumbrance or other disposition of any
\nor all such Shares in transactions involving solely Parent, Merger Subsidiary
\nand\/or one or more of their wholly-owned subsidiaries.<\/p>\n
(d) Notwithstanding the foregoing, in the event that Merger Subsidiary
\nshall acquire Shares representing at least 90% of the votes represented by all
\noutstanding Common Stock, the parties hereto agree, at the request of Merger
\nSubsidiary, to take all necessary and appropriate action to cause the Merger to
\nbecome effective, in accordance with Section 253 of the DGCL, as soon as
\nreasonably practicable after such acquisition, without a meeting of the
\nstockholders of the Company.<\/p>\n
Section 5.08. De-registration. The Company shall use commercially
\n —————
\nreasonable efforts to cause the Shares to be de-registered from the New York
\nStock Exchange and de-registered under the Exchange Act as soon as practicable
\nfollowing the Effective Time.<\/p>\n
Section 5.09. Certain Actions. The Company shall settle the
\n —————
\nIntercompany Balance and terminate all ongoing contracts, commitments and
\narrangements between the Majority Stockholder and its affiliates (other than the
\nCompany or its Subsidiaries) and the Company and its Subsidiaries (including,
\nwithout limitation, those listed on the Company Disclosure Schedule) as of the
\nacceptance for payment of and payment for any Shares by Merger Subsidiary
\npursuant to the Offer, except for transactions contemplated by this Agreement
\nand the following agreements as contemplated by the Side Letter: (a)
\nIndemnification and Hold Harmless Agreement dated July 19, 1999, which shall
\nremain in full force and effect after the Change of Control Date (as defined in
\nthe Side Letter); (b) Tax Sharing Agreement dated July 19, 1999, which shall
\nremain in full force and effect after the Change of Control Date (as defined in
\nthe Side Letter); (c) Prescription Benefit Management Agreement dated March 4,
\n1996, which shall be amended as of the Change of Control Date (as defined in the
\nSide Letter); (d) Lease Agreement dated August 1, 1999, which shall be amended
\nas of the Change of Control Date (as defined in the Side Letter); (e)
\nInformation Technology Services Agreement dated July 19, 1999, which shall be
\namended as of the Change of <\/p>\n
-30-<\/p>\n
Control Date (as defined in the Side Letter) and (f) End User License Agreement
\ndated as of January 29, 2000, which shall be amended as of the Change of Control
\nDate (as defined in the Side Letter) (collectively, the “Affiliate Agreements”).<\/p>\n
Section 5.10. Affiliate Transactions. Except as contemplated by this
\n ———————-
\nAgreement or the Side Letter or as approved in writing by Parent, after the date
\nof this Agreement to the consummation of the Offer, the Company:<\/p>\n
(a) will not terminate, amend, modify, or grant any waivers of the
\nAffiliate Agreements or the Employment Contracts in any respects; or<\/p>\n
(b) will not permit the Intercompany Balance to be increased or
\ndecreased other than as a result of cash advances or payments required to be
\nmade in the ordinary course of business pursuant to the terms of the agreements
\nlisted in the Company Disclosure Schedule.<\/p>\n
Section 5.11. Public Announcements. Parent and the Company shall
\n ———————
\nconsult with each other before issuing, and provide each other the opportunity
\nto review, comment upon and concur with, any press release or other public
\nstatement with respect to the transactions contemplated by this Agreement,
\nincluding the Offer and the Merger, and shall not issue any such press release
\nor make any such public statement prior to such consultation, except as either
\nparty may determine is required by applicable law or by obligations pursuant to
\nany listing agreement with any national securities exchange.<\/p>\n
Section 5.12. Performance by Merger Subsidiary. Parent hereby agrees
\n ——————————–
\nto cause Merger Subsidiary to comply with its obligations hereunder and under
\nthe Offer and to cause Merger Subsidiary to consummate the Merger as
\ncontemplated herein.<\/p>\n
Section 5.13. Working Capital.
\n —————
\n (a) The Company will, within five business days after the end of each
\nCompany Fiscal Period (including, without limitation, the Company Fiscal Period
\nimmediately prior to the scheduled expiration date of the Offer), deliver to
\nParent a certificate providing the Company’s good faith calculation of Company
\nNet Working Capital on a line-item by line-item basis at the end of such
\nimmediately prior Company Fiscal Period.<\/p>\n
(b) Parent shall cause Arthur Andersen L.L.P. (“Arthur Andersen”) to,
\nwithin five business days of receipt by Parent of the certificate of the Company
\ncontemplated by paragraph (a) of this Section 5.13 with regard to the Company
\nFiscal Period immediately prior to expiration of the Offer, deliver to the
\nCompany and the Majority Stockholder Arthur Andersen’s calculation of Company
\nNet Working Capital on a line-item by line-item basis for such Company Fiscal
\nPeriod.<\/p>\n
(c) If Arthur Andersen’s calculation of Company Net Working Capital
\ndiscloses that Company Net Working Capital is less than $55.0 million (a
\n“Working Capital Shortfall”), the Majority Stockholder may within one business
\nday, in its sole discretion, make a payment to Parent in the amount of the
\nWorking Capital Shortfall by immediately available funds. If the Majority
\nStockholder timely makes such a payment or if Arthur Andersen’s calculation of
\nCompany Net Working Capital discloses no Working Capital Shortfall, the Company
\nwill be <\/p>\n
-31-<\/p>\n
deemed to have satisfied the condition to the Offer set forth in paragraph
\n(c)(x) of Annex A. The provisions of this Section 5.13(c) are exclusive of the
\nprovisions contained in Section 5.13(d).<\/p>\n
(d) If Arthur Andersen’s calculation of Company Net Working Capital
\ndiscloses that there is a Working Capital Shortfall, the Majority Stockholder
\nmay within one business day, in its sole discretion, agree to the audit and
\nindemnification procedures set forth in Section 9 of the Side Letter. If the
\nMajority Stockholder timely so agrees in writing, the Company will be deemed to
\nhave satisfied the condition to the Offer set forth in paragraph (c)(x) of Annex
\nA. The provisions of this Section 5.13(d) are exclusive of the provisions
\ncontained in Section 5.13(c).<\/p>\n
ARTICLE 6<\/p>\n
CONDITIONS TO THE MERGER<\/p>\n
Section 6.01. Conditions to Each Party’s Obligation to Effect the
\n —————————————————
\nMerger. The respective obligations of each party to consummate the Merger are
\n——
\nsubject to the satisfaction or waiver, where permissible, prior to the Effective
\nTime, of the following conditions:<\/p>\n
(a) if required by applicable law, this Agreement shall have been
\napproved by the affirmative vote of the stockholders of the Company by the
\nrequisite vote in accordance with applicable law;<\/p>\n
(b) any applicable waiting period under the HSR Act relating to the
\nMerger shall have expired;<\/p>\n
(c) Merger Subsidiary shall have purchased Shares tendered pursuant to
\nthe Offer, except that this condition shall not be a condition to Parent’s and
\nMerger Subsidiary’s obligations to effect the Merger if Merger Subsidiary shall
\nhave failed to purchase Shares pursuant to the Offer or, if applicable, pursuant
\nto the exercise of the Option, in breach of its obligations under this
\nAgreement; and<\/p>\n
(d) no provision of any applicable law or regulation and no judgment,
\ninjunction, order or decree shall prohibit the consummation of the Merger.<\/p>\n
ARTICLE 7<\/p>\n
TERMINATION; AMENDMENT; WAIVER<\/p>\n
Section 7.01. Termination. This Agreement may be terminated and the
\n ———–
\nMerger contemplated hereby may be abandoned at any time prior to the Effective
\nTime (notwithstanding approval thereof by the stockholders of the Company):<\/p>\n
(a) by mutual written consent of the Company and Parent;<\/p>\n
(b) by either the Company or Parent upon notification to the other
\nparty, if the Offer has not been consummated by December 31, 2000; provided,
\nhowever, that the right to terminate this Agreement pursuant to this Section
\n7.01(b) shall not be available to any party whose <\/p>\n
-32-<\/p>\n
failure to fulfill any obligation under this Agreement or the Offer has been the
\ncause of, or resulted in, the failure of the Shares to have been purchased
\npursuant to the Offer;<\/p>\n
(c) by either the Company or Parent, if there shall be any law or
\nregulation that makes consummation of the Offer or the Merger illegal or
\notherwise prohibited or if any judgment, injunction, order or decree enjoining
\nParent or the Company from consummating the Offer or the Merger is entered and
\nsuch judgment, injunction, order or decree shall become final and unappealable;
\nprovided, however, that the party seeking to terminate this Agreement pursuant
\nto this Section 7.01(c) shall have used commercially reasonable efforts to
\nremove such order, decree, ruling or injunction and shall not be in violation of
\nSection 5.04; or<\/p>\n
(d) by the Company: if (i) the Company is not in material breach of
\nany of its covenants or agreements in this Agreement, (ii) the board of
\ndirectors of the Company authorizes the Company, prior to the Closing Date, and
\nsubject to complying with the terms of this Agreement, to enter into a binding
\nwritten agreement concerning a Superior Proposal and the Company notifies Parent
\nin writing that it intends to enter into such an agreement, attaching the most
\ncurrent version of such agreement to such notice, and (iii) Parent does not
\nmake, within four business days of receipt of the Company’s written notification
\nof its intention to enter into such an agreement, a written and binding offer
\nthat is at least as favorable, from a financial point of view, to the
\nstockholders of the Company as the Superior Proposal. The Company agrees (x)
\nthat it will not enter into a binding agreement referred to in clause (ii) of
\nthe previous sentence until at least the first calendar day following the fourth
\nbusiness day after it has provided the written notice to Parent required
\nthereby, (y) to notify Parent promptly if its intention to enter into a written
\nagreement referred to in such notice shall change at any time after giving such
\nnotification and (z) that it will not terminate this Agreement or enter into a
\nbinding agreement referred to in clause (ii) of the previous sentence if Parent
\nhas, within the period referred to in clause (x) of this sentence, made a
\nwritten and binding offer that is at least as favorable to the Company’s
\nstockholders from a financial point of view as the Superior Proposal; or<\/p>\n
(e) by Parent, at any time prior to the Closing Date, if the board of
\ndirectors of the Company shall have failed to recommend, or shall have withdrawn
\nor adversely modified its approval or recommendation of, the Offer or the Merger
\nor failed to reconfirm its recommendation of the Offer or the Merger within four
\nbusiness days after a written request by Parent to do so, or shall have resolved
\nto do any of the foregoing.<\/p>\n
Section 7.02. Effect of Termination.
\n ———————
\n (a) In the event of termination of this Agreement and the abandonment
\nof the Merger pursuant to this Article 7, this Agreement shall become void and
\nof no effect with no liability of any party hereto (or any of its directors,
\nofficers, employees, agents, legal and financial advisors or other
\nrepresentatives) except as set forth below; provided, however, that except as
\notherwise provided herein, no such termination shall relieve any party hereto of
\nany liability or damages resulting from any willful breach of this Agreement.<\/p>\n
(b) In the event that (i) a bona fide written fully-financed all-cash
\nAcquisition Proposal shall have been made to the Company or any of its
\nstockholders or any Person shall have announced an intention (whether or not
\nconditional) to make a fully-financed all-cash Acquisition <\/p>\n
-33-<\/p>\n
Proposal with respect to the Company, and on or following the date of this
\nAgreement but prior to the Closing Date, such Acquisition Proposal, announcement
\nor intention is or becomes publicly known and (ii) on or following the date on
\nwhich such fully-financed all-cash Acquisition Proposal, announcement or
\nintention is or becomes publicly known, (A) this Agreement is terminated by
\neither Parent or the Company pursuant to Section 7.01(b) and if terminated by
\nParent or Merger Subsidiary, such termination shall be prior to the Closing
\nDate, and within 6 months after such termination, the Company either enters into
\na definitive agreement with respect to, or consummates, an Acquisition
\nTransaction or (B) this Agreement is terminated (x) by the Company pursuant to
\nSection 7.01(d) or (y) by Parent pursuant to Section 7.01(e), or (z) as a result
\nof the failure of the Company to satisfy any one of the conditions set forth in
\nparagraphs (iii) or (vii) of Annex A, then, subject to subsection (c) of this
\nSection 7.02, the Company (p) shall promptly, but in no event later than two
\nbusiness days after the date of such termination if terminated by Parent or
\nMerger Subsidiary and simultaneously with such termination if terminated by
\nCompany (except as otherwise provided in the proviso to this sentence) in the
\ncase of a termination pursuant to clause (B) and on the next business day after
\neither a definitive agreement with respect to an Acquisition Transaction is
\nexecuted or an Acquisition Transaction is consummated in the case of a
\ntermination pursuant to clause (A), pay Parent a termination fee of $8.0 million
\nin cash payable by wire transfer of same day funds, and (q) shall promptly, but
\nin no event later than two business days after being notified of such by Parent,
\npay all of the documented out-of-pocket third party charges and expenses
\nreasonably incurred by Parent or Merger Subsidiary in connection with this
\nAgreement and the Stockholders Agreement and the transactions contemplated by
\nthis Agreement and the Stockholders Agreement, including, without limitation,
\nfees and expenses of accountants, attorneys and financial advisors, up to a
\nmaximum of $1,500,000, in the aggregate. The Company acknowledges that the
\nagreements contained in this Section 7.02(b) are an integral part of the
\ntransactions contemplated by this Agreement, and that, without these agreements,
\nParent and Merger Subsidiary would not enter into this Agreement; accordingly,
\nif the Company fails to promptly pay the amount due pursuant to this Section
\n7.02, and, in order to obtain such payment, Parent or Merger Sub commences a
\nsuit which results in a binding nonappealable judgment rendered by a court of
\ncompetent jurisdiction against the Company for the fee set forth in this
\nparagraph (b) the Company shall pay to Parent or Merger Subsidiary its
\nreasonable costs and expenses (including attorneys’ fees) in connection with
\nsuch suit, together with interest on the amount of the fee at the prime rate of
\nCitibank, N.A. in effect on the date such payment was required to be made.<\/p>\n
(c) Parent agrees that the payment provided for in paragraph (b) of
\nthis Section shall be the sole and exclusive remedy of Parent upon termination
\nof this Agreement pursuant to Sections 7.01(b), 7.01 (d) or 7.01(e) and such
\nremedy shall be limited to the aggregate of the sums stipulated in paragraph (b)
\nof this Section. Except as contemplated by the immediately preceding sentence,
\nnothing herein shall relieve any party from liability for the willful and
\nknowing breach of any of its representations, warranties, covenants or
\nagreements set forth in this Agreement. In no event shall the Company be
\nrequired to pay to Parent more than one termination fee pursuant to this
\nSection.<\/p>\n
Section 7.03. Amendment. To the extent permitted by applicable law,
\n ———
\nthis Agreement may be amended by the parties at any time before or after
\napproval of this Agreement by the stockholders of the Company; provided,
\nhowever, that after any such stockholder approval, no amendment shall be made
\nwhich by law requires further approval of the Company’s stockholders without the
\napproval of such stockholders. This Agreement may not be amended except by an
\ninstrument in writing signed on behalf of each of the parties.<\/p>\n
Section 7.04. Extension; Waiver. At any time prior to the Effective
\n —————–
\nTime, a party hereto may (a) extend the time for the performance of any of the
\nobligations or other acts of <\/p>\n
-34-<\/p>\n
the other parties hereto, (b) waive any inaccuracies in the representations and
\nwarranties contained herein or in any document delivered pursuant hereto by any
\nother party or (c) subject to Section 7.03, waive compliance by any other party
\nwith any of the agreements or conditions contained herein. Any agreement on the
\npart of any party to any such extension or waiver shall be valid only if set
\nforth in an instrument in writing signed on behalf of such party. The failure of
\nany party to this Agreement assert any of its rights under this Agreement or
\notherwise shall not constitute a waiver of such rights.<\/p>\n
Section 7.05. Procedure for Termination, Extension or Waiver.
\n ———————————————-
\nA termination of this Agreement pursuant to Section 7.01, an amendment of this
\nAgreement pursuant to Section 7.03 or an extension or waiver pursuant to Section
\n7.04 in order to be effective shall require, in the case of Parent or the
\nCompany, action by its Board of Directors or, with respect to any amendment of
\nthis Agreement, a duly authorized committee of its Board of Directors.<\/p>\n
ARTICLE 8<\/p>\n
MISCELLANEOUS<\/p>\n
Section 8.01. Non-Survival of Representations and Warranties. None of
\n ———————————————-
\nthe representations and warranties made in this Agreement or in any instrument
\ndelivered pursuant to this Agreement shall survive after the Effective Time.
\nThis Section 8.01 shall not limit any covenant or agreement of the parties
\nhereto that by its terms contemplates performance after the Effective Time.<\/p>\n
Section 8.02. Entire Agreement; Assignment. This Agreement (including
\n —————————-
\nthe Company Disclosure Schedule and the Parent Disclosure Schedule), the
\nStockholder Agreement and, to the extent contemplated in Section 5.03(b), the
\nConfidentiality Agreement, (a) constitute the entire agreement among the parties
\nwith respect to the subject matter hereof and supersede all other prior
\nagreements and understandings, both written and oral, among the parties or any
\nof them with respect to the subject matter hereof and (b) shall not be assigned
\nby operation of law or otherwise, provided, however, that Parent or Merger
\nSubsidiary may assign any of their rights and obligations to any direct or
\nindirect wholly-owned subsidiary of Parent, but no such assignment shall relieve
\nParent or Merger Subsidiary of its obligations hereunder. Any of Parent, Merger
\nSubsidiary or any direct or indirect wholly-owned subsidiary of Parent may
\npurchase Shares under the Offer.<\/p>\n
Section 8.03. Validity. The invalidity or unenforceability of any
\n ——–
\nprovision of this Agreement shall not affect the validity or enforceability of
\nany other provisions of this Agreement, which shall remain in full force and
\neffect.<\/p>\n
-35-<\/p>\n
Section 8.04. Notices. All notices, requests, claims, demands and
\n ——-
\nother communications hereunder shall be in writing and shall be deemed to have
\nbeen duly given when delivered in person, by facsimile transmission with
\nconfirmation of receipt, by overnight courier (with delivery confirmed), or by
\nregistered or certified mail (postage prepaid, return receipt requested) to the
\nrespective parties as follows:<\/p>\n
(a) To Parent or the Merger Subsidiary:<\/p>\n
Merck & Co., Inc.
\n One Merck Drive
\n P.O. Box 100 W53AB-05
\n Whitehouse Station, NJ 08889
\n Attention: Celia A. Colbert
\n Assistant General Counsel and
\n Secretary
\n Fax: (908) 735-1246<\/p>\n
With a copy to:<\/p>\n
Fried, Frank, Harris, Shriver
\n & Jacobson
\n One New York Plaza
\n New York, New York 10004
\n Attention: Gary P. Cooperstein, Esq.
\n Facsimile: (212) 859-4000<\/p>\n
(b) if to the Company:<\/p>\n
ProVantage Health Services, Inc.
\n N19 W24130 Riverwood Dr.,
\n Waukesha, WI 53188
\n Attention: Jeffrey A. Jones
\n President and Chief Executive Officer
\n Fax: (262) 312-3858<\/p>\n
With a copy to:<\/p>\n
Foley & Lardner
\n 777 East Wisconsin Avenue
\n Milwaukee, Wisconsin 53202
\n Attention: Jay O. Rothman, Esq.<\/p>\n
Fax: (414) 297-4900<\/p>\n
or to such other address as the person to whom notice is given may have
\npreviously furnished to the others in writing in the manner set forth above
\n(provided that notice of any change of address shall be effective only upon
\nreceipt thereof).<\/p>\n
-36-<\/p>\n
Section 8.05. Governing Law. This Agreement shall be governed by and
\n ————-
\nconstrued in accordance with the laws of the State of Delaware.<\/p>\n
Section 8.06. Jurisdiction. Any suit, action or proceeding seeking to
\n ————
\nenforce any provision of, or based on any matter arising out of or in connection
\nwith, this Agreement or the transactions contemplated hereby may be brought
\nagainst any of the parties in any federal court located in the State of Delaware
\nor any Delaware state court, and each of the parties hereto hereby consents to
\nthe exclusive jurisdiction of such courts (and of the appropriate appellate
\ncourts therefrom) in any such suit, action or proceeding and waives any
\nobjection to venue laid therein. Process in any such suit, action or proceeding
\nmay be served on any party anywhere in the world, whether within or without the
\nState of Delaware. Without limiting the generality of the foregoing, each party
\nhereto agrees that service of process upon such party at the address referred to
\nin Section 8.04, together with written notice of such service to such party,
\nshall be deemed effective service of process upon such party.<\/p>\n
Section 8.07. Descriptive Headings. The descriptive headings herein
\n ——————–
\nare inserted for convenience of reference only and shall not constitute a part
\nof or affect the meaning or interpretation of this Agreement.<\/p>\n
Section 8.08. Parties in Interest. This Agreement shall be binding
\n ——————-
\nupon and inure solely to the benefit of each party hereto, and nothing in this
\nAgreement, express or implied, is intended to confer upon any other Person any
\nrights or remedies of any nature whatsoever under or by reason of this Agreement
\nexcept for Sections 2.10, 5.05 and 5.06 (which are intended to be for the
\nbenefit of the Persons entitled to therein, and may be enforced by such
\nPersons).<\/p>\n
Section 8.09. Counterparts. This Agreement may be executed in two or
\n ————
\nmore counterparts, each of which shall be deemed to be an original, but all of
\nwhich shall constitute one and the same agreement.<\/p>\n
Section 8.10. Fees and Expenses. Subject to Section 7.02, all fees,
\n —————–
\ncosts and expenses incurred in connection with the transactions contemplated by
\nthis Agreement shall be paid by the party incurring such fees and expenses,
\nwhether or not the Offer or the Merger is consummated.<\/p>\n
Section 8.11. Enforcement of Agreement. The parties hereto agree that
\n ————————
\nmoney damages or other remedy at law would not be sufficient or adequate remedy
\nfor any breach or violation of, or a default under, this Agreement by them and
\nthat in addition to all other remedies available to them, each of them shall be
\nentitled to the fullest extent permitted by law to an injunction restraining
\nsuch breach, violation or default or threatened breach, violation or default and
\nto any other equitable relief, including, without limitation, specific
\nperformance, without bond or other security being required.<\/p>\n
Section 8.12. Waiver of Jury Trial. To the extent permitted by
\n ——————–
\napplicable law, the parties hereby irrevocably waive any and all rights to trial
\nby jury in any legal proceeding arising out of or relating to this Agreement or
\nthe transactions contemplated hereby.<\/p>\n
Section 8.13. Certain Definitions. For purposes of this Agreement
\n ——————-
\n(including Annex A hereto), the following terms shall have the meanings ascribed
\nto them below:<\/p>\n
-37-<\/p>\n
(a) “affiliate” of a Person shall mean (i) a Person that directly or
\nindirectly, through one or more intermediaries, controls, is controlled by, or
\nis under common control with, the first-mentioned Person and (ii) an
\n“associate”, as that term is defined in Rule 12b-2 promulgated under the
\nExchange Act as in effect on the date of this Agreement.<\/p>\n
(b) “control” (including the terms “controlling”, “controlled by” and
\n“under common control with” or correlative terms) shall mean the possession,
\ndirect or indirect, of the power to direct or cause the direction of the
\nmanagement and policies of a Person, whether through ownership of voting
\nsecurities, by contract, or otherwise.<\/p>\n
(c) “fully diluted” in reference to the Shares means all outstanding
\nsecurities entitled generally to vote in the election of directors of the
\nCompany on a fully diluted basis, after giving effect to the exercise or
\nconversion of all options, rights and securities exercisable or convertible into
\nsuch voting securities.<\/p>\n
(d) “knowledge” shall mean the actual knowledge of the executive
\nofficers of the Company after reasonable investigation, including consultation
\nwith the principal executive officers of each of the operating Subsidiaries.<\/p>\n
(e) “Lien” shall mean, with respect to any asset, any mortgage, lien,
\npledge, charge, security interest or encumbrance of any kind in respect of such
\nasset.<\/p>\n
(f) “Person” shall mean an individual, a corporation, a limited
\nliability company, a partnership, an association, a trust or any other entity or
\norganization, including a government or political subdivision or any agency or
\ninstrumentality thereof.<\/p>\n
(g) “subsidiary” shall mean, when used with reference to a Person
\nmeans a corporation (or other entity) the majority of the outstanding voting
\nsecurities (or equity interests) of which are owned directly or indirectly by
\nsuch Person.<\/p>\n
(h) “Subsidiary” shall mean any corporation or other entity of which
\nsecurities or other ownership interests having ordinary voting power to elect a
\nmajority of the board of directors or other persons performing similar functions
\nare directly or indirectly owned by the Company.<\/p>\n
(i) “Taxes” means any taxes of any kind, including but not limited to
\nthose on or measured by or referred to as income, gross receipts, capital,
\nsales, use, ad valorem, franchise, profits, license, withholding, employment,
\npayroll, premium, value added, property or windfall profits taxes, environmental
\ntransfer taxes, customs, duties or similar fees, assessments or charges of any
\nkind whatsoever, together with any interest and any penalties, additions to tax
\nor additional amounts imposed by any governmental authority, domestic or
\nforeign.<\/p>\n
(j) “Tax Return” means any return, report or statement required to be
\nfiled with any governmental authority with respect to Taxes.<\/p>\n
-38-<\/p>\n
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
\nbe executed on its behalf by its officer thereunto duly authorized, on the day
\nand year first above written.<\/p>\n
MERCK & CO., INC.<\/p>\n
By: \/s\/ Judy C. Lewent
\n ——————–
\n Name: Judy C. Lewent
\n Title: Senior Vice President and
\n Chief Financial Officer<\/p>\n
PV ACQUISITION CORP.<\/p>\n
By: \/s\/ Judy C. Lewent
\n ——————-
\n Name: Judy C. Lewent
\n Title: President<\/p>\n
PROVANTAGE HEALTH SERVICES, INC.<\/p>\n
By: \/s\/ Jeffrey A. Jones
\n ———————
\n Name: Jeffrey A. Jones
\n Title: President and Chief Executive
\n Officer<\/p>\n
-39-<\/p>\n
ANNEX A
\n ——-<\/p>\n
CONDITIONS TO THE OFFER<\/p>\n
The capitalized terms used in this Annex A have the meanings set forth
\nin the attached Agreement, except that the term “the Agreement” shall be deemed
\nto refer to the attached Agreement. Notwithstanding any other provision of the
\nOffer, Merger Subsidiary shall not be obligated to accept for payment or pay
\nfor, subject to Rule 14e-l(c) of the Exchange Act, any Shares, not theretofore
\naccepted for payment and may terminate or amend the Offer if (a) that number of
\nShares, which would represent at least a majority of the Shares entitled to vote
\nthat are outstanding on a fully diluted basis after giving effect to the
\nexercise or conversion of all options, rights and securities exercisable or
\nconvertible into or exchangeable for Shares or such voting securities, shall not
\nhave been validly tendered and not withdrawn immediately prior to the expiration
\nof the Offer (the “Minimum Tender Condition”), (b) any applicable waiting period
\nunder the HSR Act shall not have expired or been terminated prior to the
\nexpiration of the Offer or (c) prior to the expiration of the Offer (immediately
\nprior to the Offer in the case of clause (viii)), any of the following
\nconditions exist or shall occur:<\/p>\n
(i) there shall have been entered, enforced or issued by any
\n Governmental Entity any final non-appealable judgment, order, injunction or
\n decree, (A) which makes illegal, restrains or prohibits the making of the
\n Offer, the acceptance for payment of, or payment for, any Shares by Parent
\n or Merger Subsidiary, or the consummation of the Merger, or (B) which
\n imposes limitations on the ability of Parent or Merger Subsidiary or their
\n respective affiliates to exercise full rights of ownership of, any Shares
\n accepted for payment pursuant to the Offer including, without limitation,
\n the right to vote the Shares accepted for payment by it on all matters
\n properly presented to the stockholders of the Company or (C) which
\n prohibits or imposes any material limitation on Parent’s, Merger
\n Subsidiary’s or any of their respective affiliates’ ownership or operation
\n of all or any material portion of the business or assets of the Company and
\n its Subsidiaries taken as a whole or Parent and its Subsidiaries taken as a
\n whole except as contemplated by clause (b)(2) of Section 5.04(b) of the
\n Merger Agreement (as limited by proviso (ii) of clause (b)(2) of such
\n Section 5.04(b));<\/p>\n
(ii) there shall have been any pending action, litigation or
\n proceeding brought by any Governmental Entity or any action, litigation or
\n proceeding threatened in writing by the FTC seeking to achieve any of the
\n consequences referred to in clauses (A) through (C) of paragraph (i) above;
\n provided, however, Parent may not terminate the Agreement as a result of
\n the failure to satisfy this condition prior to December 31, 2000; and
\n further provided, however, that Parent shall comply with its obligations
\n under Section 5.04 of the Agreement;<\/p>\n
(iii) the Company’s Board of Directors shall have modified or
\n amended its recommendation of the Offer in any manner adverse to Parent or
\n Merger Subsidiary or shall have withdrawn its recommendation of the Offer
\n or shall have recommended acceptance of any Acquisition Proposal or shall
\n have failed to reconfirm its recommendation of the Offer within four
\n business days after a written request by Parent to do so, or shall have
\n resolved to do any of the foregoing; or<\/p>\n
(iv) (A) the representations and warranties of the Company set
\n forth in this Agreement shall have failed to be true and correct as of the
\n date of this Agreement and as of the consummation of the Offer (except for
\n those representations and warranties made as of a specific date, which
\n shall have failed to be true and correct as of such date), <\/p>\n
-1-<\/p>\n
considered without regard to any qualification by, or references to,
\n “material,” “in all material respects” or “Company Material Adverse
\n Effect,” except for such failures of such representations and warranties to
\n be true and correct that individually or in the aggregate, do not have a
\n Company Material Adverse Effect and except for General Changes or
\n Transaction Changes or (B) the Company shall have breached or failed to
\n comply in any material respect with any of its material obligations,
\n covenants or agreements under the Agreement and any such breach or failure
\n shall not have been substantially cured by the Company within five business
\n days after Parent provides written notice to the Company of such breach or
\n failure;<\/p>\n
(v) the Merger Agreement shall have been terminated in accordance
\n with its terms;<\/p>\n
(vi) there shall have occurred any event which could reasonably
\n be expected to have a Company Material Adverse Effect, except for General
\n Changes or Transaction Changes;<\/p>\n
(vii) any corporation, entity, “group” or “person” (as defined
\n in the Exchange Act), other than Parent, Merger Sub, or the shareholder
\n that is party to the Stockholder Agreement (so long as such shareholder
\n does not breach any of the provisions of the Stockholder Agreement), shall
\n have acquired beneficial ownership of more than 25% of the outstanding
\n Shares;<\/p>\n
(viii) there shall exist (A) any general suspension of, or
\n limitation on prices for, trading in securities on any national securities
\n exchange or in the over the counter market in the United States (other than
\n shortening of trading hours or any trading halt resulting from a specified
\n increase or decrease in a market index), (B) a declaration of any banking
\n moratorium by federal or state authorities or any suspension of payments in
\n respect of banks or any limitation (whether or not mandatory) imposed by
\n federal or state authorities on the extension of credit by lending
\n institutions in the United States, or (C) in the case of any of the
\n foregoing existing at the time of the commencement of the Offer, a material
\n acceleration or worsening thereof;<\/p>\n
(ix) any provision in the Side Letter or Affiliate Agreements
\n shall have been amended, terminated, modified or waived in a manner not
\n contemplated by the Side Letter; or<\/p>\n
(x) subject to the ability of the Majority Stockholder to timely
\n cure any shortfall in Company Net Working Capital pursuant to Section
\n 5.13(c) or (d) of the Merger Agreement, Company Net Working Capital on the
\n last day of the Company Fiscal Period immediately preceding the scheduled
\n expiration of the Offer shall be less than $55.0 million.<\/p>\n
which, in the reasonable good faith judgment of Parent and regardless of the
\ncircumstances giving rise to any such condition, makes it inadvisable to proceed
\nwith the Offer or with such acceptance for payment, purchase of, or payment for
\nShares. The failure by Parent or Merger Subsidiary at any time to exercise any
\nof the foregoing rights shall not be deemed a waiver of any such right, the<\/p>\n
-2-<\/p>\n
waiver of any such right with respect to particular facts and other
\ncircumstances shall not be deemed a waiver with respect to any other facts and
\ncircumstances, and each such right shall be deemed an ongoing right that may be
\nasserted at any time and from time to time.<\/p>\n
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