AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

dated as of

August 12, 2008

among

LONGS DRUG STORES CORPORATION,

CVS CAREMARK CORPORATION

and

BLUE MERGERSUB CORP.

TABLE OF CONTENTS

 

 

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) dated as of August 12, 2008, among Longs Drug Stores Corporation, a Maryland corporation (the “ Company ”), CVS Caremark Corporation, a Delaware corporation (“ Parent ”), and Blue MergerSub Corp., a Maryland corporation and a wholly-owned indirect subsidiary of Parent (“ Merger Subsidiary ”).

WHEREAS, the respective boards of directors of Parent and Merger Subsidiary have determined that it is in the best interests of their respective stockholders, and the board of directors of the Company (the “ Board of Directors ”) has determined that it is advisable, for Parent to acquire the Company on the terms and conditions set forth herein;

WHEREAS, on the terms and conditions set forth herein, Merger Subsidiary has agreed to commence a tender offer (as it may be amended from time to time as permitted by this Agreement, the “ Offer ”) to purchase all outstanding shares of common stock, par value $0.50 per share, of the Company (“ Shares ”) at a price of $71.50 per Share, in cash without interest (such price, or any higher price as may be paid in the Offer in accordance with this Agreement, the “ Offer Price ”);

WHEREAS, following consummation of the Offer, Merger Subsidiary will be merged with and into the Company (the “ Merger ”), with the Company surviving the Merger as a direct or indirect wholly owned subsidiary of Parent in accordance with the Maryland General Corporation Law (“ Maryland Law ”), and each Share that is not tendered and accepted pursuant to the Offer (other than Shares owned by Parent or any direct or indirect wholly owned subsidiary of Parent or the Company) will thereupon be canceled and converted into the right to receive cash in an amount equal to the Offer Price, in each case, on the terms and conditions set forth herein;

WHEREAS, the Board of Directors (A) has, by unanimous vote, (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and in the best interests of the Company and its stockholders on the terms and conditions set forth herein and (ii) adopted this Agreement and approved the transactions contemplated hereby, including the Offer and the Merger, on the terms and conditions substantially as set forth herein, and (B) has unanimously resolved to recommend that the Company’s stockholders accept the Offer, tender their Shares into the Offer and, if required by Applicable Law, approve the Merger; and

WHEREAS, the respective boards of directors of Parent and Merger Subsidiary have adopted, approved and declared advisable, and Parent has caused the sole stockholder of Merger Subsidiary to approve, this Agreement providing for the Offer and the Merger in accordance with Maryland Law upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, Parent, Merger Subsidiary and the Company hereby agree as follows:

ARTICLE 1

D EFINITIONS

Section 1.01 . Definitions. (a) As used herein, the following terms have the following meanings:

“ Acquisition Proposal ” means, other than the transactions contemplated by this Agreement, any Third-Party offer, proposal or inquiry relating to, or any Third-Party indication of interest in, (i) any acquisition or purchase, direct or indirect, of 15% or more of the consolidated assets of the Company and its Subsidiaries or 15% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company, (ii) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in any Third Party beneficially owning 15% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company, (iii) a merger, consolidation, share exchange, business combination, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company or (iv) any other transaction the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the Offer or Merger or that could reasonably be expected to dilute materially the benefits to Parent of the transactions contemplated hereby.

“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person.

“ Applicable Law ” means, with respect to any Person, any foreign, federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

“ Business Day ” means a day other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.

 

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“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Company Balance Sheet ” means the consolidated balance sheet of the Company as of January 31, 2008 and the footnotes thereto set forth in the Company 10-K.

“ Company Balance Sheet Date ” means January 31, 2008.

“ Company Disclosure Schedule ” means the disclosure schedule dated the date hereof regarding this Agreement that has been provided by the Company to Parent and Merger Subsidiary.

“ Company Material Adverse Effect ” means a material adverse effect on (i) the condition (financial or otherwise), business, assets or results of operations of the Company and its Subsidiaries, taken as a whole, excluding any effect arising out of or resulting from (A) changes in the financial or securities markets or general economic or political conditions in the United States not having a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, (B) changes (including changes of Applicable Law or applicable accounting regulations) or conditions generally affecting the industry or the geographic markets in which the Company and its Subsidiaries operate and not specifically relating to or having a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, (C) acts of war, sabotage or terrorism or natural disasters involving the United States of America not having a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, or (D) the announcement or consummation of the transactions contemplated by this Agreement, or (ii) the Company’s ability to consummate the transactions contemplated by this Agreement.

“ Company 10-K ” means the Company’s annual report on Form 10-K for the fiscal year ended January 31, 2008.

“ Environmental Laws ” means any Applicable Laws or any agreement with any Governmental Authority or other third party, relating to human health and safety, the environment or to Hazardous Substances.

“ Environmental Permits ” means all permits, licenses, franchises, certificates, approvals and other similar authorizations of Governmental Authorities relating to or required by Environmental Laws and affecting, or relating to, the business of the Company or any of its Subsidiaries as currently conducted.

“ ERISA ” means the Employee Retirement Income Security Act of 1974.

“ ERISA Affiliate ” of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code.

 

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“ GAAP ” means generally accepted accounting principles in the United States.

“ Governmental Authority ” means any transnational, domestic or foreign federal, state or local, governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.

“ Hazardous Substance ” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, waste or material, or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, including any substance, waste or material regulated under any Environmental Law.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“ Intellectual Property ” means (i) trademarks, service marks, brand names, certification marks, trade dress, domain names and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application, (ii) inventions and discoveries, whether patentable or not, in any jurisdiction, patents, applications for patents (including divisions, continuations, continuations in part and renewal applications), and any renewals, extensions or reissues thereof, in any jurisdiction, (iii) Trade Secrets, (iv) writings and other works, whether copyrightable or not, in any jurisdiction, and any and all copyright rights, whether registered or not, and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof, (v) moral rights, database rights, design rights, industrial property rights, publicity rights and privacy rights and (vi) any similar intellectual property or proprietary rights.

“ IT Assets ” means computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines and all other information technology equipment, and all associated documentation owned by the Company or its Subsidiaries or licensed or leased by the Company or its Subsidiaries pursuant to written agreement (excluding any public networks and “off-the-shelf” or “shrink-wrap” items).

“ knowledge ” of (i) the Company means the knowledge of any of the individuals set forth on Section 1.01 of the Company Disclosure Schedule after reasonable inquiry and (ii) Parent or any of its Subsidiaries means the knowledge of any of the individuals set forth on Section 1.01 of the Parent Disclosure Schedule after reasonable inquiry.

 

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“ Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien, any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

“ 1933 Act ” means the Securities Act of 1933.

“ 1934 Act ” means the Securities Exchange Act of 1934.

“ Parent Disclosure Schedule ” means the disclosure schedule dated the date hereof regarding this Agreement that has been provided by Parent to the Company.

“ Parent Material Adverse Effect ” means a material adverse effect on Parent’s ability to consummate the transactions contemplated by this Agreement.

“ Permitted Liens ” means any Lien that is (i) not material in amount and (ii) does not materially detract from the value of, or materially impair the existing use of, the asset affected by such Lien.

“ Person ” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“ Sarbanes-Oxley Act ” means the Sarbanes-Oxley Act of 2002.

“ SEC ” means the Securities and Exchange Commission.

“ Subsidiary ” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.

“ Third Party ” means any Person, including as defined in Section 13(d) of the 1934 Act, other than Parent or any of its Affiliates.

“ WARN Act ” means the Worker Adjustment and Retraining Notification Act.

 

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(b) Each of the following terms is defined in the Section set forth opposite such term:

 

 

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Section 1.02 . Other Definitional and Interpretative Provisions . The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits, Annexes and Schedules are to Articles, Sections, Exhibits, Annexes and Schedules of this Agreement unless otherwise specified. Any capitalized terms used in any Exhibit, Annex or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that, with respect to any agreement or contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

 

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ARTICLE 2

T HE O FFER

Section 2.01 . The Offer . (a) Provided that nothing shall have occurred and be continuing that, had the Offer been commenced, would give rise to a right to terminate the Offer pursuant to any of the conditions set forth in Annex I, as promptly as practicable after the date hereof and in any event within ten calendar days after the date hereof, Merger Subsidiary shall commence (within the meaning of Rule 14d-2 under the 1934 Act) the Offer to purchase any and all of the outstanding Shares at the Offer Price, net to the seller in cash. The Offer shall only be subject to the condition that there shall be validly tendered in accordance with the terms of the Offer, prior to the expiration date of the Offer and not withdrawn, a number of Shares that, together with the Shares then owned by Parent and/or Merger Subsidiary, represents at least two-thirds of the total number of Shares outstanding on a fully diluted basis (the “ Minimum Condition ”) and to the other conditions set forth in Annex I. Merger Subsidiary expressly reserves the right to waive any of the conditions to the Offer and to make any change in the terms of or conditions to the Offer; provided that, without the prior consent of the Company, (i) the Minimum Condition may not be waived and (ii) no change may be made that changes the form of consideration to be paid, decreases the Offer Price or the number of Shares sought in the Offer, imposes conditions to the Offer in addition to those set forth in Annex I or modifies the conditions set forth in Annex I or amends any other term of the Offer in any manner adverse to the holders of Shares. Notwithstanding the foregoing, (x) without the consent of the Company, Merger Subsidiary shall have the right to extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by Applicable Law and (y) if any condition to the Offer is not satisfied or waived on any scheduled expiration date of the Offer, Merger Subsidiary shall extend the Offer from time to time until such conditions are satisfied or waived; provided , in each case, that Merger Subsidiary shall not be required to extend the Offer beyond the End Date. Following expiration of the Offer, Merger Subsidiary may, in its sole discretion, provide a subsequent offering period (“ Subsequent Offering Period ”) in accordance with Rule 14d-11 of the 1934 Act. Merger Subsidiary shall not terminate or withdraw the Offer other than in connection with the termination of this Agreement in accordance with Article 11 hereof. Subject to the foregoing, including the requirements of Rule 14d-11, and upon the terms and subject to the conditions of the Offer, Merger Subsidiary shall, and Parent shall cause it to, accept for payment and pay for, as promptly as practicable after the expiration of the Offer, all Shares (i) validly tendered and not withdrawn pursuant to the Offer and (ii) validly tendered in the Subsequent Offering Period (the time at which Shares are first accepted for payment under the Offer, the “ Acceptance Time ”).

(b) On the date of commencement of the Offer, Parent and Merger Subsidiary shall (i) file with the SEC a Tender Offer Statement on Schedule TO with respect to the Offer (together with all amendments and supplements thereto

 

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and including exhibits thereto, the “ Schedule TO ”) that shall include the summary term sheet required thereby and, as exhibits, the Offer to Purchase and a form of letter of transmittal and summary advertisement and other appropriate ancillary Offer documents (collectively, together with any amendments or supplements thereto, the “ Offer Documents ”) and (ii) cause the Offer Documents, along with the notice of the Merger required by Section 3-106(d)(1) of Maryland Law (the “ Notice of Merger ”), to be disseminated to holders of Shares. Each of Parent, Merger Subsidiary and the Company agrees promptly to correct any information provided by it for use in the Schedule TO, the Offer Documents or the Notice of Merger if and to the extent that such information shall have become (or shall become known to be) false or misleading in any material respect. Parent and Merger Subsidiary shall use their reasonable best efforts to cause the Schedule TO as so corrected to be filed with the SEC and the Offer Documents as so corrected to be disseminated to holders of Shares, in each case, as soon as reasonably practicable and as and to the extent required by applicable U.S. federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Schedule TO and the Offer Documents each time before any such document is filed with the SEC, and Parent and Merger Subsidiary shall give reasonable and good faith consideration to any comments made by the Company and its counsel. Parent and Merger Subsidiary shall provide the Company and its counsel with (i) any comments or other communications, whether written or oral, that Parent, Merger Subsidiary or their counsel may receive from time to time from the SEC or its staff with respect to the Schedule TO or Offer Documents promptly after receipt of those comments or other communications and (ii) a reasonable opportunity to participate in the response of Parent and Merger Subsidiary to those comments and to provide comments on that response (to which reasonable and good faith consideration shall be given).

Section 2.02 . Company Action . (a) The Company hereby consents to the Offer and represents that the Board of Directors, at a meeting duly called and held has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and in the best interests of the Company and its stockholders, (ii) adopted this Agreement and approved the transactions contemplated hereby, including the Offer and the Merger, in accordance with the requirements of Maryland Law, (iii) resolved, subject to Section 7.04(b), to recommend acceptance of the Offer and, if required by Applicable Law, approval of the Merger by its stockholders and (iv) taken all other actions necessary to exempt the Offer, the Merger, this Agreement and the transactions contemplated hereby from any “fair price”, “moratorium”, “control share acquisition”, “interested stockholder”, “business combination” or other similar statute or regulation promulgated by a Governmental Authority (“ Takeover Statute ”). The Company has been advised that all of its directors and executive officers who own Shares intend to tender their Shares pursuant to the Offer. The Company shall promptly furnish Parent with a list of its stockholders, mailing labels and any available listing or computer file containing

 

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the names and addresses of all record holders of Shares and lists of securities positions of Shares held in stock depositories, in each case, true and correct as of the most recent practicable date, and shall provide to Parent such additional information (including updated lists of stockholders, mailing labels and lists of securities positions) and such other assistance as Parent may reasonably request in connection with the Offer.

(b) On the day that the Offer is commenced, the Company shall file with the SEC and disseminate to holders of Shares, in each case, as and to the extent required by applicable U.S. federal securities laws, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the “ Schedule 14D-9 ”) that, subject to Section 7.04(b), shall reflect the recommendations of the Board of Directors referred to above. Each of the Company, Parent and Merger Subsidiary agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect. The Company shall use its reasonable best efforts to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case, as soon as reasonably practicable and as and to the extent required by applicable U.S. federal securities laws. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 each time before it is filed with the SEC, and the Company shall give reasonable and good faith consideration to any comments made by Parent, Merger Subsidiary and their counsel. The Company shall provide Parent, Merger Subsidiary and their counsel with (i) any comments or other communications, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt of those comments or other communications and (ii) a reasonable opportunity to participate in the Company’s response to those comments and to provide comments on that response (to which reasonable and good faith consideration shall be given).

Section 2.03 . Directors . (a) Effective upon the Acceptance Time, Parent shall be entitled to designate the number of directors, rounded up to the next whole number, on the Board of Directors that equals the product of (i) the total number of directors on the Board of Directors (giving effect to the election of any additional directors pursuant to this Section) and (ii) the percentage that the number of Shares beneficially owned by Parent and/or Merger Subsidiary (including Shares accepted for payment) bears to the total number of Shares outstanding, and the Company shall cause Parent’s designees to be elected or appointed to the Board of Directors, including by increasing the number of directors and seeking and accepting resignations of incumbent directors. At such time, the Company shall also cause individuals designated by Parent to constitute the number of members, rounded up to the next whole number, on (A) each committee of the Board of Directors and (B) as requested by Parent, each board of directors of each Subsidiary of the Company (and each committee thereof) that

 

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represents the same percentage as such individuals represent on the Board of Directors. Notwithstanding the foregoing, until the Acceptance Time, the Company shall use its reasonable best efforts to ensure that all of the members of the Board of Directors and such committees and boards as of the date hereof who are not employees of the Company shall remain members of the Board of Directors and such committees and boards until the Effective Time.

(b) The Company’s obligations to appoint Parent’s designees to the Board of Directors shall be subject to Section 14(f) of the 1934 Act and Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions, and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors, as Section 14(f) and Rule 14f-1 require in order to fulfill its obligations under this Section. Parent shall supply to the Company in writing and be solely responsible for any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1 and the Company’s obligations under Section 2.03(b) shall be subject to the receipt of such information.

(c) Following the election or appointment of Parent’s designees pursuant to Section 2.03(a) and until the Effective Time, the approval of a majority of the directors of the Company then in office who were not designated by Parent (the “ Independent Directors ”) shall be required to authorize (and such authorization shall constitute the authorization of the Board of Directors and no other action on the part of the Company, including any action by any other director of the Company, shall be required to authorize) any termination of this Agreement by the Company, any amendment of this Agreement requiring action by the Board of Directors, any extension of time for performance of any obligation or action hereunder by Parent or Merger Subsidiary and any waiver of compliance with any of the agreements or conditions contained herein for the benefit of the Company.

Section 2.04 . Top-Up Option . (a) Subject to Section 2.04(b) and Section 2.04(c), the Company grants to Merger Subsidiary an irrevocable option, for so long as this Agreement has not been terminated pursuant to the provisions hereof (the “ Top-Up Option ”), to purchase from the Company up to the number of authorized and unissued Shares equal to the number of Shares that, when added to the number of Shares owned by Merger Subsidiary at the time of exercise of the Top-Up Option, constitutes one Share more than the number of Shares (the “ Requisite Short-Form Merger Shares ”) entitled to cast 90% of all the votes entitled to be cast by each group or class of shares entitled to vote as a group or class on the Merger after the issuance of all Shares to be issued upon exercise of the Top-Up Option, calculated on a fully-diluted basis or, as may be elected by Parent, on a primary basis at the Effective Time (such Shares to be issued upon exercise of the Top-Up Option, the “ Top-Up Shares ”).

 

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(b) The Top-Up Option may be exercised by Merger Subsidiary, in whole or in part, only once, at any time during the ten Business Day period following the Acceptance Time, or if any Subsequent Offering Period is provided, during the ten Business Day period following the expiration date of the Subsequent Offering Period, and only if Merger Subsidiary shall own as of such time less than the Requisite Short-Form Merger Shares; provided that notwithstanding anything in this Agreement to the contrary, the Top-Up Option shall not be exercisable to the extent (i) the issuance of the Top-Up Shares would require approval of the Company’s stockholders under Rule 312 of The New York Stock Exchange (the “ NYSE ”) (unless a waiver or exemption therefrom is obtained from the NYSE), (ii) the number of Shares issuable upon exercise of the Top-Up Option would exceed the number of authorized but unissued Shares or (iii) any other provision of Applicable Law or judgment, injunction, order or decree shall prohibit the exercise of the Top-Up Option or the delivery of the Top-Up Shares. The aggregate purchase price payable for the Top-Up Shares being purchased by Merger Subsidiary pursuant to the Top-Up Option shall be determined by multiplying the number of such Shares by the Offer Price, without interest. Such purchase price may be paid by Merger Subsidiary, at its election, either entirely in cash or by executing and delivering to the Company a promissory note having a principal amount equal to such purchase price. Any such promissory note shall bear interest at the rate of 3% per annum, shall mature on the first anniversary of the date of execution and delivery of such promissory note and may be prepaid without premium or penalty.

(c) In the event Merger Subsidiary wishes to exercise the Top-Up Option, Merger Subsidiary shall deliver to the Company a notice (the “ Top-Up Notice ”) setting forth (i) the number of Top-Up Shares that Merger Subsidiary intends to purchase pursuant to the Top-Up Option, (ii) the manner in which Merger Subsidiary intends to pay the applicable purchase price and (iii) the place and time at which the closing of the purchase of such Top-Up Shares by Merger Subsidiary is to take place. The Top-Up Notice shall also include an undertaking signed by Parent and Merger Subsidiary that, as promptly as practicable following such exercise of the Top-Up Option, Merger Subsidiary intends to (and Merger Subsidiary shall, and Parent shall cause Merger Subsidiary to, as promptly as practicable after such exercise) consummate the Merger in accordance with Section 3-106 of Maryland Law and as contemplated by Section 9.06. At the closing of the purchase of the Top-Up Shares, Parent and Merger Subsidiary shall cause to be delivered to the Company the consideration required to be delivered in exchange for the Top-Up Shares, and the Company shall cause to be issued to Merger Subsidiary a certificate representing the Top-Up Shares. The parties hereto agree to use their reasonable best efforts to cause the closing of the purchase of the Top-Up Shares to occur on the same day that the Top-Up Notice is deemed received by the Company pursuant to Section 12.01, and if not so consummated on such day, as promptly thereafter as possible. The parties further agree to use their reasonable best efforts to cause the Merger to be consummated in accordance with Section 3-106 of Maryland Law and as contemplated by Section 9.06 as close in time as possible to (including, to the extent possible, on the same day as) the issuance of the Top-Up Shares.

 

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(d) Parent and Merger Subsidiary understand that the Top-Up Shares will not be registered under the 1933 Act and will be issued in reliance upon an exemption thereunder for transactions not involving a public offering. Each of Parent and Merger Subsidiary represents, warrants and agrees that the Top-Up Option is being, and the Top-Up Shares will be, acquired by Merger Subsidiary for the purpose of investment and not with a view to or for resale in connection with any distribution thereof within the meaning of the 1933 Act. Any certificates evidencing Top-Up Shares shall include any legends required by applicable securities laws.

(e) Parent and the Company shall use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and assist and cooperate with each other in doing, all things necessary or desirable to procure from the NYSE or any other Governmental Authority any necessary waiver or other exemption from the requirements of NYSE Rule 312 or other Applicable Law in order to enable the issuance of the Top-Up Shares to occur without the need to obtain the approval of holders of a majority of the Shares present and voting at the Company Stockholder Meeting.

ARTICLE 3

T HE M ERGER

Section 3.01 . The Merger . (a) At the Effective Time, Merger Subsidiary shall be merged with and into the Company in accordance with Maryland Law, whereupon the separate existence of Merger Subsidiary shall cease, and the Company shall be the surviving corporation (the “ Surviving Corporation ”).

(b) Subject to the provisions of Article 10, the closing of the Merger (the “ Closing ”) shall take place in New York City at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, 10017 as soon as possible, but in any event no earlier than 30 days after the date of the Notice of Merger and no later than two Business Days after the date the conditions set forth in Article 10 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at the Closing) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit of such conditions, or at such other place, at such other time or on such other date as Parent and the Company may mutually agree.

(c) At the Closing, the Company and Merger Subsidiary shall file articles of merger with the State Department of Assessments and Taxation of Maryland and make all other filings or recordings required by Maryland Law in

 

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connection with the Merger. The Merger shall become effective at such time (the “ Effective Time ”) as the articles of merger are duly accepted by the State Department of Assessments and Taxation of Maryland or at such later time as may be specified in the articles of merger.

(d) From and after the Effective Time, the Surviving Corporation shall possess all the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of the Company and Merger Subsidiary, all as provided under Maryland Law.

Section 3.02 . Conversion of Shares . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Subsidiary or the Company:

(a) except as otherwise provided in Section 3.02(b) or Section 3.02(c), each Share outstanding immediately prior to the Effective Time shall be converted automatically into the right to receive the Offer Price, in cash without interest (the “ Merger Consideration ”);

(b) each Share held by any Subsidiary of the Company immediately prior to the Effective Time shall be converted into such number of shares of stock of the Surviving Corporation such that each such Subsidiary owns the same percentage of the outstanding capital stock of the Surviving Corporation immediately following the Effective Time as such Subsidiary owned in the Company immediately prior to the Effective Time;

(c) each Share owned by Parent or any of its Subsidiaries immediately prior to the Effective Time shall be canceled, and no payment shall be made with respect thereto; and

(d) each share of common stock of Merger Subsidiary outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation (except for any such shares resulting from the conversion of Shares pursuant to Section 3.02(b)).

Section 3.03 . Surrender and Payment . (a) Prior to the Acceptance Time, Parent shall appoint an agent that has been approved in advance by the Company (such approval not to be unreasonably withheld, delayed or conditioned) (the “ Exchange Agent ”) for the purpose of exchanging for the Merger Consideration (i) certificates representing Shares (the “ Certificates ”) or (ii) uncertificated Shares (the “ Uncertificated Shares ”). Parent or one of its Subsidiaries shall make available to the Exchange Agent, as needed, the Merger Consideration to be paid in respect of the Certificates and the Uncertificated Shares. Promptly after the Effective Time, Parent shall send, or shall cause the Exchange Agent to send, to each holder of Shares at the Effective Time a letter of transmittal and

 

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instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates or transfer of the Uncertificated Shares to the Exchange Agent) for use in such exchange.

(b) Each holder of Shares that have been converted into the right to receive the Merger Consideration shall be entitled to receive, upon (i) surrender to the Exchange Agent of a Certificate, together with a properly completed letter of transmittal, or (ii) receipt of an “agent’s message” by the Exchange Agent (or such other evidence, if any, of transfer as the Exchange Agent may reasonably request) in the case of a book-entry transfer of Uncertificated Shares, the Merger Consideration payable for each Share represented by a Certificate or for each Uncertificated Share. Until so surrendered or transferred, as the case may be, each such Certificate or Uncertificated Share shall represent after the Effective Time for all purposes only the right to receive the Merger Consideration.

(c) If any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate or the transferred Uncertificated Share is registered, it shall be a condition to such payment that (i) either such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer or such Uncertificated Share shall be properly transferred and (ii) the Person requesting such payment shall pay to the Exchange Agent any transfer or other Taxes required as a result of such payment to a Person other than the registered holder of such Certificate or Uncertificated Share or establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.

(d) After the Effective Time, there shall be no further registration of transfers of Shares. If, after the Effective Time, Certificates or Uncertificated Shares are presented to the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this Article 3.

(e) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 3.03(a) (and any interest or other income earned thereon) that remains unclaimed by the holders of Shares six months after the Effective Time shall be returned to the Surviving Corporation upon demand, and any such holder who has not exchanged such Shares for the Merger Consideration in accordance with this Section 3.03 prior to that time shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration in respect of such Shares without any interest thereon. Notwithstanding the foregoing, none of Parent, the Company, the Exchange Agent, the Surviving Company or any of their respective Affiliates shall be liable to any holder of Shares for any amount paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Any amounts remaining unclaimed by holders of Shares two years after the Effective Time (or such earlier date immediately prior to such time when the amounts would otherwise escheat to or become property of any Governmental Authority) shall become, to the extent permitted by Applicable Law, the property of the Surviving Corporation free and clear of any claims or interest of any Person previously entitled thereto.

 

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(f) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 3.03(a) to pay for Shares for which appraisal rights have been perfected shall be returned to the Surviving Corporation, upon demand.

Section 3.04 . No Dissenters’ or Appraisal Rights. No dissenters’ or appraisal rights shall be available with respect to the Merger or the other transactions contemplated hereby.

Section 3.05 . Stock Options, Performance Shares and Restricted Shares . (a) At the Acceptance Time, each then-outstanding option to purchase Shares granted under any employee stock option or compensation plan or arrangement of the Company (a “ Company Stock Option ”), whether or not vested or exercisable, shall be converted into the right to receive, and the Company shall pay to each former holder of any such converted Company Stock Option at or promptly after the Acceptance Time an amount in cash equal to the product of (i) the excess, if any, of the Merger Consideration over the applicable exercise price per Share of such Company Stock Option and (ii) the number of Shares such holder could have purchased (assuming full vesting of such Company Stock Option) had such holder exercised such Company Stock Option in full immediately prior to the Acceptance Time.

(b) At the Acceptance Time, each then-outstanding right to earn a restricted Share under the Company’s performance-based restricted stock grant program (a “ Performance Share ”) shall be deemed earned (i) at maximum, if such Performance Share relates to the 2008/2009 performance cycle, and (ii) target, if such Performance Share relates to the 2009/2010 performance cycle; provided , however , that the portion of such 2009/2010 performance award that is not dependent solely on the Company’s performance in 2009 shall be prorated by a fraction, the numerator of which is the number of days, elapsed between February 1, 2008 and the Acceptance Time and the denominator of which is the number of days in the full 2009/2010 performance cycle. Earned Performance Shares shall be fully vested and converted into the right to receive the Merger Consideration at the Acceptance Time, and any Performance Shares not earned in accordance with the foregoing shall be cancelled without consideration.

(c) At the Acceptance Time, each then-outstanding restricted Share granted under any equity or compensation plan or arrangement of the Company (a “ Company Restricted Share ”) shall vest (and all restrictions thereon shall immediately lapse) and shall be converted into the right to receive the Merger Consideration in accordance with Section 3.02(a).

(d) The Company shall pay the holders of Company Stock Options and Performance Shares the cash payments described in this Section 3.05 as soon as

 

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reasonably practicable after the Acceptance Time, but in any event no later than the earlier of (i) the Company’s next payroll cycle occurring after the five-day period following the Acceptance Time or (ii) ten Business Days following the Acceptance Time.

Section 3.06 . Adjustments . If, during the period between the date of this Agreement and the Effective Time, the outstanding Shares shall be changed into a different number of shares or a different class, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of Shares, or stock dividend thereon with a record date during such period, but excluding any change that results from any exercise of Company Stock Options, the Offer Price, the Merger Consideration and any other amounts payable pursuant to this Agreement shall be appropriately adjusted.

Section 3.07 . Withholding Rights . Notwithstanding anything to the contrary contained herein, each of the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to Articles 2 and 3 such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of Tax law, and if any such amounts are deducted and withheld, the Surviving Corporation or Parent, as the case may be, shall timely pay such amounts over to the appropriate Government Authority. If the Surviving Corporation or Parent, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which the Surviving Corporation or Parent, as the case may be, made such deduction and withholding.

Section 3.08 . Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, the completion of the letter of transmittal by such Person and, if required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall pay, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration to be paid in respect of the Shares represented by such Certificate, as contemplated by this Article 3.

ARTICLE 4

T HE S URVIVING C ORPORATION

Section 4.01 . Articles of Incorporation . The articles of incorporation of the Company in effect at the Effective Time shall be the articles of incorporation of the Surviving Corporation until amended in accordance with Applicable Law.

 

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Section 4.02 . Bylaws . The bylaws of Merger Subsidiary in effect at the Effective Time shall be the bylaws of the Surviving Corporation until amended in accordance with Applicable Law.

Section 4.03 . Directors and Officers . From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with Applicable Law, (i) the directors of Merger Subsidiary at the Effective Time shall be the directors of the Surviving Corporation and (ii) the officers of Merger Subsidiary at the Effective Time shall be the officers of the Surviving Corporation.

ARTICLE 5

R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY

Subject to Section 12.05, except as set forth in the Company Disclosure Schedule, the Company represents and warrants to Parent that:

Section 5.01 . Corporate Existence and Power . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland, has all corporate powers and has, and has had at all relevant times, all governmental licenses, authorizations, permits, consents and approvals (“ Permits ”) required to carry on its business as now conducted, except for those Permits the absence of which would not have, individually or in the aggregate, a Company Material Adverse Effect. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has heretofore made available to Parent true and complete copies of the articles of incorporation and bylaws of the Company as currently in effect.

Section 5.02 . Corporate Authorization . (a) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company’s corporate powers and, except for the affirmative vote of the holders of two-thirds of the outstanding Shares in connection with the consummation of the Merger (if required by Applicable Law), have been duly authorized by all necessary corporate action on the part of the Company. The affirmative vote of the holders of two-thirds of the outstanding Shares entitled to vote thereon (if required by Applicable Law) is the only vote of the holders of any of the Company’s capital stock necessary in connection with the consummation of the Merger. Assuming due authorization, execution and delivery hereof by Parent and Merger Subsidiary, this Agreement constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms (subject, in the case of enforceability, to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).

 

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(b) At a meeting duly called and held, the Board of Directors has (i) unanimously determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and in the best interests of the Company and its stockholders, (ii) unanimously adopted this Agreement and approved the transactions contemplated hereby, including the Offer and the Merger, and (iii) unanimously resolved (subject to Section 7.04) to recommend acceptance of the Offer and approval of the Merger by its stockholders (such recommendation, the “ Company Board Recommendation ”).

Section 5.03 . Governmental Authorization . The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby require no action by or in respect of, or filing with, any Governmental Authority, other than (i) the filing and acceptance for the record of articles of merger with respect to the Merger with the State Department of Assessments and Taxation of Maryland and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, (ii) compliance with any applicable requirements of the HSR Act, (iii) compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other applicable state or federal securities laws, (iv) actions required by applicable Food and Drug Administration, Drug Enforcement Administration, Medicare/Medicaid, state boards of pharmacy and governmental controlled substances, federal and state insurance and other federal and state Governmental Authorities with jurisdiction over the dispensing or distribution of pharmaceutical products or over the provision of health care items or services, pharmacy benefit management services, durable medical equipment, insurance and risk sharing arrangements and products and services, third-party administrator, utilization review and liquor authorities approvals, in each case, to the extent applicable (the “ Healthcare Regulatory Approvals ”), (v) applicable requirements of the rules and regulations of the NYSE, (vi) actions required by the Nevada Gaming Commission and the Nevada State Gaming Control Board and (vii) any actions or filings the absence of which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 5.04 . Non-contravention . The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the articles of incorporation or bylaws of the Company, (ii) assuming compliance with the matters referred to in Section 5.03, contravene, conflict with, or result in a violation or breach of any provision of any Applicable Law, (iii) assuming compliance with the matters referred to in Section 5.03, require any consent or other action by any Person under, constitute a default, or an event that, with or

 

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without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company or any of its Subsidiaries is entitled under any provision of any agreement or other instrument binding upon the Company or any of its Subsidiaries or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of the Company and its Subsidiaries or (iv) result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries, with only such exceptions, in the case of each of clauses (ii) through (iv), as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 5.05 . Capitalization . (a) The authorized capital stock of the Company consists of (i) 120,000,000 Shares and (ii) 30,000,000 shares of preferred stock, $0.50 par value per share, of which 300,000 shares of preferred stock are classified as Series A Junior Participating Preferred Stock. As of August 6, 2008, there were outstanding 35,930,604 Shares (of which an aggregate of 464,993 are Company Restricted Shares), no shares of preferred stock, Performance Shares settleable in 412,000 Shares, and employee stock options to purchase an aggregate of 1,622,833 Shares (of which options to purchase an aggregate of 1,313,533 Shares were exercisable). All outstanding shares of capital stock of the Company have been, and all shares that may be issued pursuant to any employee stock option or other compensation plan or arrangement will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued, fully paid and nonassessable and free of preemptive rights. No Subsidiary or Affiliate of the Company owns any shares of capital stock of the Company.

(b) Section 5.05(b) of the Company Disclosure Schedule contains a complete and correct list of (A) each outstanding Employee Stock Option, including the holder, date of grant, exercise price, vesting schedule and number of Shares subject thereto, (B) each outstanding Company Restricted Share, including the holder, date of grant and number vested and (C) each outstanding Performance Share, including the holder, date of grant and number of Shares subject thereto.

(c) There are outstanding no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth in this Section 5.05 and for changes since August 6, 2008 resulting from the exercise of employee stock options outstanding on such date, there are no issued, reserved for issuance or outstanding (i) shares of capital stock of or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company, (iii) warrants, calls, options or other rights to acquire from the Company, or other obligation of the Company to

 

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issue, any capital stock or voting securities of the Company or (iv) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock or voting securities of the Company (the items in clauses (i) though (iv) being referred to collectively as the “ Company Securities ”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Securities. Neither the Company nor any of its Subsidiaries is a party to any voting agreement with respect to the voting of any Company Securities.

Section 5.06 . Subsidiaries . (a) Each Subsidiary of the Company has been duly organized, is validly existing and (where applicable) in good standing under the laws of its jurisdiction of organization, has all organizational powers and has, and has had at all relevant times, all Permits required to carry on its business as now conducted, except for those Permits the absence of which would not have, individually or in the aggregate, a Company Material Adverse Effect. Each such Subsidiary is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not have, individually or in the aggregate, a Company Material Adverse Effect. All material Subsidiaries of the Company and their respective jurisdictions of organization are identified in the Company 10-K.

(b) All of the outstanding capital stock of, or other voting securities or ownership interests in, each Subsidiary of the Company is owned by the Company, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests). There are no issued, reserved for issuance or outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock of or other voting securities of or ownership interests in any Subsidiary of the Company, (ii) warrants, calls, options or other rights to acquire from the Company or any of its Subsidiaries, or other obligations of the Company or any of its Subsidiaries to issue, any capital stock of or other voting securities or ownership interests in, or any securities convertible into or exchangeable for any capital stock or other voting securities of or ownership interests in, any Subsidiary of the Company or (iii) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock of, or other voting securities of or ownership interests in, any Subsidiary of the Company (the items in clauses (i) through (iii) being referred to collectively as the “ Company Subsidiary Securities ”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Subsidiary Securities. Except for the capital stock or other equity or voting interests of its Subsidiaries, the Company does not own, directly or indirectly, any capital stock or other equity or voting interests in any Person.

 

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Section 5.07 . SEC Filings and the Sarbanes-Oxley Act . (a) The Company has filed with or furnished to the SEC, and made available to Parent, all reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed or furnished by the Company since January 1, 2005 (collectively, together with any exhibits and schedules thereto and other information incorporated therein, the “ Company SEC Documents ”).

(b) As of its filing date (and as of the date of any amendment), each Company SEC Document complied, and each Company SEC Document filed subsequent to the date hereof will comply, as to form in all material respects with the applicable requirements of the 1933 Act and the 1934 Act, as the case may be.

(c) As of its filing date (or, if amended or superseded by a filing prior to the date hereof, on the date of such filing), each Company SEC Document filed pursuant to the 1934 Act did not, and each Company SEC Document filed subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(d) Each Company SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date such registration statement or amendment became effective, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

(e) The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15 under the 1934 Act). Such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the 1934 Act are being prepared. Such disclosure controls and procedures are effective in timely alerting the Company’s principal executive officer and principal financial officer to material information required to be included in the Company’s periodic and current reports required under the 1934 Act. For purposes of this Agreement, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.

(f) The Company has established and maintained a system of internal controls over financial reporting (as defined in Rule 13a-15 under the 1934 Act) sufficient to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of Company financial

 

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statements for external purposes in accordance with GAAP. The Company has disclosed, based on its most recent evaluation of internal controls prior to the date hereof, to the Company’s auditors and audit committee (i) any significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in internal controls. The Company has made available to Parent a summary of any such disclosure made by management to the Company’s auditors and audit committee since January 1, 2005.

(g) There are no outstanding loans or other extensions of credit made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the 1934 Act) or director of the Company. The Company has not, since the enactment of the Sarbanes-Oxley Act, taken any action prohibited by Section 402 of the Sarbanes-Oxley Act.

(h) The Company has complied in all material respects with the applicable listing and corporate governance rules and regulations of the New York Stock Exchange.

(i) Each of the principal executive officer and principal financial officer of the Company (or each former principal executive officer and principal financial officer of the Company, as applicable) have made all certifications required by Rule 13a-14 and 15d-14 under the 1934 Act and Sections 302 and 906 of the Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC and the NYSE, and the statements contained in any such certifications are complete and correct.

Section 5.08 . Financial Statements . The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company included or incorporated by reference in the Company SEC Documents fairly present, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end audit adjustments in the case of any unaudited interim financial statements).

Section 5.09 . Disclosure Documents . (a) Each document required to be filed by the Company with the SEC or required to be distributed or otherwise disseminated to the Company’s stockholders in connection with the transactions contemplated by this Agreement (the “ Company Disclosure Documents ”), including the Schedule 14D-9, the proxy or information statement of the Company (the “ Company Proxy Statement ”), if any, to be filed with the SEC in connection with the Merger, and any amendments or supplements thereto, when filed, distributed or disseminated, as applicable, will comply as to form in all material respects with the applicable requirements of the 1934 Act.

 

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(b) (i) The Company Proxy Statement, as supplemented or amended, if applicable, at the time such Company Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company and at the time such stockholders vote on approval of the Merger and at the Effective Time, and (ii) Company Disclosure Document (other than the Company Proxy Statement), at the time of the filing of such Company Disclosure Document or any supplement or amendment thereto and at the time of any distribution or dissemination thereof, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 5.09(b) will not apply to statements or omissions included in the Company Disclosure Documents based upon information furnished to the Company in writing by Parent or Merger Subsidiary specifically for use therein.

(c) The information with respect to the Company or any of its Subsidiaries that the Company furnishes to Parent or Merger Subsidiary in writing specifically for use in the Schedule TO and the Offer Documents, at the time of the filing of the Schedule TO, at the time of any distribution or dissemination of the Offer Documents and at the time of the consummation of the Offer, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

Section 5.10 . Absence of Certain Changes . (a) Since the Company Balance Sheet Date, the business of the Company and its Subsidiaries has been conducted in the ordinary course consistent with past practices in all material respects and there has not been any event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(b) Since the Company Balance Sheet Date through the date hereof, (i) there has not been any action taken by the Company or any of its Subsidiaries that, if such action had been taken during the period from the date of this Agreement through the Effective Time without Parent’s consent, would constitute a breach of Section 7.01(b), (g), (h), (i), (m)(ii) or (n) and (ii) none of the Company or any of its Subsidiaries have settled any matter referenced in clauses (A), (B) or (C) of Section 7.01(m).

Section 5.11 . No Undisclosed Material Liabilities . There are no material liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, that would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries (or in the notes thereto) other

 

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than (a) liabilities or obligations disclosed in or reflected or reserved against in the Company’s consolidated balance sheet or in the notes thereto included in the Company’s most recent 10-Q filed prior to the date of this Agreement and (b) liabilities or obligations incurred in the ordinary course of business consistent with past practices since the date of the Company’s consolidated balance sheet included in the Company’s most recent 10-Q filed prior to the date of this Agreement.

Section 5.12 . Compliance with Laws and Court Orders . The Company and each of its Subsidiaries is and has been in compliance with, and to the knowledge of the Company is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any Applicable Law, except for failures to comply or violations that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 5.13 . Litigation . There is no material action, suit, arbitration, investigation or proceeding (or any reasonable basis therefor) pending against, or, to the knowledge of the Company, threatened against or affecting, the Company or any of its Subsidiaries or any of their respective properties, or, to the actual knowledge of the Company, threatened against or affecting, any current or former officer, director or employee of the Company or any of its Subsidiaries or any Person for whom the Company or any of its Subsidiaries may be liable, before (or, in the case of threatened actions, suits, investigations or proceedings, that would be before) or by any Governmental Authority (including any of the Food and Drug Administration, Department of Health and Human Services, the Drug Enforcement Administration, state Medicaid agencies, state pharmacy boards and other federal or state Governmental Authorities with jurisdiction over the dispensing or distribution of pharmaceutical products or over the provision of health care items or services) or arbitrator.

Section 5.14 . Regulatory Compliance .

(a) The Permits of the Company and each of its Subsidiaries are valid and in full force and effect, and no violation or default exists under any such Permit, except where the failure to hold any such Permit, the invalidity of such Permit or the existence of any such violation or default would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Assuming all Healthcare Regulatory Approvals are obtained, the Merger, in and of itself, would not cause the revocation or cancellation of any Permit except where the revocation or cancellation of such Permit would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(b) Neither the Company nor any of its Subsidiaries has received written notice from any Governmental Authority that (i) alleges any material noncompliance (or that the Company or any of its Subsidiaries is under

 

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investigation or the subject of an inquiry by any such