EMAGEON INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material under § 240.14a-12
EMAGEON INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Form, Schedule or Registration Statement No.:
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Date Filed:
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1200 Corporate Drive
Suite 200
Birmingham, Alabama 35242
November 14,
2008
Dear Stockholder:
You are cordially invited to attend a special meeting of the
stockholders of Emageon Inc. to be held on December 17,
2008 at 9:00 a.m., local time, at 1200 Corporate Drive,
Suite 200, Birmingham, Alabama. At the special meeting, you
will be asked to consider and vote on, among other things, a
proposal to adopt the Agreement and Plan of Merger, dated
October 13, 2008, by and among Emageon, Health Systems
Solutions, Inc. and HSS Acquisition Corp., as it may be amended
from time to time.
Under the merger agreement, HSS Acquisition Corp. will merge
with and into Emageon with Emageon continuing as the surviving
corporation and as a wholly owned subsidiary of Health Systems
Solutions. If the merger is completed, holders of Emageon common
stock will be entitled to receive $2.85 in cash, without
interest and less any applicable withholding tax, for each share
of Emageon common stock that they own as of the effective time
of the merger.
After careful consideration, our Board of Directors approved
the merger agreement, the merger and the other transactions
contemplated by the merger agreement, and determined that the
merger agreement, the merger and the other transactions
contemplated by the merger agreement are advisable, fair to and
in the best interests of Emageon and its stockholders. Our Board
of Directors unanimously recommends that you vote
FOR the adoption of the merger agreement at the
special meeting.
The enclosed proxy statement provides detailed information about
the merger agreement and the merger. We encourage you to read
the proxy statement carefully.
The merger agreement must be adopted by the affirmative vote of
holders of a majority of the outstanding shares of our common
stock, so your vote is very important, regardless of the number
of shares that you own. On behalf of the Board of Directors,
I urge you to vote your shares by completing, signing, dating
and returning the enclosed proxy card as soon as possible, even
if you currently plan to attend the special meeting.
Thank you for your support. We look forward to seeing you at the
special meeting.
Sincerely,
Charles A. Jett, Jr.
Chief Executive Officer
This
proxy statement is dated November 14, 2008, and is first
being mailed to
Emageon stockholders on or about November 17,
2008.
1200 Corporate Drive
Suite 200
Birmingham, Alabama 35242
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD DECEMBER 17,
2008
To the Stockholders of Emageon Inc.:
Notice is hereby given that a special meeting of the
stockholders of Emageon Inc., a Delaware corporation, will be
held on December 17, 2008, at 9:00 a.m., local time,
at 1200 Corporate Drive, Suite 200, Birmingham, Alabama,
for the following purposes:
1. to consider and vote upon the adoption of the Agreement
and Plan of Merger, dated October 13, 2008, by and among
Emageon Inc., Health Systems Solutions, Inc. and HSS Acquisition
Corp., as it may be amended from time to time, as more fully
described in the enclosed proxy statement;
2. to consider and vote on any proposal to adjourn the
special meeting to a later date, if necessary or appropriate, to
solicit additional proxies if there are insufficient votes in
favor of the foregoing proposal; and
3. to transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.
The Board of Directors of Emageon has fixed the close of
business on November 12, 2008 as the record date for the
special meeting. Only holders of record of Emageon common stock
at the close of business on the record date are entitled to
notice of, and to vote at, the special meeting or any
adjournment or postponement thereof. At the close of business on
the record date, 21,449,459 shares of Emageon common stock
were outstanding and entitled to vote.
Holders of Emageon common stock are entitled to appraisal rights
under the Delaware General Corporation Law in connection with
the merger if they meet certain conditions. See The
Merger Appraisal Rights on page 49. A
copy of Section 262 of the Delaware General Corporation Law
is attached to the proxy statement as Annex E.
Your vote is important. The affirmative vote of the holders
of a majority of the outstanding shares of Emageons common
stock is required to adopt the merger agreement, and the
affirmative vote of at least a majority of the votes cast by
holders of Emageons common stock is required to approve
any proposal to adjourn the special meeting.
All stockholders are invited to attend the special meeting in
person. Even if you plan to attend the special meeting in
person, we request that you complete, sign, date and return the
enclosed proxy to ensure that your shares will be represented at
the special meeting if you are unable to attend. If you attend
the special meeting and wish to vote in person, you may withdraw
your proxy and vote in person. Holders of common stock may
revoke their proxies in the manner described in the accompanying
proxy statement at any time before they have been voted at the
special meeting.
Our Board of Directors unanimously recommends that you vote
FOR the adoption of the merger agreement and
FOR adjournment of the special meeting, if necessary
or appropriate, to solicit additional proxies if there are not
sufficient votes in favor of adopting the merger agreement at
the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Emageon Inc.
John W. Wilhoite
Corporate Secretary
Birmingham, Alabama
November 14, 2008
TABLE OF
CONTENTS
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Annexes
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in this
proxy statement. Any representation to the contrary is a
criminal offense.
SUMMARY
TERM SHEET
This summary, together with the section of this proxy
statement entitled Questions and Answers About the Special
Meeting and the Merger, highlights selected information
from this proxy statement and may not contain all of the
information that is important to you as an Emageon stockholder.
To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read
carefully this entire proxy statement and the documents we refer
to in this proxy statement. The merger agreement is attached as
Annex A to this proxy statement. Before voting on the
proposal to adopt the merger agreement, we encourage you to read
the merger agreement as it is the legal document that governs
the merger.
Except as otherwise specifically noted in this proxy
statement, we, our, us and
similar words in this proxy statement refer to Emageon Inc. In
addition, we sometimes refer to Emageon Inc. as
Emageon or the company, to Health
Systems Solutions, Inc. as HSS or Health
Systems Solutions, to HSS Acquisition Corp. as
Merger Sub, and to the Agreement and Plan of Merger,
dated as of October 13, 2008, among Emageon, HSS and Merger
Sub, as it may be amended from time to time, as the
merger agreement.
The
Companies (page 21)
Emageon Inc.
1200 Corporate Drive, Suite 200
Birmingham, Alabama 35242
Phone:
(205) 980-9222
We provide an enterprise-level information technology solution
for the clinical analysis and management of digital medical
images within multi-hospital networks, community hospitals and
diagnostic imaging centers. Our solution consists of advanced
visualization and image management software for multiple medical
specialties, third-party components and comprehensive support
services. Our web-enabled advanced visualization software, which
is hosted by the customer, provides physicians across the
enterprise, in multiple medical specialties and at any network
access point, with dynamic tools to manipulate and analyze
images in both a two dimensional and three dimensional
perspective. With these tools, physicians have the ability to
better understand internal anatomic structure and pathology,
which can improve clinical diagnoses, disease screening and
therapy planning. Our open standard solution is designed to help
customers improve staff productivity, enhance revenue
opportunities, automate complex medical imaging workflow, lower
total cost of ownership and provide better service to physicians
and patients. Emageon is publicly traded on The NASDAQ Global
Market under the symbol EMAG.
Health Systems Solutions, Inc.
42 West 39th Street, 6th Floor
New York, NY 10018
Phone: (212) 798-9400
HSS is a technology and services company dedicated to bringing
innovation to the health care industry. HSSs objective is
to leverage its understanding of current and next-generation
technologies to offer value-added products and services which
will generate improved clinical, operational and financial
outcomes for its clients. HSSs portfolio of products and
services extends across many segments of health care including
home health care, medical staffing, acute and post-acute
facilities and telehealth/telemedicine. HSSs business is
grouped into three segments: technology solutions, software and
consulting. HSS is publicly traded on the OTC
Bulletin Board under the symbol HSSO.
HSS Acquisition Corp.
42 West 39th Street, 6th Floor
New York, NY 10018
Phone: (212) 798-9400
Merger Sub, a wholly owned subsidiary of HSS, was organized
solely for the purpose of entering into the merger agreement
with us and completing the merger and has not conducted any
business operations.
1
The
Merger (page 54)
The merger agreement provides that Merger Sub will merge with
and into Emageon, with Emageon continuing as the surviving
corporation and as a wholly owned subsidiary of HSS. At the
effective time of the merger, each share of our common stock
that is outstanding immediately prior to the effective time of
the merger, other than shares owned by us, HSS, Merger Sub, any
of our subsidiaries or by stockholders properly exercising
appraisal rights under Delaware law, will be automatically
converted into the right to receive $2.85 in cash, without
interest and less any applicable withholding taxes.
Merger
Consideration (page 54)
Common
Stock
If the merger is completed, you will receive $2.85 in cash,
without interest and less any applicable withholding taxes, in
exchange for each share of Emageon common stock that you own.
After the merger is completed, you will have the right to
receive the merger consideration, but you will no longer have
any rights as an Emageon stockholder and will have no rights as
an HSS stockholder. Emageon stockholders will receive the merger
consideration after exchanging their Emageon stock certificates
(or book-entry shares) in accordance with the instructions
contained in a letter of transmittal to be mailed to our
stockholders promptly (but in no event more than three business
days) after the effective time of the merger.
Treatment
of Stock Options and Stock-Based Awards
Stock
Options
At the effective time of the merger, each outstanding option to
acquire our common stock will become fully vested and will be
cancelled, and the holder will be entitled to receive an amount
in cash, without interest and less any applicable withholding
tax, equal to the product of the maximum number of shares of
common stock subject to such option with respect to which such
option has not previously been exercised, multiplied by the
excess of $2.85 over the exercise price per share of such option.
Restricted
Stock
At the effective time of the merger, each outstanding share of
common stock held subject to a restricted stock agreement will
become fully vested and free of all restrictions and will be
cancelled and converted into the right to receive an amount in
cash, without interest and less any applicable withholding tax,
equal to the per share merger consideration of $2.85.
Restricted
Stock Units
At the effective time of the merger, each outstanding restricted
stock unit award will be cancelled, and the holder will be
entitled to receive an amount in cash, without interest and less
any applicable withholding tax, equal to the maximum number of
shares of common stock subject to such restricted stock unit
award, multiplied by the per share merger consideration of
$2.85, and will also receive any dividend equivalents accrued,
but not yet distributed, with respect to such restricted stock
unit award (other than any such dividend equivalents that are
held in the form of restricted stock units as of the effective
time of the merger).
Financing
(page 61)
The total amount of funds necessary to complete the merger and
the related transactions is expected to be obtained through the
sale by HSS of convertible debentures and warrants to Stanford
International Bank, Limited, which we refer to as SIBL, pursuant
to the terms of a Convertible Secured Debenture Purchase
Agreement, dated as of October 12, 2008, which we refer to
as the debenture purchase agreement. HSS has advised us that
SIBL beneficially owns approximately 86% of HSSs
outstanding common stock. SIBLs purchase of the debenture
pursuant to which the merger consideration will be financed is
subject to satisfaction
2
of the closing conditions in the merger agreement and certain
other customary closing conditions. HSSs obligation to
complete the merger is not contingent on its ability to obtain
financing.
Market
Price and Dividend Data (page 16)
Our common stock is listed on The NASDAQ Global Market under the
symbol EMAG. On October 13, 2008, the last full
trading day prior to the public announcement of the merger, the
closing price for our common stock was $2.08 per share. On
November 13, 2008, the last trading day prior to the date
of this proxy statement, the closing price for our common stock
was $2.36 per share.
Reasons
for the Merger and Recommendation of Emageons Board of
Directors (page 36)
In the course of reaching its decision to approve the merger
agreement and to recommend that Emageon stockholders vote to
adopt the merger agreement, our Strategic Alternatives Committee
and Board of Directors consulted with our senior management and
the independent financial advisors and legal counsel to the
Strategic Alternatives Committee and Emageon, reviewed a
significant amount of information and considered a number of
factors, including, among others, the following:
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the results of the investigation of strategic alternatives
conducted by the Strategic Alternatives Committee of our Board
of Directors and its financial advisors, Jefferies &
Company, Inc., who we refer to as Jefferies, and SunTrust
Robinson Humphrey, Inc., who we refer to as SunTrust Robinson
Humphrey, before entering into the merger agreement;
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the attractiveness of the merger compared to other strategic
alternatives reasonably available to us;
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the fact that the per share merger consideration represented the
highest price received in the final bidding process and an
approximate 27% premium over the closing price of Emageon common
stock on the last trading date prior to the announcement of the
merger, an approximate 26% premium over the average closing
price over the three months preceding the execution of the
merger agreement and an approximate 16.2% premium over the
average closing price since January 1, 2008;
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the fact that the merger consideration will be paid in cash,
which provides certainty and immediate value to our stockholders;
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the financial presentation and opinion of SunTrust Robinson
Humphrey that the proposed per share merger consideration of
$2.85 is fair, from a financial point of view, to the
stockholders of Emageon;
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the increasing level of uncertainty associated with our business
as a result of conditions in our primary market, slower overall
demand for medical imaging software, hardware and support
services, and disruption of our base of existing and potential
customers as a result of our investigation of strategic
alternatives;
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the potential for continued negative effects on our business
resulting from deterioration in general economic conditions and
the tightening of credit markets;
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the significant costs associated with continuing as an
independent public company in light of the relative size and
scale of our operations for the foreseeable future;
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the terms of HSSs financing from SIBL, its majority
shareholder, the fact that the merger is not subject to a
financing condition and the resulting increased certainty that
the proposed acquisition will be completed;
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the terms of the merger agreement, which, among other things,
permit our Strategic Alternatives Committee and Board of
Directors to exercise their fiduciary duties to our stockholders
under Delaware corporate law to consider unsolicited acquisition
proposals and to change the Boards recommendation with
respect to the merger, as well as the limited number and nature
of closing conditions and the limited risk of non-satisfaction
of the closing conditions; and
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the deposit by HSS of $5.0 million in escrow, which is
available to us as a non-exclusive remedy under certain
circumstances if HSSs financing is not timely available or
HSS is determined by a final non-appealable court order to have
intentionally breached the merger agreement.
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Our Board of Directors put significant weight on the analysis
and unanimous recommendation of the Strategic Alternatives
Committee as well as the financial presentations of SunTrust
Robinson Humphrey and Jefferies prepared for the Strategic
Alternatives Committee and delivered to our Board of Directors
at such committees request and the fact that such
committee received an opinion delivered by SunTrust Robinson
Humphrey as to the fairness, from a financial point of view, of
the merger consideration to the holders of Emageon common stock.
Our Board of Directors unanimously approved and adopted the
merger agreement, approved the merger and the other transactions
contemplated by the merger agreement, determined that the merger
agreement, the merger and the other transactions contemplated by
the merger agreement are advisable, fair to and in the best
interests of Emageon and its stockholders, and recommends that
our stockholders vote FOR adoption of the merger
agreement, and FOR the proposal to adjourn the
special meeting if necessary or appropriate to solicit
additional proxies.
Opinion
of Emageons Financial Advisor (page 38)
SunTrust Robinson Humphrey, Inc., which is referred to as
SunTrust Robinson Humphrey throughout this proxy statement,
delivered its oral opinion to the Strategic Alternatives
Committee of the Board of Directors of Emageon, subsequently
confirmed in writing, to the effect that as of October 13,
2008, and based upon and subject to certain matters stated
therein, the merger consideration to be received by the holders
of Emageon common stock pursuant to the merger agreement is
fair, from a financial point of view, to the holders of
Emageons common stock.
The full text of SunTrust Robinson Humphreys written
opinion, dated October 13, 2008, to the Strategic
Alternatives Committee, which sets forth the assumptions made,
matters considered and limitations on the review undertaken, is
attached as Annex B to this proxy statement and is
incorporated herein by reference. The description of the
SunTrust Robinson Humphrey opinion set forth in this proxy
statement is qualified in its entirety by reference to the full
text of the opinion. Holders of Emageon common stock are
encouraged to read the opinion in its entirety.
SunTrust Robinson Humphreys opinion was rendered at the
request and for the benefit of the Strategic Alternatives
Committee in its evaluation of the transaction. The opinion does
not address the merits of the transaction as compared to
alternative transactions or strategies that may be available to
Emageon nor does it address Emageons underlying decision
to engage in the transaction or any other aspect or implication
of the transaction or any other agreement, arrangement or
understanding entered into by Emageon or any other person in
connection with the transaction. The opinion also does not
constitute a recommendation as to how any stockholder should
vote or act with respect to any matter relating to the merger.
Interests
of Emageons Executive Officers and Directors in the Merger
(page 44)
When considering the recommendation of our Board of Directors,
you should be aware that members of our Board of Directors and
our executive officers have interests in the merger other than
their interests as Emageon stockholders generally, including
those interests described below. These interests may be
different from, or in conflict with, your interests as an
Emageon stockholder. The members of our Strategic Alternatives
Committee and our Board of Directors were aware of these
additional interests, and considered them, when they approved
the merger agreement.
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All outstanding stock options and restricted stock units held by
our executive officers and directors will, as applicable and in
the same manner as our other stockholders, become fully vested
and free of restrictions, and will be converted into the right
to receive cash consideration.
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Charles A. Jett, Jr., our current President and Chief
Executive Officer, is a party to an employment agreement and a
severance agreement with us. Under the severance agreement,
Mr. Jetts employment
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with us will terminate upon the effectiveness of the merger, and
he will be entitled to receive the severance payments and
benefits, and, if necessary,
gross-up
payments related thereto, that are provided for under his
employment and severance agreements following the termination of
his employment in connection with a change in control of Emageon.
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Keith Stahlhut, our acting Principal Operating Officer, entered
into an employment agreement with HSS on October 10, 2008
that will be effective as of the effective time of the merger.
Under Mr. Stahlhuts employment agreement, he will be
employed by HSS as the President of the HSS Emageon division (a
division of HSS that will consist of the business of Emageon)
following the merger. The employment agreement is for a
three-year
term beginning on the date of closing of the merger, and
provides, among other things, for the payment of base salary and
a performance bonus, and the grant of options to purchase shares
of common stock of HSS.
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Our directors Augustus K. Oliver and Benner Ulrich are a
principal and employee, respectively, of Oliver Press Partners,
LLC, which, through its affiliates, is the beneficial owner of
approximately 16.64% of our outstanding common stock. On
June 22, 2008, we entered into an agreement with
Mr. Jett and affiliates of Oliver Press Partners
terminating the proxy contest with respect to our 2008 annual
meeting of stockholders. Under the agreement, among other
things, we agreed to appoint Messrs. Oliver and Ulrich to
our Board of Directors, to elect Bradley S. Karro to our Board
of Directors, to appoint Messrs. Ulrich and Karro to the
Strategic Alternatives Committee of our Board of Directors and
to reconstitute the Strategic Alternatives Committee to
recommence its investigation of strategic alternatives for
Emageon.
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Certain of our other executive officers are party to employment
agreements with us under which they will receive severance
benefits if their employment is terminated under certain
circumstances.
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The merger agreement provides for indemnification arrangements
for each of our current and former directors and officers that
will continue for six years following the effective time of the
merger.
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The merger agreement provides for continuing arrangements
regarding directors and officers liability insurance
policies to cover our present and former directors and officers
for a period of six years following the effective time of the
merger.
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We have been informed that HSS and Mr. Jett anticipate that
they will enter into an agreement for Mr. Jett to provide
consulting services to the combined company following the
merger, but the terms and conditions of any such engagement are
subject to further negotiation and discussion and have not been
finalized.
HSS has initiated discussions with certain members of our
existing senior management team in addition to Mr. Stahlhut
and Mr. Jett regarding employment or engagement with the
surviving corporation in the merger. Prior to completion of the
merger, certain of these members of our existing senior
management team may enter into new agreements
and/or
amendments to existing employment or severance agreements with
HSS or Merger Sub regarding employment or engagement with the
surviving corporation in the merger.
The
Special Meeting (page 17)
Date,
Time, Place and Purpose
A special meeting of our stockholders will be held on
December 17, 2008, at 1200 Corporate Drive, Suite 200,
Birmingham, Alabama, at 9:00 a.m., local time, to:
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consider and vote upon a proposal to adopt the merger agreement;
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consider and vote upon a proposal to adjourn the special meeting
to a later date, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes in favor of
the foregoing proposal; and
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transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
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Record
Date and Voting Power
You are entitled to vote at the special meeting if you owned
shares of our common stock at the close of business on
November 12, 2008, which is the record date for the special
meeting. You will have one vote at the special meeting for each
share of our common stock that you owned at the close of
business on the record date. There were 21,449,459 shares
of our common stock entitled to be voted at the special meeting
as of the record date.
Required
Vote
The adoption of the merger agreement requires the affirmative
vote of a majority of the shares of our common stock outstanding
at the close of business on the record date. Approval of any
proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies requires the
affirmative vote of at least a majority of the votes cast by
holders of our common stock that are present, in person or by
proxy, at the special meeting provided a quorum is present in
person or by proxy at the special meeting.
Voting
Agreements (page 18)
In connection with the execution of the merger agreement, HSS
and Merger Sub entered into voting agreements with our
directors, certain of our officers and our largest stockholder
pursuant to which they agreed to vote all of their shares of
Emageon common stock in favor of adoption of the merger
agreement and against any competing transaction or proposal. As
of the record date for the special meeting, the officers,
directors and stockholder who entered into the voting agreements
collectively held and were entitled to
vote 3,794,387 shares of Emageon common stock, which
represents approximately 17.69% of the outstanding Emageon
common stock entitled to vote at the special meeting.
Conditions
to Closing (page 62)
The closing of the merger is subject to a number of mutual
conditions, including the adoption by our stockholders of the
merger agreement, the expiration or termination, if applicable,
of the regulatory waiting period under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, which we refer
to as the HSR Act, the approval or consent, if applicable, of
governmental entities under applicable foreign merger control
laws, and there being no law or order in effect that makes
illegal or otherwise prevents or prohibits the consummation of
the merger.
HSSs and Merger Subs obligations to complete the
merger are subject to the following additional conditions:
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the accuracy of our representations and warranties in the merger
agreement;
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our performance, in all material respects, of our obligations
under the merger agreement, and our compliance, in all material
respects, with our agreements and covenants under the merger
agreement;
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the absence of any material adverse effect with respect to us;
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our certification to HSS at closing that the conditions with
respect to our representations, warranties, obligations,
agreements and covenants have been satisfied; and
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the receipt of required waivers or consents under certain of our
contracts.
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Our obligation to complete the merger is subject to the
following additional conditions:
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the accuracy of HSSs and Merger Subs representations
and warranties in the merger agreement;
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the performance, in all material respects, by HSS and Merger Sub
of their obligations under the merger agreement, and the
compliance, in all material respects, of HSS and Merger Sub with
their agreements and covenants under the merger
agreement; and
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the certification by HSS to us at closing that the conditions
with respect to its representations, warranties, obligations,
agreements and covenants have been satisfied.
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Consummation of the merger is not conditioned on HSS obtaining
financing.
6
No
Solicitation (page 59)
The merger agreement restricts our ability to initiate, solicit
or knowingly encourage or knowingly facilitate the submission
of, or to engage in negotiations with respect to, any takeover
proposal involving Emageon. Notwithstanding these restrictions,
before the adoption of the merger agreement by our stockholders
and subject to the terms and conditions of the merger agreement,
as long as we have not breached our non-solicitation obligations
under the merger agreement, we may engage in discussions and
negotiations with, and provide certain information to, any
person who has made an unsolicited bona fide written takeover
proposal that our Strategic Alternatives Committee or Board of
Directors has determined in good faith, after consultation with
its outside legal counsel and its financial advisors,
constitutes, or would be reasonably expected to lead to, a
superior proposal, and with respect to which our Strategic
Alternatives Committee or Board of Directors has determined in
good faith that failure to take such action could result in a
violation of its fiduciary duties to our stockholders under
applicable law.
In addition, under the terms of the merger agreement, our Board
of Directors may not change its recommendation to our
stockholders that they adopt the merger agreement or recommend
or endorse any takeover proposal, and we may not terminate the
merger agreement and enter into an agreement for a takeover
proposal, unless:
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our Strategic Alternatives Committee or Board of Directors
determines in good faith, after consultation with its outside
legal counsel and its financial advisors, that the takeover
proposal constitutes a superior proposal, and that, after
consultation with its outside legal counsel, failing to take
such action could result in a breach of its fiduciary duties;
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we provide HSS with at least three business days prior
written notice, and negotiate in good faith with HSS during such
three-day
period; and
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in the event of a termination of the merger agreement, we pay a
termination fee of $3.0 million and enter into a new
definitive agreement with respect to the superior proposal
simultaneously with the termination of the merger agreement.
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We have agreed to promptly notify HSS of the receipt of any
takeover proposal, request for non-public information concerning
a takeover proposal or any bona fide inquiry or request for
discussions or negotiations regarding any takeover proposal.
Termination
of Merger Agreement (page 63)
Emageon and HSS may terminate the merger agreement at any time
by mutual written consent. The merger agreement also may be
terminated by either Emageon or HSS upon written notice to the
other if:
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the effective time of the merger is not on or before
March 31, 2009;
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the merger agreement is submitted to, but is not adopted by, our
stockholders at a duly convened stockholders
meeting; or
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a law or governmental entity prohibits, or a final order
restrains or prohibits, completion of the merger despite the
terminating partys reasonable best efforts to remove or
avoid the prohibition or order.
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HSS may terminate the merger agreement by written notice to
Emageon if:
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our Board withdraws, modifies or qualifies its recommendation to
our stockholders that they adopt the merger agreement;
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our Board approves, recommends or endorses a takeover proposal
other than the merger;
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our Board enters into an agreement accepting another takeover
proposal;
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we fail to include in this proxy statement our Boards
recommendation that our stockholders vote FOR
adoption of the merger agreement;
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we intentionally and knowingly breach any of our
non-solicitation obligations with respect to a takeover
proposal; or
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we breach a representation, warranty, covenant or agreement in
the merger agreement in a manner that would give rise to a
failure of a closing condition, and the breach is incapable of
being cured before March 31, 2009.
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We may terminate the merger agreement by written notice to HSS
if:
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HSS or Merger Sub breaches a representation, warranty, covenant
or agreement in the merger agreement that would prevent HSS or
Merger Sub from completing the merger, and the breach is
incapable of being cured before March 31, 2009;
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all applicable conditions to closing under the merger agreement
are satisfied and HSS or Merger Sub does not receive financing
required to complete the merger; or
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before our stockholders adopt the merger agreement, we receive a
superior proposal and, after providing HSS with three business
days prior written notice and negotiating in good faith
with HSS, we pay HSS a $3.0 million termination fee and
enter into a definitive agreement with respect to the superior
proposal.
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Termination
Fee (page 65)
We have agreed to pay to HSS a one-time termination fee of
$3.0 million if, before completion of the merger, we
terminate the merger agreement in accordance with the terms
thereof to enter into a definitive agreement with respect to a
superior proposal, or HSS terminates the merger agreement
because (i) our Board changes its recommendation that our
stockholders adopt the merger agreement, (ii) our Board
approves or recommends another takeover proposal, (iii) we
enter into an agreement for another takeover proposal or
(iv) we intentionally and knowingly materially breach our
non-solicitation obligations under the merger agreement. We also
will be required to pay the $3.0 million termination fee if
the merger agreement is terminated under certain circumstances
before the merger is completed and within 12 months after
termination we enter into an agreement for, or consummate, a
takeover proposal.
Deposit
Escrow Agreement (page 68)
In connection with the merger agreement, we entered into a
Deposit Escrow Agreement dated October 21, 2008, which we
refer to as the deposit escrow agreement, with HSS and The Bank
of New York Mellon, which we refer to as the escrow agent, under
which HSS deposited $5.0 million with the escrow agent that
we are entitled to receive, as a non-exclusive remedy, in the
event that HSSs financing is not available within two
business days of the satisfaction of our obligations under the
merger agreement or the merger agreement is terminated by us and
HSS is determined by a final non-appealable court order to have
intentionally breached the merger agreement.
Material
U.S. Federal Income Tax Consequences of the Merger
(page 52)
The receipt of cash in the merger will be a taxable transaction
for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign
income or other tax laws. Generally, for U.S. federal
income tax purposes, a stockholder will recognize gain or loss
equal to the difference between the amount of cash received by
the stockholder in the merger and the stockholders
adjusted tax basis in the shares of Emageon common stock that
are converted into cash in the merger. If the shares of Emageon
common stock are held by a stockholder as capital assets, gain
or loss recognized by such stockholder will be capital gain or
loss, which will be long-term capital gain or loss if the
stockholders holding period for the shares of Emageon
common stock exceeds one year. Capital gains recognized by an
individual upon a disposition of a share of Emageon common stock
that has been held for more than one year generally will be
subject to a maximum U.S. federal income tax rate of 15%
or, in the case of a share that has been held for one year or
less, will be subject to tax at ordinary income tax rates. In
addition, there are limits on the
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deductibility of capital losses. Because individual
circumstances may differ, you should consult your own tax
advisor to determine the particular tax effects of the merger to
you.
Regulatory
Matters Related to the Merger (page 52)
Under the merger agreement, we agreed with HSS to make, if
applicable, all appropriate filings with the United States
Federal Trade Commission, which we refer to as the FTC, and the
Antitrust Division of the United States Department of Justice,
which we refer to as the DOJ, under the HSR Act, and all
appropriate filings under foreign competition or merger control
laws. However, other than the filing of a certificate of merger
with the Secretary of State of the State of Delaware in order to
effect the merger, we do not believe that any regulatory filings
or applications, including under the HSR Act, are required to be
made in respect of the consummation of the merger.
If any lawsuit or legal proceeding is instituted that challenges
the merger agreement or the consummation of the transactions
contemplated by the merger agreement, each of the parties is
required under the merger agreement to use its reasonable best
efforts to defend or contest such lawsuit or proceeding.
Appraisal
Rights (page 49)
Our stockholders have the right under Delaware law to exercise
appraisal rights and to receive payment in cash for the fair
value of their shares of our common stock as determined by the
Delaware Court of Chancery in a judicial appraisal proceeding.
The fair value of shares of our common stock, as so determined,
may be more or less than the merger consideration to be paid to
non-dissenting Emageon stockholders in the merger. To preserve
their rights, stockholders who wish to exercise appraisal rights
must not vote in favor of the adoption of the merger agreement
and must follow specific procedures. Emageon stockholders must
precisely follow these specific procedures to exercise appraisal
rights, or their appraisal rights may be lost. These procedures
are described in this proxy statement, and the provisions of
Delaware law that grant appraisal rights and govern such
procedures are attached as Annex E to this proxy statement.
You are encouraged to read these provisions carefully and in
their entirety.
ANY EMAGEON STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL
RIGHTS OR WHO WISHES TO PRESERVE HIS, HER OR ITS RIGHT TO DO SO
SHOULD REVIEW ANNEX E CAREFULLY AND SHOULD CONSULT HIS, HER
OR ITS LEGAL ADVISOR, BECAUSE FAILURE TO TIMELY COMPLY WITH THE
PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH
RIGHTS.
9
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to address
some commonly asked questions regarding the special meeting and
the proposed merger. These questions and answers may not address
all questions that may be important to you as an Emageon
stockholder. We encourage you to refer to and read carefully
this entire proxy statement, the annexes to this proxy statement
and the documents referred to in this proxy statement for a
complete understanding of the special meeting and the merger.
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What is the date, time and place of the special meeting? |
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The special meeting will be held at 1200 Corporate Drive,
Suite 200, Birmingham, Alabama on December 17, 2008,
beginning at 9:00 a.m., local time. |
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Who is soliciting my proxy? |
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Your proxy is being solicited by the Board of Directors of
Emageon. |
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On what am I being asked to vote at the special meeting? |
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You are being asked to consider and vote on two proposals: |
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Proposal 1 the adoption of a merger
agreement that provides for the acquisition of Emageon by HSS
through a merger of Merger Sub, a wholly owned subsidiary of
HSS, with and into Emageon; and
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Proposal 2 the possible adjournment
of the special meeting to a later date, if necessary or
appropriate, to solicit additional proxies if there are
insufficient votes in favor of the merger agreement represented
at the special meeting;
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and the transaction of such other business as may properly come
before the meeting or any adjournment or postponement thereof. |
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As a result of the merger, Emageon will become a wholly owned
subsidiary of HSS, and our common stock will no longer be listed
on The NASDAQ Global Market, will not be publicly traded and
will be deregistered under the Securities Exchange Act of 1934,
as amended, which we refer to as the Exchange Act. |
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What will I receive in the merger? |
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If the merger is completed, you will be entitled to receive
$2.85 cash, without interest and less any applicable withholding
tax, for each share of Emageon common stock that you own. For
example, if you own 100 shares of Emageon common stock, you
will be entitled to receive $285.00 in cash, without interest
and less any applicable withholding tax, in exchange for your
shares. |
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What do I need to do now? |
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We urge you to read this entire proxy statement carefully,
including its annexes and the documents referred to in, or
incorporated by reference into, this proxy statement, and to
consider how the merger affects you. Then, if you are a
stockholder of record, mail your completed, signed and dated
proxy card in the enclosed return envelope as soon as possible
so that your shares can be represented and voted at the special
meeting. If you hold your shares in street name, you
should follow the instructions you receive from your broker or
bank on how to vote your shares. Please do not send in your
stock certificates with your proxy card. |
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How does Emageons Board of Directors recommend that I
vote? |
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Our Board of Directors unanimously recommends that you vote
FOR the proposal to adopt the merger
agreement and FOR the proposal to adjourn the
special meeting, if necessary or appropriate, to solicit
additional proxies. |
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What factors did Emageons Board of Directors consider
in making its recommendation? |
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In making its recommendation, our Board of Directors took into
account, among other things, the results of the recent strategic
investigation conducted by its Strategic Alternatives Committee
and the committees financial advisors; the attractiveness
of the merger compared to other strategic alternatives
reasonably available to us; the cash consideration to be
received by holders of our common stock in the merger and the
premium over the current and historical market prices of our
common stock; the opinion of the Strategic Alternative
Committees independent financial advisor, SunTrust
Robinson Humphrey, that the merger consideration is fair, from a
financial point of view, to our stockholders; the increasing
level of uncertainty associated with our business as a result of
market and industry conditions and disruption of our customer
base; the deterioration in general economic conditions and the
tightening of credit markets; the costs associated with
continuing as an independent public company; the ready
availability of financing for HSS; the terms of the merger
agreement, including our ability to furnish information to, and
conduct negotiations with, a third party should we receive an
acquisition proposal superior to HSSs; the limited number
and nature of closing conditions and the limited risk of
non-satisfaction of the closing conditions; and the deposit by
HSS of $5.0 million in escrow which is available to us as
remedy under certain circumstances. |
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What vote of our stockholders is required to adopt the
proposals? |
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The votes required to adopt the proposals are as follows: |
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Proposal 1 adoption of the merger
agreement requires the affirmative vote of the
holders of a majority of our outstanding shares of common stock
entitled to vote at the special meeting, whether or not the
shares are present at the special meeting; and
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Proposal 2 adjournment of the
special meeting, if necessary or appropriate, in order to
solicit additional proxies requires the affirmative
vote of the holders of a majority of our shares of common stock
present at the special meeting (in person or by proxy) and
voting with respect to the proposal.
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Holders of a majority of the shares of common stock entitled to
vote must be present, in person or represented by proxy, before
we may transact business at the special meeting. This is called
a quorum. Both abstentions and broker non-votes
(which are discussed below) are counted for the purpose of
determining the presence of a quorum. |
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In connection with the execution of the merger agreement, HSS
and Merger Sub entered into voting agreements with our
directors, certain of our officers and our largest stockholder,
pursuant to which they agreed to vote all of their shares of
Emageon common stock in favor of adoption of the merger
agreement and against any competing transaction or proposal. As
of the record date for the special meeting, the officers,
directors and stockholder who entered into the voting agreements
collectively held and were entitled to vote
3,794,387 shares of Emageon common stock, which represents
approximately 17.69% of the outstanding Emageon common stock
entitled to vote at the special meeting. |
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Who is entitled to vote at the special meeting? |
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Only holders of record of our common stock as of the close of
business on November 12, 2008, which is the record date for
the special meeting, are entitled to receive notice of the
special meeting and to vote the shares they held on the record
date at the special meeting, or at any adjournments or
postponements of the special meeting. You will have one vote at
the special meeting for each share of common stock you owned at
the close of business on the record date. |
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How can I cast a vote? |
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If your shares are registered in your name (i.e.,
if you are a stockholder of record), you can vote your shares by
completing and returning the enclosed proxy card or you may vote
in person at the special meeting. |
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If your shares are held in street name through a
broker or bank, you may vote by completing and returning the
voting form provided by your broker or bank, or by the Internet
or telephone through your broker or bank if such a service is
provided. To vote via the Internet or telephone through your
broker or bank, |
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you should follow the instructions on the voting form provided
by your broker or bank. You may vote in person at the special
meeting if you get a proxy from your broker or bank. |
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May I vote in person? |
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Yes. If your shares are registered in your name, you may attend
the special meeting and vote your shares in person rather than
signing and returning your proxy card. If your shares are held
in street name, you must get a proxy from your
broker or bank in order to attend the special meeting and vote. |
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How are votes counted? |
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For Proposal 1 adoption of the merger
agreement you may vote FOR,
AGAINST or ABSTAIN. An
abstention will not count as a vote cast on Proposal 1, but
will count for the purpose of determining whether a quorum is
present. As a result, if you ABSTAIN, it has
the same effect as a vote AGAINST adoption of
the merger agreement. |
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For Proposal 2 approval of the adjournment or
postponement of the meeting, if necessary or appropriate, to
solicit additional proxies you may vote
FOR, AGAINST or
ABSTAIN. An abstention will not count as a
vote cast with respect to Proposal 2, but will count for
the purpose of determining whether a quorum is present. If you
submit a proxy card pursuant to which you
ABSTAIN from voting on Proposal 2, you
will be deemed not to have cast a vote for the purpose of voting
on that matter (though you will be deemed present for the
purpose of the quorum needed to bring the matter to a vote) and,
therefore, your abstention will have no effect on the outcome of
the vote with respect to an adjournment or postponement. |
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If you sign and return your proxy card, but do not indicate how
you want to vote, your proxy will be voted
FOR Proposal 1 and
FOR Proposal 2, and will be voted in
accordance with the discretion of the persons named as proxies
as to any other matters properly brought before the special
meeting for a vote. |
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May I change my vote after I have mailed my signed proxy
card? |
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Yes. You may change your vote before your proxy is voted at the
special meeting using any one of the following methods: |
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if you submitted a proxy card, you can execute and
deliver a written notice of revocation to our Corporate
Secretary at our principal executive offices located at 1200
Corporate Drive, Suite 200, Birmingham, Alabama 35242, or
you can complete, execute and deliver to our Secretary a new,
later-dated proxy card for the same shares;
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you can attend the meeting and vote in person,
although your attendance alone will not revoke your proxy; or
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if you have instructed a broker or bank to vote your
shares, you must follow directions received from your broker or
bank to change those instructions.
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What is the difference between holding shares as a
stockholder of record and as a beneficial owner? |
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Most of our stockholders hold their shares through a broker,
trustee or other nominee (such as a bank) rather than directly
in their own name. As summarized below, there are some
distinctions between shares owned of record and those owned
beneficially. |
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Stockholder of Record. If your
shares are registered directly in your name with our transfer
agent, you are considered to be the stockholder of record with
respect to those shares, and these proxy materials are being
sent directly to you. As the stockholder of record, you have the
right to grant your proxy directly to us or to vote in person at
the special meeting. We have enclosed a proxy card for you to
use.
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Beneficial Owner of Shares Held In Street
Name. If your shares are held in a
brokerage account, by a trustee or by another nominee (such as a
bank), you are considered the beneficial owner of shares held in
street name, but the shares are considered to be
held of record by such broker, trustee or other
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nominee. In that case, we initially sent these proxy materials
to that other person as the stockholder of record, and they have
been forwarded to you by that person, together with a voting
instruction card. As the beneficial owner, you have the right to
direct your broker, trustee or nominee how to vote, and you are
also invited to attend the special meeting. |
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However, since a beneficial owner is not the stockholder of
record, you may not vote your shares in person at the special
meeting unless you obtain a legal proxy from the
broker, trustee or nominee who holds your shares of record,
giving you the right to vote the shares at the meeting. Your
broker, trustee or other nominee should have enclosed or
provided voting instructions for you to use in directing the
broker, trustee or nominee to vote your shares. If not, you
should immediately contact the broker, trustee or other nominee
to request such instructions. |
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If my broker holds my shares in street name, will
my broker vote my shares for me? |
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Your broker will not be able to vote your shares without
instructions from you. You should instruct your broker to vote
your shares following the procedure provided by your broker.
Without instructions, your shares will not be voted, which will
have the same effect as if you voted AGAINST
adoption of the merger agreement. Broker non-votes will have no
effect on the proposal to adjourn the special meeting, if
necessary or appropriate, to solicit additional proxies. |
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What should I do if I receive more than one set of voting
materials? |
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You may receive more than one set of voting materials, including
multiple copies of this proxy statement and multiple proxy cards
or voting instruction cards. For example, if you hold your
shares in more than one brokerage account, you will receive a
separate voting instruction card for each brokerage account in
which you hold shares. If you are a stockholder of record and
your shares are registered in more than one name, you will
receive more than one proxy card. Please complete, sign, date
and return each proxy card and voting instruction card that you
receive. |
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What happens if I sell my shares of Emageon common stock
before the special meeting? |
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The record date for the special meeting is earlier than the date
of the special meeting and the date that the merger is expected
to be completed. If you transfer your shares of Emageon common
stock after the record date but before the special meeting, you
will retain your right to vote at the special meeting, but you
will have transferred your right to receive $2.85 per share in
cash, without interest and less any applicable withholding tax,
to be received by our stockholders in the merger. You must hold
your shares through the completion of the merger in order to
receive the merger consideration of $2.85 per share. |
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Will the merger be taxable to me? |
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Generally, yes. The exchange of shares of our common stock for
the cash merger consideration will be a taxable transaction to
our stockholders for U.S. federal income tax purposes. Tax
matters can be complicated, and the tax consequences of the
merger to you will depend on the facts of your own situation. We
encourage you to consult your own tax advisor to fully
understand the tax consequences of the merger to you. |
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When do you expect the merger to be completed? |
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We are working toward completing the merger as quickly as
possible and expect to consummate the merger in the fourth
quarter of 2008 or the first quarter of 2009. In addition to
obtaining stockholder approval, we must satisfy all other
closing conditions before completing the merger. See The
Merger Agreement Conditions to Closing. |
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Who will bear the cost of the solicitation? |
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The expense of soliciting proxies for use by our Board of
Directors will be borne by Emageon. We have retained Morrow and
Co., LLC, which we refer to as Morrow, to assist in distributing
the proxy materials to brokerage houses and other nominees and
fiduciaries, and to assist in solicitation of proxies by
contacting record and beneficial owners of our common stock, for
a fee of $5,500 plus expenses. We will also |
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request that brokers, banks and other custodians, nominees and
fiduciaries representing beneficial owners of shares forward the
proxy materials to such beneficial owners, and we will, upon
request of such parties, reimburse reasonable forwarding charges
and out-of-pocket expenses. |
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Proxies also may be solicited by certain of our directors,
officers or other employees personally or by telephone,
facsimile or other means of communication. No additional
compensation will be paid to these individuals for such services. |
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Am I entitled to appraisal rights? |
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Yes. As a holder of our common stock, you are entitled to
appraisal rights under the Delaware General Corporation Law in
connection with the merger if you meet certain conditions, which
conditions are described in this proxy statement under the
caption The Merger Appraisal Rights. |
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Should I send my Emageon stock certificates now? |
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No. Please do not send any stock certificates with your
proxy card. Soon after the merger is consummated, you will
be sent a letter of transmittal by the paying agent with written
instructions for exchanging your share certificates for the cash
consideration. These instructions will tell you how and where to
send in your certificates for your cash consideration. |
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When will I receive payment for my shares? |
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You will receive your cash payment after the paying agent
receives your stock certificates and any other documents
requested in the instructions accompanying the letter of
transmittal. If you are the beneficial owner of shares of common
stock that are held in street name, the broker or
bank that holds the shares of record for you will complete the
letter of transmittal with respect to your shares and receive
payment under the merger agreement on your behalf. The payment
for such shares will be credited to your account with such
broker or bank. |
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Where can I find more information about Emageon? |
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Emageon files certain information with the SEC under the
Exchange Act. You may read and copy this information at the
SECs public reference facilities. You may call the SEC at
1-800-SEC-0330
for information about these facilities. This information is also
available at the Internet site the SEC maintains at
http://www.sec.gov
and at Emageons corporate website at
http://www.emageon.com.
Information contained on our website is not part of, or
incorporated in, this proxy statement. You can also request
copies of our filings documents from us. See Where You Can
Find More Information beginning on page 73. |
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Who can help answer my other questions? |
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If you would like additional copies, without charge, of this
proxy statement or if you have questions about the merger,
including the procedures for voting your shares, you should
contact: |
Morrow and
Co., LLC
Stockholders call: (800) 662-5200
Brokers or Banks call: (203) 658-9400
or
John W. Wilhoite
Corporate Secretary
Emageon Inc.
1200 Corporate Drive, Suite 200
Birmingham, Alabama 35242
14
CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in this proxy statement regard
matters that are not historical facts and are forward-looking
statements within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995, as amended, including statements regarding expectations as
to the completion of the merger and other transactions
contemplated by the merger agreement. These statements are often
identified by the use of forward-looking words such as
believe, expect, potential,
continue, may, will,
should, could, would,
intend, plan, estimate,
anticipate and comparable words or the negative
version of these and other words. Because such forward-looking
statements contain risks and uncertainties, actual results may
differ materially from those expressed in or implied by such
forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to:
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the occurrence of any event, change or other circumstance that
could give rise to the termination of the merger agreement and
the possibility that Emageon could be required to pay a
$3.0 million termination fee in connection therewith;
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the outcome of any legal proceedings that have been or may be
instituted against Emageon and others related to the merger
agreement;
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the inability to complete the merger due to the failure to
obtain stockholder approval or the failure to satisfy other
conditions to the completion of the merger;
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the failure to obtain the necessary financing set forth in the
debenture purchase agreement with SIBL to be received in
connection with the merger;
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risks that the proposed transaction disrupts current plans and
operations and the potential difficulties in employee retention
as a result of the merger;
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risks regarding a loss of or decrease in purchases by
Emageons major customers as a result of the merger;
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the ability to recognize the benefits of the merger; and
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the amount of the costs, fees, expenses and charges related to
the merger and the actual terms of the financing that will be
obtained for the merger.
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The business of Emageon is also subject to a number of risks
generally such as:
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competition from larger competitors;
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risks associated with a history of operating losses;
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reliance on continuing relationships with large customers;
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the risk of significant product errors or product failures;
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reliance on reseller arrangements for important components of
its solution;
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the risk of not responding effectively to changes in its
industry;
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customers reliance on third party reimbursements;
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risks regarding the potential impact on its business of FDA
regulations and other applicable health care regulations;
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and other risks that are set forth in the Risk
Factors, Legal Proceedings and
Management Discussion and Analysis of Results of
Operations and Financial Condition sections of, and
elsewhere in, the filings that Emageon makes with the Securities
and Exchange Commission, which we refer to as the SEC. Many of
the factors that will determine the outcome of the subject
matter of this proxy statement are beyond Emageons ability
to control or predict. Emageon undertakes no obligation to
release publicly the results of any revisions to these
forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence
of unanticipated events, except as required by law.
15
MARKET
PRICE AND DIVIDEND DATA
Market
for Common Stock
Our common stock is listed on the NASDAQ Global Market under the
symbol EMAG. As of November 13, 2008, the last
trading day before the date of this proxy statement, there were
21,449,459 outstanding shares of our common stock, par value
$0.001 per share, and approximately 67 holders of record of our
common stock. The following table shows, for the periods
indicated, the range of low and high per share sales prices for
our common stock as reported on The NASDAQ Global Market.
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Emageon
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Common Stock Closing Price
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High
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Low
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Year Ended December 31, 2006
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First Quarter
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$
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18.82
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$
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15.30
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Second Quarter
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17.90
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12.90
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Third Quarter
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15.96
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13.39
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Fourth Quarter
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16.53
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13.79
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Year Ended December 31, 2007
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First Quarter
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$
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15.58
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$
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9.75
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Second Quarter
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11.89
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7.42
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Third Quarter
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10.25
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7.90
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Fourth Quarter
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8.66
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3.08
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Year Ended December 31, 2008
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First Quarter
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$
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4.05
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$
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1.87
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Second Quarter
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2.91
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2.06
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Third Quarter
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2.55
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1.80
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Fourth Quarter (through October 30, 2008)
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2.59
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1.74
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The following table shows the closing per share sales price of
our common stock, as reported on The NASDAQ Global Market on
October 13, 2008, the last full trading day before the
public announcement of the merger, and on November 13,
2008, the last trading day before the date of this proxy
statement:
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Emageon
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Common Stock
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Closing Price
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October 13, 2008
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$
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2.08
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November 13, 2008
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$
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2.36
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Following the merger there will be no further market for our
common stock and our stock will be de-listed from The NASDAQ
Global Market and deregistered under the Exchange Act.
Dividends
We have not declared or paid any cash dividends on our common
stock. Instead, we have retained earnings, if any, for use in
the operation of our business and to fund future growth. We are
prohibited under the merger agreement from declaring and paying
dividends on our common stock. In addition, covenants in the
loan and security agreement for our line of credit currently
prohibit us from paying dividends or making other distributions.
Initial
Public Offering
Our initial public offering of common stock was declared
effective by the SEC on February 8, 2005. In the offering
we sold 5,750,000 shares of our common stock at $13.00 per
share, and received net proceeds of approximately
$67.2 million.
16
THE
SPECIAL MEETING
This proxy statement is being furnished to our stockholders in
connection with the solicitation of proxies by our Board of
Directors to be used at the special meeting of stockholders or
any adjournment or postponement thereof.
Date,
Time and Place
We will hold the special meeting at 1200 Corporate Drive,
Suite 200, Birmingham, Alabama on December 17, 2008,
beginning at 9:00 a.m., local time.
Purpose
of the Special Meeting
At the special meeting, we will ask you to adopt the merger
agreement, a copy of which is attached to this proxy statement
as Annex A, and, if necessary or appropriate, we may ask
you to approve the adjournment or postponement of the special
meeting in order to solicit additional proxies if there are
insufficient votes at the time of the meeting to approve the
merger agreement. In addition, you may be asked to vote on other
business that is properly brought before the special meeting. If
any other matters properly come before the special meeting, the
persons named in the enclosed proxy card will vote the shares
represented by all properly executed proxies on such matters in
accordance with their discretion. We are not currently aware of
any additional business that may come before the special meeting.
Record
Date; Shares Entitled to Vote
Our Board of Directors has established the close of business on
November 12, 2008 as the record date for the special
meeting. Only holders of record of our common stock at the close
of business on the record date are entitled to notice of and to
vote at the special meeting. For each share of our common stock
that you owned on the record date, you are entitled to cast one
vote on each matter voted upon at the special meeting. As of the
close of business on the record date, there were
21,449,459 shares of our common stock outstanding and
entitled to vote, which were held by approximately 67 holders of
record. These numbers do not reflect outstanding stock options
or restricted stock units, which are not entitled to vote at the
special meeting.
Quorum
A quorum of stockholders is necessary to conduct business at the
special meeting. The presence in person or representation by
proxy at any meeting of our stockholders of a majority of the
outstanding shares of our common stock entitled to vote at the
meeting will constitute a quorum. You will be deemed to be
present if you attend the meeting or if you submit a proxy by
mail and it is received at or prior to the meeting and not
timely revoked.
Abstentions and broker non-votes, which are discussed below, are
counted for purposes of determining whether a quorum is present
at a special meeting. Shares held by us in our treasury do not
count toward a quorum.
If a quorum is not present, the holders of a majority of the
common stock represented at the special meeting may adjourn the
meeting in order to solicit additional proxies. If a quorum is
not present at the special meeting, it is expected that the
meeting will be adjourned or postponed in order to solicit
additional proxies.
Vote
Required
The adoption of the merger agreement requires the affirmative
vote of the holders of at least a majority of the shares of our
common stock outstanding at the close of business on the record
date for the special meeting. Because the vote on the proposal
to adopt the merger agreement is based on the total number of
shares outstanding, rather than the number of actual votes cast,
your failure to vote, or your decision to abstain from voting,
on this proposal will have the same effect as a vote
AGAINST the proposal. Similarly, a broker
non-vote, which occurs when a broker does not have discretionary
voting authority to vote on a proposal and
17
has not received instructions from the beneficial owner of the
shares as to how to vote on the proposal, will also have the
same effect as a vote AGAINST the proposal.
Brokers, banks and other nominees will not have discretionary
authority on the proposal to adopt the merger agreement.
Approval of the proposal to adjourn the special meeting for the
purpose of soliciting proxies, if necessary or appropriate,
requires the affirmative vote of the holders of a majority of
the shares voted on such proposal. Abstentions and broker
non-votes will have no effect on the proposal to adjourn the
special meeting.
Shares
Owned by Emageon Directors and Executive Officers
As of the close of business on the record date, our directors
and executive officers beneficially owned 4,617,415 shares
of our common stock, which represented approximately 20.73% of
the shares of our common stock outstanding on that date. These
figures include stock options that may be exercised within
60 days of the record date.
Voting
Agreements
In connection with the execution of the merger agreement, HSS
and Merger Sub entered into voting agreements with our
directors, certain of our officers and our largest stockholder
pursuant to which they agreed to vote all of their shares of
Emageon common stock in favor of adoption of the merger
agreement and against any competing transaction or proposal. As
of the record date for the special meeting, the officers,
directors and stockholder who entered into the voting agreements
collectively held and were entitled to
vote 3,794,387 shares of Emageon common stock, which
represents approximately 17.69% of the outstanding Emageon
common stock entitled to vote at the special meeting.
Voting of
Proxies
Shares
Held of Record
If your shares of our common stock are registered in your name,
you can vote those shares by completing and returning the
enclosed proxy card or voting in person at the special meeting.
Voting by Proxy. If you choose to vote by
proxy, simply mark the enclosed proxy card, date and sign it,
and return it in the postage-paid envelope provided.
All shares represented by properly executed proxies received in
time for the special meeting will be voted at the special
meeting in the manner specified by the stockholders giving those
proxies. Properly executed proxies that do not contain voting
instructions will be voted FOR the proposal
to adopt the merger agreement and the proposal to adjourn the
special meeting to solicit additional proxies, if necessary or
appropriate. No proxy that is specifically marked
AGAINST the proposal to adopt the merger
agreement will be voted in favor of the adjournment proposal,
unless it is specifically marked FOR the
adjournment proposal.
Although it is not currently expected, if the proposal to
adjourn the special meeting to solicit additional proxies is
approved, the special meeting may be adjourned for the purpose
of soliciting additional proxies to approve the proposal to
adopt the merger agreement. Other than for the purposes of
adjournment to solicit additional proxies, whether or not a
quorum exists, holders of a majority of the outstanding common
stock present in person or represented by proxy at the special
meeting and entitled to vote thereat may adjourn the special
meeting. Any signed proxies received by us in which no voting
instructions are provided on such matter will be voted in favor
of an adjournment in these circumstances. If any matters other
than the matters discussed in this proxy statement are properly
brought before the special meeting, the persons named as proxies
will vote in accordance with their judgment as to matters that
they believe to be in the best interest of our stockholders.
Any adjournment may be made without notice (if the adjournment
is for not more than sixty days from the record date), other
than by an announcement made at the special meeting of the time,
date and place of the adjourned meeting. Any adjournment of the
special meeting for the purpose of soliciting additional proxies
18
will allow our stockholders who have already sent in their
proxies to revoke them at any time prior to their use at the
special meeting as adjourned or postponed.
Voting in Person. If you plan to attend the
special meeting and wish to vote in person, you will be given a
ballot at the special meeting.
Shares
Held in Street Name
If your shares are held in street name, which means that your
shares are held of record by a broker, trustee or other nominee
(such as a bank), then your broker or bank has enclosed a voting
instruction card for you to use to indicate your voting
preference. It may provide that you can deliver your
instructions by telephone or via the Internet. While you are
welcome to attend the meeting in person, you would not be
permitted to vote unless you obtain a signed proxy from your
broker or bank, who is the holder of record of your shares,
authorizing you to vote at the special meeting.
Stockholders who have questions or requests for assistance in
completing and submitting proxy cards should contact our proxy
solicitor, Morrow, or our Corporate Secretary, as set forth
below under Assistance.
Whether or not you expect to attend the meeting, please
complete, date, sign and promptly return the accompanying proxy
(or follow the instructions given to you by your broker or bank)
so that your shares may be represented at the meeting.
DO NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD. A
letter of transmittal with instructions for the surrender of
your stock certificates will be mailed to you as soon as
practicable if and when the merger is completed.
Revocability
of Proxies
If your shares of our common stock are registered in your name
and have not delivered an irrevocable proxy, you have the
unconditional right to revoke your proxy at any time prior to
its exercise by employing any of the following methods:
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you can deliver to our Corporate Secretary, at our principal
executive offices located at 1200 Corporate Drive,
Suite 200, Birmingham, Alabama 35242, a written notice
(dated later than the date of your proxy card) stating that
you would like to revoke your proxy;
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you can complete, execute and deliver to our Corporate Secretary
a new, later-dated proxy card for the same shares, provided the
new proxy card is received before the polls close at the special
meeting; or
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you can attend the special meeting and vote in person.
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Attendance at the special meeting alone will not constitute a
revocation of a proxy absent compliance with one of the
foregoing methods of revocation. If your shares are held in
street name, you must follow the instructions given to you by
the broker or bank to change your voting instructions.
Recommendation
of Emageons Board of Directors
For the reasons set forth in this proxy statement, our Board of
Directors unanimously approved and adopted the merger agreement,
the merger and the other transactions contemplated by the merger
agreement, determined that the merger agreement, the merger and
the other transactions contemplated by the merger agreement are
advisable, fair to and in the best interests of Emageon and its
stockholders, and recommends that our stockholders vote
FOR adoption of the merger agreement, and
FOR the proposal to adjourn the special
meeting, if necessary or appropriate, to solicit additional
proxies.
Solicitation
of Proxies
We will bear the cost of this proxy solicitation. Certain of our
directors, officers and other employees may, without
compensation other than reimbursement for actual expenses,
solicit proxies personally or by telephone, facsimile or other
means of communication. We also will request that brokers, banks
and other
19
custodians, nominees and fiduciaries representing beneficial
owners of shares forward the proxy materials to such beneficial
owners, and we will, upon request of such parties, reimburse
reasonable forwarding charges and out-of-pocket expenses. We
have retained Morrow to assist in distributing the proxy
materials to brokerage houses and other nominees and
fiduciaries, and to assist in solicitation of proxies by
contacting record and beneficial owners of our common stock, for
a fee of $5,500 plus expenses.
Householding
of Special Meeting Materials
Some banks, brokers and other nominee record holders may be
participating in the practice of householding proxy
statements and annual reports. This means that only one copy of
our proxy statement may have been sent to multiple stockholders
in each household. We will promptly deliver a separate copy of
either document to any stockholder upon written or oral request
to our Corporate Secretary, who may be contacted as set forth
below under The Special Meeting
Assistance.
Stockholder
List
A list of our stockholders entitled to vote at the special
meeting will be available for examination by any Emageon
stockholder at the special meeting. For ten days prior to the
special meeting, this stockholder list will be available for
inspection during ordinary business hours at our corporate
offices located at 1200 Corporate Drive, Suite 200,
Birmingham, Alabama 35242.
Assistance
If you need assistance in completing your proxy card or have
questions regarding the special meeting, please contact:
Morrow and
Co., LLC
Stockholders call: (800) 662-5200
Brokers or Banks call: (203) 658-9400
or
John W.
Wilhoite
Corporate Secretary
Emageon Inc.
1200 Corporate Drive, Suite 200
Birmingham, Alabama 35242
20
THE
COMPANIES
Emageon
Inc.
Emageon provides an enterprise-level information technology
solution for the clinical analysis and management of digital
medical images within multi-hospital networks, community
hospitals and diagnostic imaging centers. Our solution consists
of advanced visualization and image management software for
multiple medical specialties, third-party components and
comprehensive support services. Our web-enabled advanced
visualization software, which is hosted by the customer,
provides physicians across the enterprise, in multiple medical
specialties and at any network access point, with dynamic tools
to manipulate and analyze images in both a two dimensional and
three dimensional perspective. With these tools, physicians have
the ability to better understand internal anatomic structure and
pathology, which can improve clinical diagnoses, disease
screening and therapy planning. Our open standard solution is
designed to help customers improve staff productivity, enhance
revenue opportunities, automate complex medical imaging
workflow, lower total cost of ownership and provide better
service to physicians and patients. Emageon is publicly traded
on The NASDAQ Global Market under the symbol EMAG.
Emageons principal executive offices are located at 1200
Corporate Drive, Suite 200, Birmingham, Alabama 35242, and
its telephone number is
(205) 980-9222.
Additional information about Emageon is contained in
Emageons filings with the SEC. See Where You Can
Find More Information.
Health
Systems Solutions, Inc.
HSS is a technology and services company dedicated to bringing
innovation to the health care industry. HSSs objective is
to leverage its understanding of current and next-generation
technologies to offer value-added products and services which
will generate improved clinical, operational and financial
outcomes for its clients. HSSs portfolio of products and
services extends across many segments of health care including
home health care, medical staffing, acute and post-acute
facilities and telehealth/telemedicine. HSSs business is
grouped into three segments: technology solutions, software and
consulting. HSS is publicly traded on the OTC
Bulletin Board under the symbol HSSO.
HSSs principal executive offices are located at
42 West 39th Street, 6th Floor, New York, NY 10018, and its
telephone number is (212) 798-9400. Additional information
about HSS is contained in HSSs filings with the SEC. See
Where You Can Find More Information.
HSS
Acquisition Corp.
HSS Acquisition Corp. is a wholly owned subsidiary of HSS. HSS
Acquisition Corp. was organized solely for the purpose of
entering into the merger agreement with Emageon and completing
the merger and has not conducted any business operations. HSS
Acquisition Corp.s principal executive offices are located
at 42 West 39th Street, 6th Floor, New York, NY 10018, and
its telephone number is (212) 798-9400.
PROPOSAL 1
ADOPTION OF THE MERGER AGREEMENT
THE
MERGER
Background
of the Merger
Emageon regularly reviews and evaluates its business strategy
and strategic alternatives with the goal of enhancing
stockholder value. In this regard, in early 2007, the Board of
Directors determined to consider what strategic alternatives
might be available to Emageon.
During the first quarter of 2007, Charles A. Jett, Jr., in his
capacity as Chief Executive Officer, reviewed with the directors
current market trends and sales expectations for 2007 and
initiated the consideration by the Board of Directors of various
strategic alternatives. On April 24, 2007, at a regularly
scheduled meeting of the Board of Directors, Emageons
management reviewed a presentation with the Board regarding
managements
21
assessment of industry trends, Emageons business plan and
future prospects and managements preliminary analysis of a
number of strategic alternatives Emageon might consider pursuing
in order to enhance stockholder value. After extended
discussions, the Board of Directors determined to commence a
formal review of potential strategic alternatives for the
benefit of Emageons stockholders. Representatives of
Kilpatrick Stockton LLP, counsel for Emageon, which we refer to
as Kilpatrick Stockton, advised the Board of Directors regarding
its fiduciary duties in engaging in a strategic alternatives
review process. The Board of Directors determined that because
one of the possible alternatives, a sale of Emageon, could
involve potential conflicts of interest with management and
certain directors, it should establish a strategic alternatives
committee comprised of independent, disinterested directors to
review, evaluate and consider potential strategic alternatives,
including, but not limited to, acquisitions of other businesses,
a merger or combination with another company, the sale of part
or all of Emageon to a financial or strategic purchaser
and/or a
refinancing or recapitalization of Emageon. Accordingly, the
Board of Directors established a strategic alternatives
committee, which we refer to as the Strategic Alternatives
Committee, comprised entirely of independent members of the
Board of Directors, being Hugh H. Williamson III (the
chair), Fred C. Goad, Jr. and Roddy J. H. Clark, and
granted it the authority to engage independent attorneys,
investment advisors and other such advisors as it deemed
appropriate.
Following this meeting, the Strategic Alternatives Committee
members discussed the engagement of legal and financial advisors
to assist the Strategic Alternatives Committee in its evaluation
of strategic alternatives for the benefit of Emageons
stockholders. Over the next several days following the Board of
Directors meeting, members of the Strategic Alternatives
Committee held conversations with potential legal counsel and
various investment banks, including SunTrust Robinson Humphrey
and Bass, Berry and Sims PLC, which we refer to as Bass,
Berry & Sims.
On May 3, 2007, the Strategic Alternatives Committee met to
discuss the purpose, duties and role of the Strategic
Alternatives Committee and the process by which it would begin
to examine potential strategic alternatives. The Strategic
Alternatives Committee invited representatives of Bass,
Berry & Sims and SunTrust Robinson Humphrey to
participate in the meeting. Also participating at the Strategic
Alternatives Committees request were Mr. Jett and W.
Todd Carlisle, Emageons General Counsel. Mr. Jett
reviewed with the Strategic Alternatives Committee
managements assessment of Emageons business plan and
future prospects as discussed at the April 24, 2007 Board
of Directors meeting. Mr. Jett expressed his desire to work
with the Strategic Alternatives Committee in evaluating
strategic alternatives and to act in the best interest of
Emageons stockholders. Mr. Jett discussed with the
Strategic Alternatives Committee conversations Emageon had held
with various potential acquisition targets as well as inquiries
by various parties interested in Emageon, its business
operations and technology. The Strategic Alternatives Committee
reviewed SunTrust Robinson Humphreys preliminary analysis
regarding a process for evaluating organic growth opportunities
and both buy side and sell side
opportunities, including a potential timeline for completing the
Strategic Alternatives Committees analysis and making a
recommendation to the full Board of Directors. The Strategic
Alternatives Committee excused the SunTrust Robinson Humphrey
representatives from the meeting and met in executive session to
review its discussions with various investment banks (to serve
as financial advisor to the Strategic Alternatives Committee)
and the engagement of a financial advisor and legal counsel.
Following this discussion, the Strategic Alternatives Committee
authorized and approved the engagement of Bass,
Berry & Sims to serve as legal counsel to the
Strategic Alternatives Committee and SunTrust Robinson Humphrey
to serve as financial advisor to the Strategic Alternatives
Committee, subject to negotiation and execution of appropriate
engagement letters with each firm.
On May 21, 2007, the Strategic Alternatives Committee met
and discussed with Mr. Jett various operational matters as
well as his observations from Emageons first quarter
earnings conference call held May 9, 2007 in which Emageon
had announced a reduction in its financial guidance for 2007.
The Strategic Alternatives Committee reviewed SunTrust Robinson
Humphreys recommendation for evaluating, through a
targeted, controlled process coordinated by SunTrust Robinson
Humphrey, the potential market value of Emageon from the
perspectives of strategic parties and financial sponsors, as
well as analyzing potential organic growth opportunities for
Emageon. The Strategic Alternatives Committee discussed and
agreed upon a list of potential Tier One and
Tier Two strategic parties and financial
sponsors selected primarily on the
22
basis of their potential level of interest in and ability to act
on a transaction with Emageon. The Strategic Alternatives
Committee also considered the parties knowledge of
Emageons industry in compiling these lists. The Strategic
Alternatives Committee initially authorized SunTrust Robinson
Humphrey to contact 15 potential Tier One strategic parties
and five potential Tier One financial sponsors. The
Strategic Alternatives Committee articulated to SunTrust
Robinson Humphrey and Bass, Berry & Sims that
discussions with these parties were to be undertaken in
connection with the Strategic Alternatives Committees
evaluation of a full continuum of alternatives including
continuing as an independent public company with certain
internal reorganization efforts and analysis of capital needs,
evaluating various possible acquisition opportunities and
analyzing the markets valuation of Emageon to determine
whether a potential sale of Emageon was in the best interest of
Emageons stockholders. The Strategic Alternatives
Committee engaged in an executive session during which the
Strategic Alternatives Committee members discussed the proposed
process and the Strategic Alternatives Committees actions
going forward. Representatives of Bass, Berry & Sims
advised the Strategic Alternatives Committee concerning its
fiduciary duties, including the Strategic Alternatives Committee
members duties of care and loyalty and the importance that
they act independently on behalf of Emageons stockholders.
From May 21, 2007 through October 24, 2007, SunTrust
Robinson Humphrey contacted 27 entities, including 19 strategic
parties and eight financial sponsors, on behalf of the Strategic
Alternatives Committee. During this time, Emageon executed
confidentiality agreements with eight of these parties,
including two strategic parties and six financial sponsors.
Parties executing confidentiality agreements were provided
preliminary financial information about Emageon, were granted
access to an electronic data room and engaged in telephone calls
and meetings with Emageons management. Most of the
strategic parties contacted were not interested in pursing a
transaction with Emageon for a variety of reasons. As a result
of this process, Emageons management, with the assistance
of SunTrust Robinson Humphrey, continued to revise its analysis
of Emageons continuing viability as an independent,
publicly traded company.
The Strategic Alternatives Committee held teleconference
meetings on each of May 31, 2007, June 7, 2007 and
June 15, 2007. During these calls, the Strategic
Alternatives Committee members reviewed with SunTrust Robinson
Humphrey the ongoing discussions with various strategic parties
and financial sponsors as well as additional potential parties
SunTrust Robinson Humphrey could contact in connection with the
Strategic Alternatives Committees evaluation of strategic
alternatives for the benefit of Emageons stockholders. The
Strategic Alternatives Committee also reviewed updates from
management regarding managements assessment of various
operational, financial and business development matters during
these calls.
On June 26, 2007, the Strategic Alternatives Committee met
and discussed with SunTrust Robinson Humphrey and management the
status of discussions with various strategic parties and
financial sponsors, including the lack of interest indicated by
a number of the strategic parties contacted. The Strategic
Alternatives Committee also discussed the proposed timeline for
completing its evaluation of strategic alternatives on behalf of
Emageon and its stockholders and making a recommendation to the
full Board of Directors. The Strategic Alternatives Committee
discussed with Mr. Jett Emageons financial outlook
for 2007 and 2008 and Emageons ongoing conversations with
various potential acquisition targets. The Strategic
Alternatives Committee members further discussed with
representatives of Bass, Berry & Sims their fiduciary
duties, the Strategic Alternatives Committees role in the
evaluation of strategic alternatives for the benefit of
Emageons stockholders and the full continuum of
alternatives being evaluated. The Strategic Alternatives
Committee also met in executive session to discuss the
evaluation process, market observations and managements
role in assisting the Strategic Alternatives Committee in its
evaluation process.
During July 2007, the Strategic Alternatives Committee, with the
assistance of SunTrust Robinson Humphrey, continued discussions
with four financial sponsors and one strategic party regarding a
possible transaction with Emageon. Each of these parties
continued a due diligence investigation of Emageon with the
assistance of Emageons management and representatives of
SunTrust Robinson Humphrey. On July 20, 2007, the Strategic
Alternatives Committee executed a confidentiality agreement with
a second strategic party. In late July, one of the financial
sponsors expressed to SunTrust Robinson Humphrey that it no
longer wished to be involved in the process. In addition, a
third strategic party, referred to herein as Company
A, contacted Mr. Jett to express an interest in a
strategic transaction with Emageon.
23
On July 30, 2007, Oliver Press Partners, LLC, which we
refer to as Oliver Press, filed a Schedule 13D with the SEC
indicating it had purchased a significant stake in Emageon. On
August 2, 2007, the Strategic Alternatives Committee met to
discuss the investment by Oliver Press in Emageon and the
potential impact of Oliver Presss investment and possible
desire to influence Emageons activities on the ongoing
strategic alternatives evaluation process. The Strategic
Alternatives Committee discussed with Mr. Jett
conversations he had held with representatives of Oliver Press
as well as various business development and operational matters
regarding Emageon. The Strategic Alternatives Committee
discussed the status of discussions with the three strategic
parties, including Company A, and the three financial sponsors
that continued to express interest in Emageon.
On August 9, 2007, at a regularly scheduled meeting of the
Board of Directors, the Strategic Alternatives Committee made a
presentation to the Board regarding the status of the strategic
alternatives evaluation process. The Board of Directors reviewed
a presentation by SunTrust Robinson Humphrey regarding the three
financial sponsors and three strategic parties (including
Company A), the level of interest indicated by each and an
evaluation of each partys ability to complete a
transaction.
During the week following the August 9, 2007 Board of
Directors meeting, the two strategic parties other than Company
A and one of the financial sponsors informed SunTrust Robinson
Humphrey they were not interested in further discussions
regarding a transaction with Emageon. The Strategic Alternatives
Committee instructed SunTrust Robinson Humphrey to prepare a bid
letter to the remaining two financial sponsors, one of which is
referred to herein as Company D, requesting a formal
offer and markup of a form of merger agreement. The Strategic
Alternatives Committee worked with Emageons management,
Bass, Berry & Sims and Kilpatrick Stockton to prepare
a form of merger agreement to be delivered to the parties. On
August 22, 2007, SunTrust Robinson Humphrey delivered the
bid letter on behalf of the Strategic Alternatives Committee to
the two remaining financial sponsors, including Company D. A
form of merger agreement, which had been approved by the
Strategic Alternatives Committee, was delivered to these parties
on August 31, 2007. The Strategic Alternatives Committee,
with SunTrust Robinson Humphreys assistance, continued to
engage in discussions with Company A regarding a possible
strategic transaction based on a number of scenarios, including
a stock for stock combination of the two entities.
During the first part of September 2007, the two remaining
financial sponsors, including Company D, informed SunTrust
Robinson Humphrey they were no longer interested in a
transaction with Emageon. The Strategic Alternatives Committee,
with the assistance of SunTrust Robinson Humphrey, continued to
engage in discussions with Company A regarding a number of
possible scenarios under which the parties might structure a
strategic transaction, including as a stock for stock business
combination.
On September 17, 2007, the Strategic Alternatives Committee
addressed the withdrawal of all parties other than Company A
from discussions with Emageon. The Strategic Alternatives
Committee discussed the feasibility of a possible transaction
with Company A, including the potential timeline for negotiating
a definitive transaction, the structure of such a transaction
and the potential value of such a transaction to Emageons
stockholders. The Strategic Alternatives Committee reviewed with
representatives of Bass, Berry & Sims the Strategic
Alternatives Committees fiduciary duties and its role in
connection with its evaluation of strategic alternatives for the
benefit of Emageons stockholders, including with respect
to negotiations with Company A. The Strategic Alternatives
Committee also reviewed current operations, Emageons
financial condition and a wide range of additional alternatives
it might consider that might enhance stockholder value. After
this discussion, the Strategic Alternatives Committee excused
Mr. Jett and Mr. Carlisle from the meeting and engaged
in an extended discussion regarding the process, the timeline
for reporting to the full Board of Directors and the feasibility
and potential value to Emageons stockholders of a possible
transaction with Company A. The representatives of SunTrust
Robinson Humphrey were then excused from the meeting and the
Strategic Alternatives Committee met in executive session to
discuss the strategic alternatives available to Emageon.
Following this executive session, the Strategic Alternatives
Committee authorized members of Emageons management and
Mr. Clark, as representative of the Strategic Alternatives
Committee, to meet with representatives of Company A to further
gauge Company As level of interest in pursuing a
definitive transaction. The Strategic Alternatives Committee
also requested SunTrust Robinson Humphrey to prepare and
distribute to the Strategic Alternatives Committee members
SunTrust Robinson Humphreys valuation analysis
24
of a transaction with Company A based on various scenarios as
discussed at this meeting. On September 18, 2007, SunTrust
Robinson Humphrey distributed to the Strategic Alternatives
Committee members its analysis of a transaction between Emageon
and Company A, including its analysis of an appropriate
valuation of Emageons and Company As common stock.
During the following weeks, the Strategic Alternatives Committee
continued to negotiate with Company A regarding a proposed
transaction. On October 19, 2007, the Strategic
Alternatives Committee delivered a form of merger agreement to
Company A in furtherance of these negotiations. The parties
continued to disagree as to the value attributable to
Emageons stock in a stock for stock combination.
On October 22, 2007, the Strategic Alternatives Committee
met to discuss the status of discussions with Company A,
including a discussion of a number of open issues on which the
parties differed, including among other things, Company As
valuation of Emageons common stock. The Strategic
Alternatives Committee also reviewed generally the results of
its evaluation of strategic alternatives for the benefit of
Emageon and its stockholders. The Strategic Alternatives
Committee members discussed with Bass, Berry & Sims
their fiduciary duties in connection with the Strategic
Alternatives Committees evaluation of strategic
alternatives on behalf of Emageons stockholders, noting
that the feasible alternatives currently available to Emageon,
which included primarily a strategic transaction with Company A
or continuing as an independent public company with such
internal restructuring and assessment of capital needs as
determined by the full Board of Directors, would not involve a
conflict of interest with members of management or any
directors. After this discussion, the Strategic Alternatives
Committee determined to recommend to the full Board of Directors
that the review of strategic alternatives be returned to the
full Board of Directors pending further developments, if any,
that might require a committee of independent directors.
On October 24, 2007, at a regularly scheduled meeting of
the Board of Directors, the Strategic Alternatives Committee
delivered its report to the Board of Directors. The Strategic
Alternatives Committee noted it had contacted an aggregate of 27
parties, including 19 strategic parties and eight financial
sponsors as part of its strategic alternatives evaluation
process and had entered into confidentiality agreements with
eight of those parties, including two strategic parties and six
financial sponsors. The Strategic Alternatives Committee
discussed various other possible strategic alternatives,
including continuing as an independent public company with a
reorganization of Emageons management team, investment in
product development initiatives and a continuing analysis of
Emageons capital needs, as well as the evaluation of
possible acquisitions of other businesses. The Strategic
Alternatives Committee stated that, as of the date of the Board
meeting, only Company A continued to indicate an interest in
exploring strategic alternatives with Emageon. Accordingly, the
Strategic Alternatives Committee recommended to the Board of
Directors that Emageon continue negotiations with Company A
regarding a definitive transaction and, if agreement could not
be reached regarding a transaction that would be in the best
interest of Emageons stockholders, Emageon should continue
operating on a standalone basis with such restructuring and
other steps as were determined by management and the full Board
of Directors to be in the best interest of Emageons
stockholders. After discussion, the Board of Directors approved
the cessation of the Strategic Alternatives Committees
activities. The Company continued to negotiate with Company A
following the October 24, 2007 Board of Directors meeting
but was unable to reach agreement regarding a definitive
transaction.
On November 6, 2007, Emageon issued a press release
reporting its financial results for the quarter ended
September 30, 2007. The market value of Emageons
common stock declined substantially following the release of
Emageons financial results. At a special Board of
Directors meeting on November 13, 2007, the Board of
Directors, noting the decline in the market value of
Emageons stock, closing at $4.58 per share (as reported on
NASDAQ) on November 13, 2007, following the release of
Emageons financial results for the third quarter of 2007
and the difficulties Emageon faced in the public market,
determined further analysis of strategic alternatives would be
required and requested that the Strategic Alternatives Committee
reconvene. Following the Board of Directors meeting,
Mr. Williamson, on behalf of the Strategic Alternatives
Committee, requested Mr. Jett to contact representatives of
Company B, a strategic party that the Strategic
Alternatives Committee believed might have an interest in a
potential acquisition of Emageon.
25
The Strategic Alternatives Committee met on November 16,
2007 and discussed with Mr. Jett his preliminary
conversations with Company B, which indicated an interest in a
possible acquisition of Emageon. The Strategic Alternatives
Committee also authorized representatives of SunTrust Robinson
Humphrey to contact parties previously contacted as part of the
Strategic Alternatives Committees process, as well as
certain additional strategic parties and financial sponsors with
which the Strategic Alternatives Committee had not yet had
discussions but who might be interested, particularly in light
of Emageons reduced market valuation.
On December 4, 2007, the Strategic Alternatives Committee
met to discuss the ongoing conversations with Company B and
certain other strategic parties and financial sponsors contacted
by SunTrust Robinson Humphrey. Mr. Jett and representatives
of SunTrust Robinson Humphrey reported to the Strategic
Alternatives Committee at this meeting that Company B continued
to express an interest in Emageon as did one other strategic
party, referred to herein as Company C.
Additionally, Mr. Jett reported that one of Emageons
current institutional investors had contacted him regarding a
possible investment transaction that would include as a
condition to such investment representation on Emageons
Board of Directors. The Strategic Alternatives Committee
instructed Mr. Jett to pursue further the interest
expressed by this institutional investor in a potential
investment transaction. The Strategic Alternatives Committee
discussed with representatives of SunTrust Robinson Humphrey
additional parties the Strategic Alternatives Committee might
contact and instructed SunTrust Robinson Humphrey to contact
those parties to determine their interest in a possible
transaction with Emageon.
Throughout December 2007 and January 2008, the Strategic
Alternatives Committee, with the assistance of SunTrust Robinson
Humphrey, held ongoing discussions with six strategic parties,
including Company B and Company C, regarding a possible
transaction with Emageon. Company B and Company C continued to
conduct due diligence on Emageon during this time. SunTrust
Robinson Humphrey subsequently received a call from a financial
sponsor that had previously expressed an interest in Emageon,
Company D, in which representatives of Company D expressed a
renewed interest in discussing an acquisition of Emageon. In
early January, Company B informed the Strategic Alternatives
Committee that it was no longer interested in pursuing an
acquisition of Emageon. On January 22, 2008, Company C
submitted an indication of interest in which it offered to
purchase only Emageons cardiology line of business. After
reviewing SunTrust Robinson Humphreys analysis of Company
Cs proposal, the Strategic Alternatives Committee
determined Company Cs proposal undervalued Emageon and
that splitting Emageon into segments was not in the best
interest of Emageons stockholders.
On January 28, 2008, the Strategic Alternatives Committee
met and discussed the withdrawal of Company B from discussions
with Emageon and the continued interest of Company D in a
possible transaction. The Strategic Alternatives Committee
discussed the costs and benefits of an investment in Emageon by
one of its current institutional investors as well as the
feasibility of a stock buyback as a way to generate value for
Emageons stockholders. After extended discussion, the
Strategic Alternatives Committee determined that a possible sale
of Emageon represented the best way to enhance stockholder value
at this time. Accordingly, the Strategic Alternatives Committee
agreed to continue its current evaluation of strategic
alternatives, including the potential transaction with Company D.
Subsequent to the meeting on January 28, 2008, the
Strategic Alternatives Committee received an indication of
interest from Company D. The Strategic Alternatives Committee
reconvened on the morning of January 29, 2008 to discuss
the indication of interest received from Company D, a financial
sponsor. Mr. Jett and Mr. Carlisle were present at the
meeting but Mr. Jett was excluded from the discussion of
the indication of interest from Company D and was not provided a
copy for his review. The Strategic Alternatives Committee
instructed SunTrust Robinson Humphrey to obtain additional
information from Company D and to inquire as to the possibility
of including an equity component as part of the transaction so
as to allow Emageons current stockholders to retain an
interest in Emageon following an acquisition of Emageon by
Company D.
On February 11, 2008, the Strategic Alternatives Committee
met to discuss further Company Ds indication of interest.
Mr. Williamson expressed to the Strategic Alternatives
Committee that Company D was not willing to consider an equity
component but remained interested in pursuing an acquisition of
Emageon
26
for cash. The Strategic Alternatives Committee also noted that
Company D had requested Emageon to enter into an exclusivity
agreement before it continued its due diligence review. The
Strategic Alternatives Committee requested SunTrust Robinson
Humphrey to prepare an analysis of Company Ds offer and
report back to the Strategic Alternatives Committee.
On February 19, 2008, the Strategic Alternatives Committee
met and reviewed SunTrust Robinson Humphreys analysis of a
transaction with Company D, including the feasibility of
completing a transaction, the structure of the proposed
transaction, the timeframe for negotiating the transaction and
the potential value of the transaction to Emageons
stockholders. Following this discussion, the Strategic
Alternatives Committee instructed SunTrust Robinson Humphrey,
with the assistance of Bass, Berry & Sims, to
negotiate an exclusivity agreement on behalf of the Strategic
Alternatives Committee with Company D. Subsequent to this
meeting, on February 25, 2008, Emageon entered into a
45-day
exclusivity agreement with Company D.
Mr. Williamson, on behalf of the Strategic Alternatives
Committee, requested Bass, Berry & Sims to draft a
form of merger agreement for the Strategic Alternatives
Committees review. From February 25, 2008 through
March 20, 2008, Company D conducted an extensive due
diligence review of Emageon. On March 14, 2008, the
Strategic Alternatives Committee met and discussed the form of
merger agreement to be delivered to Company D. Following this
discussion, the Strategic Alternatives Committee instructed
Bass, Berry & Sims to deliver the agreement to
SunTrust Robinson Humphrey and convey the Strategic Alternatives
Committees authorization for its distribution to Company
D. The form of merger agreement was immediately delivered to
Company D.
On March 20, 2008, Company D communicated to SunTrust
Robinson Humphrey that based on its analysis of its due
diligence review and market conditions, it was no longer willing
to pursue a transaction within the range communicated in its
indication of interest and that it was significantly reducing
its offer price. The Strategic Alternatives Committee met on
March 24, 2008 and discussed Company Ds reduced offer
with representatives of SunTrust Robinson Humphrey. The
Strategic Alternatives Committee reviewed SunTrust Robinson
Humphreys analysis of the reduced offer and after extended
discussions determined that a sale of Emageon at the reduced
offer price would undervalue Emageon and would not provide
adequate value to Emageons stockholders. The Strategic
Alternatives Committee instructed representatives of SunTrust
Robinson Humphrey to contact Company D to confirm that the
Strategic Alternatives Committee would no longer consider such a
reduced offer and requested the termination of the exclusivity
arrangement between Emageon and Company D, which exclusivity
agreement was subsequently terminated. The Strategic
Alternatives Committee authorized SunTrust Robinson Humphrey to
contact Company C to determine whether it had any interest in
discussing an acquisition of Emageon as a whole as opposed to
only the cardiology segment of Emageons business. Company
C did not express an interest in an acquisition of Emageon as a
whole.
On April 18, 2008, the Strategic Alternatives Committee met
and discussed the strategic alternatives evaluation process with
SunTrust Robinson Humphrey and reviewed managements
observations regarding the impact of the process on
Emageons ongoing business operations. Noting the lack of
executable offers received as a result of the strategic
alternatives process despite the substantial number of parties
contacted and the disruption of Emageons operations that
would result from continuing the process, the Strategic
Alternatives Committee determined it was in the best interest of
Emageon and its stockholders to conclude the evaluation of
strategic alternatives and to take such steps as the full board
determined were necessary for Emageon to continue operating on
an independent basis. The Board of Directors received, discussed
and accepted this recommendation at its regularly scheduled
meeting on April 29, 2008.
On May 9, 2008, in connection with Emageons annual
stockholders meeting, Oliver Press filed with the SEC a
preliminary proxy statement seeking stockholder support for
three directors nominated by Oliver Press to Emageons
Board of Directors at Emageons annual stockholder meeting
scheduled for June 23, 2008. Over the ensuing weeks,
Emageon engaged in a proxy contest with Oliver Press. On
June 22, 2008, Emageon entered into an agreement with
Mr. Jett and representatives of Oliver Press terminating
the proxy contest with respect to the election of directors at
Emageons annual meeting. Under the terms of the agreement,
the size of Emageons Board of Directors was ultimately
expanded to nine members, Mr. Jett and Douglas D. French
tendered their resignations from the Board of Directors and
Augustus K. Oliver and Benner Ulrich, principals
27
of Oliver Press, were appointed to the Board of Directors. In
addition, the Board of Directors agreed to appoint Bradley S.
Karro to the Board of Directors, subject to the Boards
review of Mr. Karros qualifications and a background
check of Mr. Karro. Mr. Karro was appointed to the
Board of Directors on July 29, 2008. Further,
Mr. Ulrich and, upon his subsequent appointment to the
Board of Directors, Mr. Karro were added to the Strategic
Alternatives Committee by the Board of Directors. The settlement
agreement also contemplated that the Strategic Alternatives
Committee would be reconstituted and would recommence its
evaluation of strategic alternatives and that it would meet on
June 23, 2008 to contemplate the engagement of an
additional (or alternative) financial advisor and develop a
schedule of activities in connection with its evaluation of
strategic alternatives.
On June 23, 2008, the reconstituted Committee (consisting
of four directors Mr. Ulrich, Mr. Clark,
Mr. Goad and Mr. Williamson) met by telephone.
Mr. Oliver and Mr. Jett participated in the meeting at
the Strategic Alternatives Committees request. At this
meeting, the Strategic Alternatives Committee discussed the
activities of the Strategic Alternatives Committee since its
inception in April 2007, the viability of recommencing the
investigation of strategic alternatives and the proposed
timeline for a potential process. The Strategic Alternatives
Committee also discussed with Mr. Jett managements
views of the potential impact of such a process on Emageon and
its relationships with its employees and customers.
Mr. Ulrich inquired about the possibility of separating the
cardiology and imaging businesses of Emageon both for purposes
of evaluating strategic alternatives and operationally, and
Mr. Jett agreed to provide financial and other information
to the Strategic Alternatives Committee to assist in analyzing
this possibility. In addition, the Strategic Alternatives
Committee discussed its engagement of SunTrust Robinson Humphrey
and the possible benefits and risks of engaging a new financial
advisor. In this regard, Mr. Ulrich and Mr. Oliver
agreed to contact certain firms the Strategic Alternatives
Committee might consider and report to the Strategic
Alternatives Committee the following day regarding these
preliminary conversations.
The Strategic Alternatives Committee met again on June 24,
2008. Mr. Ulrich stated that he and Mr. Oliver had
engaged in conversations with SunTrust Robinson Humphrey as well
as three other investment banks, including Jefferies &
Company, Inc., which we refer to as Jefferies, regarding their
interest in working with the Strategic Alternatives Committee.
Mr. Ulrich stated that Jefferies had expressed a desire to
work with the Strategic Alternatives Committee. The Strategic
Alternatives Committee discussed further the process for
evaluating strategic alternatives, including conducting a
controlled process as had been done previously or conducting a
broader public auction within a timeframe that would limit the
potential risk to Emageons ability to operate but that
would allow Emageon to analyze whether a buyer might be found
for Emageon at a valuation beneficial to Emageons
stockholders. The Strategic Alternatives Committee agreed to
continue discussions with Jefferies regarding a possible
engagement and instructed Mr. Jett to coordinate with
Jefferies regarding a visit to Emageons headquarters in
Birmingham, Alabama to conduct due diligence. The Strategic
Alternatives Committee also instructed Mr. Jett to prepare
an analysis regarding managements views of Emageons
continuing viability as an independent public company. Also at
this meeting, the Strategic Alternatives Committee agreed to
appoint Mr. Ulrich as Chair of the Strategic Alternatives
Committee.
On June 30, 2008, the Strategic Alternatives Committee met
to discuss the possible engagement of a financial advisor as
well as certain inquiries Mr. Jett had received regarding
Emageons interest in a possible transaction. The Strategic
Alternatives Committee discussed with Mr. Jett
conversations he had had with one financial sponsor, referred to
herein as Company E, and two strategic parties,
Company F and Health Systems Solutions.
Mr. Jett stated that each of these parties had contacted
him to express an interest in discussing a possible acquisition
of Emageon. Mr. Oliver stated that another financial
sponsor, referred to herein as Company G, had
contacted him to express an interest in acquiring Emageon. The
Strategic Alternatives Committee determined to obtain a final
proposal from Jefferies and to meet again on
July 2, 2008.
On July 2, 2008, the Strategic Alternatives Committee met
by telephone with representatives of Jefferies who made a
presentation to the Strategic Alternatives Committee regarding,
among other matters, the Strategic Alternatives Committees
strategic alternatives process, including parties Jefferies
thought the Strategic Alternatives Committee should approach,
the proposed timeline for completing a possible transaction and
Jefferies proposed fee structure for serving as financial
advisor to the Strategic Alternatives Committee.
28
The Strategic Alternatives Committee met again on July 3,
2008 to discuss the engagement of a financial advisor, including
the possible engagement of Jefferies and the role of SunTrust
Robinson Humphrey going forward. After discussion, the Strategic
Alternatives Committee determined it was in the best interest of
Emageon and its stockholders to engage Jefferies as its lead
financial advisor and authorized Mr. Ulrich, working with
Bass, Berry & Sims, to negotiate and enter into an
engagement letter with Jefferies and an amendment to the
engagement letter with SunTrust Robinson Humphrey reflecting
SunTrust Robinson Humphreys revised role and including
SunTrust Robinson Humphreys willingness to, if
appropriate, evaluate and render an opinion as to the fairness,
from a financial point of view, of a selected transaction.
On July 11, 2008, the Strategic Alternatives Committee
entered into an engagement letter with Jefferies pursuant to
which Jefferies agreed to serve as the Strategic Alternatives
Committees lead financial advisor, and Emageon issued a
press release announcing that the Strategic Alternatives
Committee had retained Jefferies to assist it in its evaluation
of strategic alternatives available to Emageon. Also on
July 11, 2008, the Strategic Alternatives Committee entered
into an amendment to its engagement letter with SunTrust
Robinson Humphrey whereby SunTrust Robinson Humphrey agreed to a
reduction in its fee and agreed to, if appropriate, evaluate and
provide its opinion as to the fairness, from a financial point
of view, of a selected transaction. Mr. Ulrich, on behalf
of the Strategic Alternatives Committee, requested that
Jefferies begin contacting the parties discussed at the
July 2, 2008 meeting, including, among others, Company E,
Company F, Company G and HSS, and report to the Strategic
Alternatives Committee regarding its preliminary conversations
and the status of its due diligence investigation of Emageon.
From July 11, 2008 to September 12, 2008, the
Strategic Alternatives Committee, with Jefferies
assistance, contacted 47 parties, including 17 strategic parties
and 30 financial sponsors, most of which had not previously been
contacted by the Strategic Alternatives Committee. An extensive
financial information package was delivered to 27 parties with
which Emageon had executed confidentiality agreements. The
process was structured to solicit interest, provide diligence
materials and receive indications of interest on or about
September 8, 2008.
The Strategic Alternatives Committee met on July 22, 2008
and discussed with representatives of Jefferies its preliminary
conversations with various parties. The Strategic Alternatives
Committee also discussed with Mr. Jett his recent
conversations with representatives of Company F who had
discussed a possible valuation, which represented a discount to
Emageons then current market price. Mr. Jett stated
that Company F requested to negotiate on an exclusive basis with
Emageon. After discussion, the Strategic Alternatives Committee
determined that the valuation proposed by Company F was
inadequate and that the Strategic Alternatives Committee should
continue with its evaluation of other strategic alternatives.
On July 28, 2008, Company E submitted a preliminary
indication of interest to the Strategic Alternatives Committee
proposing to purchase all of the outstanding shares of common
stock of Emageon. The proposal indicated that Company E was
unwilling to move forward in discussions with Emageon without
Emageon agreeing to either negotiate exclusively with Company E
through September 8, 2008 or reimburse Company Es
expenses through September 8, 2008, if Emageon was
unwilling to enter into an exclusive negotiating arrangement.
The Strategic Alternatives Committee met on July 29, 2008
and discussed the proposal made by Company E as well as the
status of discussions with various strategic parties and
financial sponsors. Representatives of Jefferies reported to the
Strategic Alternatives Committee that in addition to Company E,
Company F continued to indicate an interest in a transaction
with Emageon. The Strategic Alternatives Committee also
discussed several parties with which Jefferies had discussed a
potential transaction but which had subsequently indicated they
were not interested. The Strategic Alternatives Committee noted
that Company E had done a substantial amount of due diligence
regarding Emageon and had expressed the most interest of any of
the parties with which the Strategic Alternatives Committee was
currently engaged in discussions. Following discussion regarding
Company E and the ongoing diligence being conducted by several
other parties who had indicated an interest in Emageon, the
Strategic Alternatives Committee determined it was not prudent
to negotiate exclusively with Company E but that Company
Es continued participation in the process was important.
Accordingly, the Strategic Alternatives Committee instructed
Mr. Jett, along with Mr. Ulrich and
29
representatives of Jefferies and Bass, Berry & Sims to
engage in discussions with representatives of Company E
regarding an appropriate expense reimbursement arrangement.
During the following week, Mr. Jett, Mr. Ulrich and
representatives of Jefferies and Bass, Berry & Sims
had several phone conversations with representatives of Company
E and Company Es outside legal counsel in which Company E
reiterated its interest in acquiring Emageon at the price range
indicated in its indication of interest, but expressed that it
would not move forward in discussions with Emageon without
either entering into an exclusivity agreement or an expense
reimbursement arrangement. The Strategic Alternatives Committee,
with the assistance of Bass, Berry & Sims, began
negotiating an expense reimbursement agreement with Company E
under which Emageon would agree to reimburse Company E for
certain third party expenses incurred in connection with its
investigation of Emageon and negotiation of a transaction with
Emageon through September 8, 2008, subject to an agreed
upon maximum amount. Additionally, the expense reimbursement was
only payable if Emageon discontinued discussions with Company E
prior to September 8, 2008, or entered into a separate
transaction not involving Company E within one year.
On August 5, 2008, the Strategic Alternatives Committee met
and discussed with representatives of Jefferies the status of
its discussions with various parties and considered further the
proposed expense reimbursement agreement with Company E. The
Strategic Alternatives Committee discussed managements
views regarding certain financial and operational circumstances
surrounding Emageon, including Emageons declining revenue
growth and employee attrition as well as the impact of declining
conditions in the credit market on Emageon and its customers.
After discussing the interest in Emageon indicated by Company E
and their offer range representing a premium to the then current
market price of Emageons common stock, as well as the
uncertainty of the level of interest of other parties contacted,
the Strategic Alternatives Committee determined it was in the
best interest of Emageon and its stockholders to enter into the
expense reimbursement agreement with Company E in order to
ensure Company Es continued participation in the process.
Accordingly, the Strategic Alternatives Committee authorized
entering into the expense reimbursement agreement with Company E.
During the week following the Strategic Alternatives
Committees August 5, 2008 meeting, representatives of
Jefferies discussed regularly with representatives of Company E
the status of Company Es diligence review of Emageon.
Mr. Jett also had various conversations with
representatives of Company E regarding Emageons business
operations. Jefferies continued to discuss with a number of
other parties their possible interest in a transaction with
Emageon and worked with Emageons management to prepare an
extensive financial information package for distribution to
parties participating in the process.
The Strategic Alternatives Committee met on August 12, 2008
and discussed with representatives of Jefferies and
Mr. Jett the status of Company Es due diligence
review of Emageon as well as the status of the financial
information package to be delivered to various other parties
that had expressed interest in a transaction. The Strategic
Alternatives Committee discussed the timing of the distribution
of a proposed merger agreement to Company E and the proposed
timing for requiring other parties to submit indications of
interest. The Strategic Alternatives Committee discussed with
representatives of Bass, Berry & Sims the Strategic
Alternatives Committees fiduciary duties, including the
Strategic Alternatives Committee members duties of care
and loyalty and the importance of their independence on behalf
of Emageons stockholders. The Strategic Alternatives
Committee and representatives of Bass, Berry & Sims
also discussed the continued involvement of Mr. Jett in the
Strategic Alternatives Committees discussions with various
parties, including Company E. The Strategic Alternatives
Committee discussed Mr. Jetts knowledge of Emageon
and its industry and the various parties involved in discussions
with the Strategic Alternatives Committee, which was helpful to
the Strategic Alternatives Committee in its analysis of
strategic alternatives. The Strategic Alternatives Committee
noted Mr. Jetts desire to act in the best interest of
Emageons stockholders and that his actions throughout the
strategic alternatives evaluation process had been consistent
with this goal. The Strategic Alternatives Committee
specifically instructed Mr. Jett that no discussions were
to take place regarding any arrangements for members of the
management team in connection with a potential transaction.
Mr. Jett confirmed such understanding and stated that no
such conversations had taken place. Finally, the Strategic
Alternatives Committee instructed representatives of Bass,
Berry & Sims to prepare a form of merger
30
agreement for the Strategic Alternatives Committees review
to be distributed with a bid package to be delivered to
potential buyers.
From August 5, 2008 to August 21, 2008,
representatives of Company E and Company Es lenders
continued to conduct a due diligence review of Emageon and held
several meetings with members of Emageons management.
Jefferies engaged in several discussions with representatives of
Company E regarding the status of Company Es due diligence
investigation of Emageon. During these discussions, Company E
indicated that it had concerns its lenders might not be willing
to provide adequate financing to support a price in the range
proposed by Company E in its initial indication of interest.
On August 19, 2008, the Strategic Alternatives Committee
met to discuss the status of its discussions with various
parties, including Company E. Representatives of Bass,
Berry & Sims advised the Strategic Alternatives
Committee concerning its fiduciary duties, including the
Strategic Alternatives Committee members duties of care
and loyalty and the importance that they act independently on
behalf of Emageons stockholders. Representatives of
Jefferies stated that a financial information package regarding
Emageon had been delivered to 27 parties currently engaged in
the process. The Strategic Alternatives Committee discussed with
representatives of Jefferies Company Es diligence process
and Company Es desire to preempt the bid process by
seeking to negotiate a definitive transaction by
September 8, 2008. The Strategic Alternatives Committee
reviewed the proposed bid letter to be distributed to parties
interested in submitting a bid for Emageon and instructed
Jefferies to deliver the bid letter to such parties requesting
indications of interest by no later than September 8, 2008.
The Strategic Alternatives Committee also reviewed with
representatives of Bass, Barry & Sims the form of
merger agreement to be sent to Company E and, at the appropriate
time, to other potential bidders in the process. The Strategic
Alternatives Committee agreed to wait to distribute the merger
agreement to Company E until it confirmed it would be able to
obtain financing.
On August 21, 2008, representatives of Jefferies spoke with
representatives of Company E who stated they were unable to
provide guidance regarding Company Es ability to obtain
adequate financing in connection with its offer to acquire
Emageon at the price range indicated in its indication of
interest. Company E agreed to cease incurring reimbursable
expenses under the expense reimbursement agreement until it had
confirmation from its lenders regarding financing.
The Strategic Alternatives Committee met on August 26, 2008
and discussed the status of discussions with various parties in
the process. The Strategic Alternatives Committee also discussed
with representatives of Jefferies Company Es concerns
about its financing. Representatives of Jefferies informed the
Strategic Alternatives Committee that one strategic party had
expressed interest in discussing the Strategic Alternatives
Committees thoughts on an offer that included the
potential buyers stock as part of the consideration and
had requested an opportunity to meet with the Strategic
Alternatives Committee. After further discussion, the Strategic
Alternatives Committee agreed to meet by teleconference with
representatives of this strategic party and asked
representatives of Jefferies to coordinate a time for a meeting,
which meeting was held on September 9, 2008. The Strategic
Alternatives Committee also discussed with Mr. Jett various
operational matters of Emageon and considered managements
views regarding the impact of the ongoing process on Emageon.
From August 26, 2008 to September 8, 2008,
representatives of Jefferies held a number of conversations with
various parties to which it had delivered the bid letter and a
number of parties continued to conduct due diligence on Emageon.
In addition, Mr. Jett and other members of management
addressed various questions regarding the business operations of
Emageon and met either in person or by phone with various
parties in the process.
On September 8, 2008, the Strategic Alternatives Committee
received indications of interest from six parties, one of which
was HSS.
On September 9, 2008, the Strategic Alternatives Committee
held a meeting to discuss the indications of interest with
representatives of Jefferies, including price ranges and the
qualifications of each party submitting a bid. The Strategic
Alternatives Committee also discussed with Jefferies other
parties expected to submit an indication of interest, including,
among others, Company E and Company G, based on discussions
Jefferies
31
had held with such parties. Representatives of Bass,
Berry & Sims reviewed with the Strategic Alternatives
Committee members their fiduciary duties in evaluating the
proposals, negotiating a transaction for the benefit of
Emageons stockholders and making a recommendation to the
full Board of Directors. The Strategic Alternatives Committee
instructed Jefferies to prepare an analysis of each of the
indications received and to deliver the analysis to the
Strategic Alternatives Committee as soon as possible.
Over the next two days, the Strategic Alternatives Committee
received six additional indications of interest, including from,
among others, Company E, which confirmed that it expected to be
able to obtain financing for the transaction, Company F and
Company G. Jefferies prepared an analysis of each of the
indications of interest received and distributed the analysis to
the Strategic Alternatives Committee for its review. In total,
the Strategic Alternatives Committee received indications of
interest from 12 parties, including five strategic parties and
seven financial sponsors. The preliminary non-binding
indications of interest proposed valuations for Emageons
common stock ranging from $2.00 per share to $3.75 per share,
subject to various qualifications.
On September 12, 2008, the Strategic Alternatives Committee
met and reviewed Jefferies analysis of the 12 indications
of interest received, including the price ranges indicated, the
form of consideration and the qualifications of each party
submitting a bid. At the Strategic Alternatives Committees
request, Mr. Jett and Mr. Carlisle participated in the
meeting and provided the Strategic Alternatives Committee with
managements views on each party, including the amount of
diligence each had undertaken and their views as to the
feasibility of completing a definitive transaction with each
party. The Strategic Alternatives Committee reviewed
Mr. Jetts analysis of Emageons operational and
financial condition and noted that a sale of Emageon continued
to be in the best interest of Emageons stockholders.
Mr. Jett and Mr. Carlisle were then excused from the
meeting, and the Strategic Alternatives Committee met in
executive session with representatives of Bass,
Berry & Sims and Jefferies. The Strategic Alternatives
Committee members discussed with representatives of Bass,
Berry & Sims their fiduciary duties in connection with
the evaluation of the indications of interest received and the
possible negotiation of a definitive agreement with such
parties. The Strategic Alternatives Committee discussed the
number of parties with which it should continue discussions
based on the valuations indicated by the parties and the ability
of each to complete a transaction within the next three to four
weeks, which was considered advisable in order to limit the
distraction caused by the process for management and employees
of Emageon. Based on this discussion, the Strategic Alternatives
Committee agreed that Company E and HSS should remain in the
process based on their respective valuations of Emageon, their
knowledge of Emageons industry and the substantial amount
of diligence conducted by each. The Strategic Alternatives
Committee then discussed in detail four other parties, all
financial sponsors, which had submitted bids ranging from $2.40
to $3.75 per share in cash, including each partys ability
to complete a transaction within the timeframe contemplated by
the Strategic Alternatives Committee. After this discussion, the
Strategic Alternatives Committee instructed Jefferies to contact
each of these parties to determine their willingness to continue
in the process without an exclusivity agreement and whether the
parties would be able to submit a formal bid, that would include
comments to the form of merger agreement, to the Strategic
Alternatives Committee on or before October 3, 2008. The
parties were contacted in an order based primarily on the
valuation range submitted, with the parties indicating a higher
valuation being given the first opportunity to continue in the
process.
On September 15, 2008, the Strategic Alternatives Committee
met and discussed the status of conversations with the four
financial sponsors discussed at the Strategic Alternatives
Committees meeting on September 12, 2008.
Representatives of Jefferies indicated they had contacted the
two parties submitting the highest valuation range and were
confirming whether these parties were willing to continue in the
process. The Strategic Alternatives Committee noted that, given
the valuation ranges proposed by these two parties, Jefferies
should determine these parties willingness to continue in
the process before approaching the other two financial sponsors,
one of which was Company G. However, if neither of the parties
were willing to continue in the process, Jefferies should
contact Company G and the other party discussed at the
September 12, 2008 Committee meeting in an effort to have
at least three parties in total (including Company E and HSS)
continue in the process. The Strategic Alternatives Committee
then instructed Jefferies to send the bid package
32
to HSS and Company E with instructions that formal bids were due
to the Strategic Alternatives Committee on or before
October 3, 2008.
Over the next two days the first three of the four parties
Jefferies contacted subsequent to the September 12, 2008
Committee meeting informed Jefferies they would not continue to
participate in the process. Representatives of Jefferies
discussed these conversations with Mr. Ulrich, who, on
behalf of the Strategic Alternatives Committee, instructed
Jefferies to contact Company G. On September 17, 2008,
representatives of Company G indicated to Jefferies they would
be willing to continue in the process without exclusivity and
that they could deliver a formal bid to the Strategic
Alternatives Committee on or before October 3, 2008.
Accordingly, at the instruction of Mr. Ulrich, on behalf of
the Strategic Alternatives Committee, a bid package was
delivered to Company G.
Between September 17, 2008 and September 29, 2008,
representatives of Jefferies and Emageons management
responded to a number of requests from and held informational
meetings with representatives of each of Company E, Company G
and HSS. In addition, Company F contacted the Strategic
Alternatives Committee and requested the opportunity to enter a
formal bid. Company F was told that the valuation submitted in
its indication of interest was substantially below the valuation
ranges received from other parties. Company F stated that it
believed it would be able to increase its offer price. Given the
substantial due diligence done by Company F and Company Fs
knowledge of Emageons industry, the Strategic Alternatives
Committee agreed to send Company F a bid package.
On September 29, 2008, the full Board of Directors met to
discuss the strategic alternatives process with the Strategic
Alternatives Committee. Representatives of Jefferies and Bass,
Berry & Sims as well as Mr. Jett and
Mr. Carlisle also participated in the meeting. At this
meeting, members of the Strategic Alternatives Committee
reviewed with the full Board of Directors the process conducted
by the Strategic Alternatives Committee, the indication of
interests received, the four parties from whom formal bids were
expected, the process for selecting these four parties and the
October 3, 2008 deadline. The Board of Directors discussed
with the Strategic Alternatives Committee and representatives of
Jefferies the qualifications of each of the four parties and the
background of each. The Board of Directors discussed with
Mr. Jett managements perspective on the parties and
reviewed Mr. Jetts analysis of Emageons
financial and operational condition as well as managements
support of pursuing a transaction in the time frame recommended
by the Strategic Alternatives Committee. Following the Board
meeting, the Strategic Alternatives Committee met with
representatives of Jefferies and Bass, Berry & Sims to
discuss further the process and conversations Jefferies and
management continued to have with the potential bidders
regarding the process and Emageons operations.
During the week of September 29, 2008, the Strategic
Alternatives Committee received preliminary markups of the form
of merger agreement from each of Company E, Company G and HSS.
The Strategic Alternatives Committee, with the assistance of
Bass, Berry & Sims, reviewed and held discussions with
legal counsel for each of these parties regarding the changes to
the merger agreement proposed by each party and delivered
revised drafts of the merger agreement to each party.
On October 3, 2008, Emageon received final bids, including
markups of the form of merger agreement, from Company F, Company
G and HSS. Company F proposed to purchase Emageon for $2.20 per
share, Company G proposed $2.45 per share, and HSS proposed
$3.00 per share, each in all cash transactions. Company E
informed Jefferies that it would not be submitting a bid.
On October 4, 2008, the Strategic Alternatives Committee
met for the primary purpose of discussing the bids received.
Representatives of Jefferies, Bass, Berry & Sims and
SunTrust Robinson Humphrey participated in the meeting. The
Strategic Alternatives Committee members discussed with
representatives of Bass, Berry & Sims their fiduciary
duties in connection with the Strategic Alternatives
Committees role in considering whether to proceed with a
possible sale of Emageon and the Strategic Alternatives
Committees choice and recommendation of a buyer to the
full Board of Directors of Emageon. The Strategic Alternatives
Committee reviewed Jefferies presentation regarding the
bids received and discussed with representatives of Bass,
Berry & Sims the key terms, including terms relating
to the conditionality of the potential acquirors
obligation to consummate the merger, Emageons fiduciary
out and the deal protection terms, the expected timing of their
closing and the remedies available to each party for a breach of
the merger agreement, as well as issues to be
33
negotiated in the merger agreement markups submitted by each
party. The Strategic Alternatives Committee discussed with
representatives of SunTrust Robinson Humphrey its preliminary
analysis of the bids received. After extended discussion, the
Strategic Alternatives Committee determined to focus its
attention on reaching a definitive agreement with HSS, primarily
due to the superior value proposed and representations regarding
the availability of its financing, while maintaining dialogue
with Company F and Company G to ensure an alternative
transaction in the event HSS did not execute a definitive
agreement.
From October 4, 2008 through October 9, 2008, the
Strategic Alternatives Committee and HSS and their respective
legal and financial advisors engaged in extensive negotiations
regarding open issues in the merger agreement. At the Strategic
Alternatives Committees request, in light of financing
risks in the current environment, HSS was requested to make a
$5.0 million deposit at signing to be held in escrow as
unliquidated damages in the event its financing was not
available at closing or HSS otherwise intentionally breached the
merger agreement. At this point, however, HSS was not willing to
make the deposit a non-exclusive remedy or have the deposit
payable upon its intentional breach of the merger agreement. The
parties also negotiated the terms of a voting agreement to be
executed by Oliver Press and Emageons directors and
executive officers. HSS also continued to negotiate a purchase
agreement with an affiliate of its majority stockholder
regarding the purchase of additional convertible debentures in
HSS for purposes of funding HSSs acquisition of Emageon
and additional working capital following the transaction.
Separately, HSS negotiated the principal terms of an agreement
with Keith Stahlhut, Emageons acting Principal Operating
Officer, pursuant to which Mr. Stahlhut would be employed
by HSS following the merger.
The Strategic Alternatives Committee met on October 9, 2008
primarily to consider its recommendation to the Board of
Directors regarding the sale of Emageon to HSS. Representatives
of Bass, Berry & Sims, Jefferies, SunTrust Robinson
Humphrey and Emageons management, including Mr. Jett,
participated in the meeting at the Strategic Alternatives
Committees request. Representatives of Bass,
Berry & Sims reviewed with the Strategic Alternatives
Committee members their fiduciary duties in connection with
their consideration of whether to recommend a possible sale of
Emageon to the Board of Directors. The Strategic Alternatives
Committee reviewed a presentation by management regarding
Emageons operations and financial results for the third
quarter of 2008 and Emageons projected financial results
for the year ending December 31, 2008. Mr. Jett
discussed with the Strategic Alternatives Committee
managements continued belief that the sale of Emageon in
the near term was in the best interest of Emageon and its
stockholders. The Strategic Alternatives Committee discussed
with representatives of Jefferies the Strategic Alternatives
Committees evaluation of strategic alternatives, including
the parties contacted since July 2008 and the process for
qualifying these parties to become potential buyers of Emageon,
as well as the valuation of the bid proposals received from HSS,
Company F and Company G. The Strategic Alternatives Committee
reviewed a detailed presentation from SunTrust Robinson
Humphrey, including all of the analyses that would ultimately
form the basis for its fairness opinion. SunTrust Robinson
Humphreys report was extensive and provided an evaluation
of Emageon from a number of perspectives, including a reference
companies analysis, a reference transactions analysis, a
discounted cash flows analysis and a premiums paid analysis. The
Strategic Alternatives Committee reviewed the assumptions
utilized by SunTrust Robinson Humphrey in connection with each
analysis. Representatives of SunTrust Robinson Humphrey
articulated to the Strategic Alternatives Committee that
SunTrust Robinson Humphrey was prepared to render its opinion to
the Strategic Alternatives Committee that the consideration to
be received by Emageons stockholders in the proposed
transaction with HSS was fair, from a financial point of view,
to such holders. The Strategic Alternatives Committee reviewed
with representatives of Bass, Berry & Sims the terms
of the proposed merger agreement with HSS, including the
material open items and the timeline for finalizing the merger
agreement. Mr. Jett then left the meeting and after
extended discussion, the Strategic Alternatives Committee agreed
that the sale of Emageon to HSS was the best strategic
alternative reasonably available to Emageon and unanimously
determined to recommend to the Board of Directors a sale of
Emageon to HSS, pursuant to the transaction terms discussed at
the meeting.
Following the Strategic Alternatives Committee meeting on
October 9, 2008, the full Board of Directors held a special
meeting to consider the recommendation of the Strategic
Alternatives Committee regarding the sale of Emageon to HSS.
Representatives of Bass, Berry & Sims, Jefferies,
SunTrust Robinson Humphrey and Emageons management,
including Mr. Jett and Mr. Carlisle, participated in
the meeting at the request of the
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Board of Directors. Representatives of Bass, Berry &
Sims reviewed with the directors their fiduciary duties in
connection with their consideration of whether to proceed with a
possible sale of Emageon. The Board of Directors reviewed a
presentation by management regarding Emageons operations
and financial results for the third quarter of 2008 and
Emageons projected financial results for the year ending
December 31, 2008. Mr. Jett reiterated
managements continued belief that the sale of Emageon in
the near term was in the best interest of Emageon and its
stockholders. Next, at the request of Mr. Williamson,
Mr. Ulrich and representatives of Jefferies led a
discussion regarding the Strategic Alternatives Committees
evaluation of strategic alternatives, including the parties
contacted since July 2008, the process for qualifying these
parties to become potential buyers of Emageon, the role of the
Strategic Alternatives Committees financial and legal
advisors in the process and the potential transaction with HSS
recommended by the Strategic Alternatives Committee and being
considered by the Board of Directors. The Board of Directors
reviewed a detailed presentation from SunTrust Robinson
Humphrey, including all of the analyses that would ultimately
form the basis for its fairness opinion. The Board of Directors
reviewed the assumptions utilized by SunTrust Robinson Humphrey
in connection with its analysis. Representatives of SunTrust
Robinson Humphrey articulated to the Board of Directors that the
transaction with HSS offered the highest value reasonably
available and that SunTrust Robinson Humphrey was prepared to
render its opinion to the Strategic Alternatives Committee that
the consideration to be received by Emageons stockholders
in the proposed transaction with HSS was fair, from a financial
point of view, to such holders. The Board of Directors reviewed
with representatives of Bass, Berry & Sims the terms
of the proposed merger agreement with HSS, including the
material open items (including whether HSS would be willing to
fund a $5 million escrow fund as unliquidated damages in
case it failed to secure financing for the transaction or HSS
otherwise intentionally breached the merger agreement) and the
timeline for finalizing the merger agreement. Each member of the
Board of Directors indicated his or her willingness to sign the
form of voting agreement in support of the proposed transaction
with HSS, as did Mr. Ulrich and Mr. Oliver on behalf
of Oliver Press. The Strategic Alternatives Committee confirmed
its recommendation and belief that the sale to HSS was the best
strategic alternative reasonably available to Emageon. At this
time, the Strategic Alternatives Committee members excused
themselves from the meeting to allow the remaining directors to
address any concerns and questions to the financial and legal
advisors and Mr. Jett and Mr. Carlisle. Thereafter,
upon the Strategic Alternatives Committee members rejoining the
meeting, Bass, Berry & Sims reviewed the terms of the
proposed resolutions relating to the proposed merger and
responded to questions. After extended discussions, the Board of
Directors, in part based on the recommendation of the Strategic
Alternatives Committee and the review of SunTrust Robinson
Humphreys fairness presentation, unanimously approved the
merger agreement, the voting agreement and the deposit
agreement, subject to satisfactory resolution of the final terms
of the deposit agreement in the manner discussed at the meeting.
On October 10, 2008 and October 11, 2008, the
Strategic Alternatives Committee and HSS and their respective
financial and legal advisors continued to negotiate the
remaining outstanding issues in the various transaction
documents and to finalize Emageons disclosure schedules.
On the morning of October 12, 2008, a representative of HSS
contacted Jefferies and stated HSS and its financing sources
were concerned about the recent turbulence in the credit markets
and the outlook of the global economy and reduced the offer
price from $3.00 per share to $2.75 per share. Following further
discussion, HSS revised its reduced purchase price from $2.75
per share to $2.85 per share. In addition, HSS conceded to the
demands of Emageon regarding the $5.0 million deposit
agreement, primarily that it include payment to Emageon for
HSSs intentional breach of the merger agreement and that
the deposit payment would be a non-exclusive remedy when
payable, and not liquidated damages.
Later on October 12, 2008, the Board of Directors held a
special meeting to discuss the revised offer price proposed by
HSS. Mr. Jett and representatives of SunTrust Robinson
Humphrey, Jefferies and Bass, Berry & Sims
participated in the meeting at the Board of Directors
request. The Board of Directors reviewed the revised purchase
price proposed by HSS and discussed the reasons given for the
reduction. Jefferies also confirmed that based on recent
discussions with Company F and Company G that such parties would
not be able to offer a similar value to HSSs revised
proposal. SunTrust Robinson Humphrey provided an update of its
analyses presented on October 9, 2008 in light of the
reduced price, and confirmed that the reduced offer
35
price did not result in any meaningful changes to its financial
analyses. Representatives of SunTrust Robinson Humphrey
expressed their oral opinion that the merger consideration to be
received by Emageons stockholders was fair to such
stockholders from a financial point of view, which opinion was
subsequently confirmed in writing to the Strategic Alternatives
Committee. The full text of the written opinion of SunTrust
Robinson Humphrey, which set forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with such opinions, is attached
as Annex B to this proxy statement. The Strategic
Alternatives Committee reaffirmed its recommendation to enter
into the merger agreement. Following extended discussions, the
Board of Directors, in part based on the recommendation of the
Strategic Alternatives Committee and the review of SunTrust
Robinson Humphreys fairness presentation, unanimously
approved the merger agreement, the voting agreement and the
deposit agreement.
The merger agreement and the related transaction documents were
finalized and executed by the parties on October 13, 2008,
and Emageon and HSS issued a joint press release publicly
announcing the proposed merger.
Reasons
for the Merger and Recommendation of Emageons Board of
Directors
In the course of reaching its decision to approve the merger
agreement and to recommend that Emageon stockholders vote to
adopt the merger agreement, our Board of Directors consulted
with our senior management and the independent financial
advisors and legal counsel to the Strategic Alternatives
Committee and Emageon, reviewed a significant amount of
information and considered a number of factors, including, among
others, the following potentially positive factors in support of
the merger:
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the results of the extensive investigation of strategic
alternatives that was conducted by the Strategic Alternatives
Committee of our Board of Directors with the assistance of its
financial advisors, Jefferies and SunTrust Robinson Humphrey,
which involved, during the time following the settlement of the
proxy contest regarding the election of directors at our 2008
annual meeting of stockholders, contacting approximately 47
parties to determine their interest in acquiring Emageon,
entering into confidentiality agreements with 27 parties,
receiving 12 preliminary indications of interest for the
acquisition of Emageon, and ultimately the submission of
HSSs definitive proposal to acquire Emageon;
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the possible alternatives to the sale of Emageon, including
continuing to operate Emageon on an independent basis; the risks
and uncertainties associated with such alternatives, including
the uncertain returns that would be created by continuing to
execute our current strategic plan compared to the certainty of
realizing in cash a fair value for our stockholders in the
merger; and the Strategic Alternatives Committee and our Board
of Directors resulting belief that no other alternative
reasonably available to Emageon and its stockholders would
provide greater value and certainty to stockholders in the
foreseeable future;
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the increasing level of uncertainty associated with the
continued operation of our business resulting from the mature
condition of our primary market for sales of our picture
archiving and communications radiology systems, or PACS, and the
consequent pressure on revenue growth; slower overall market
demand for medical imaging software, hardware, and support
services; high penetration of our primary radiology market and
the related delay in the timing of customer software replacement
cycles; and disruption of our base of existing and potential
customers as a result of our investigation of strategic
alternatives;
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the fact that the per share merger consideration represented the
highest price received in the final bidding process and an
approximate 27.0% premium over the closing price of Emageon
common stock for the last trading date prior to the announcement
of the merger, an approximate 26.0% premium over the average
closing price over the three months preceding the execution of
the merger agreement, and an approximate 16.2% premium over the
average closing price since January 1, 2008;
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the fact that the merger consideration will be paid in cash,
which provides certainty and immediate value to our stockholders;
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the financial presentation and oral opinion of SunTrust Robinson
Humphrey rendered to the Strategic Alternatives Committee of our
Board of Directors on October 12, 2008, which opinion was
subsequently confirmed by delivery of a written opinion, to the
effect that, as of the date of the written opinion and based
upon and subject to the considerations described in the written
opinion, the merger consideration to be received by the holders
of Emageon common stock in the merger was fair, from a financial
point of view, to such stockholders;
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the potential for continued negative effects on the operation of
our business, our operating results and our profitability
associated with the recent deterioration in general economic
conditions and prospects for our industry, and the tightening of
credit market conditions, which has been exacerbated in recent
months as the impact of the increasingly negative lending
environment has expanded and deepened;
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the significant costs associated with continuing as an
independent public company, and the implications of such costs
for our future profitability and the trading prices of our
common stock in light of our relative size;
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the terms of HSSs financing from SIBL pursuant to the
terms of the debenture purchase agreement, the fact that the
merger is not subject to a financing condition and the resulting
increased certainty that the proposed acquisition will be
completed;
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the terms of the merger agreement, which, among other things,
permit our Strategic Alternatives Committee and Board of
Directors to exercise their fiduciary duties to our stockholders
under Delaware corporate law to consider unsolicited acquisition
proposals and to change the Boards recommendation with
respect to the merger, as well as the limited number and nature
of closing conditions and the limited risk of non-satisfaction
of the closing conditions, including that for purposes of the
merger agreement a material adverse effect on
Emageon does not include events, circumstances, developments or
changes resulting from the numerous circumstances or events
described under The Merger Agreement Material
Adverse Effect;
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the deposit by HSS of $5.0 million in escrow, which is
available to us as a non-exclusive remedy under certain
circumstances if HSSs financing is not timely available or
HSS is determined by a final non-appealable court order to have
intentionally breached the merger agreement; and
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the fact that stockholders who do not vote in favor of adoption
of the merger agreement will have the right to demand appraisal
of the fair value of their shares under Delaware law if they
meet the prescribed conditions.
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Our Board of Directors put significant weight on the analysis
and unanimous recommendation of its Strategic Alternatives
Committee, as well as the financial presentations of SunTrust
Robinson Humphrey and Jefferies that were prepared for the
Strategic Alternatives Committee and delivered to our Board of
Directors at the request of such committee, and the fact that
such committee received an opinion delivered by SunTrust
Robinson Humphrey as to the fairness, from a financial point of
view, of the merger consideration to the holders of Emageon
common stock.
In the course of their deliberations, the Strategic Alternatives
Committee and our Board of Directors also considered a variety
of risks and other potentially negative factors relating to the
merger agreement, including the following:
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the fact that we will no longer exist as an independent public
company and our stockholders will forgo any future increase in
our value that might result from our possible growth;
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the risks and contingencies related to the announcement and
pendency of the merger, including diverting management focus and
resources from other opportunities and the effect of the merger
on our customers, employees, suppliers and our relationships
with other third parties (including the potential negative
reaction of these parties to the fact that we would be acquired
by HSS);
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the risk that the conditions to HSSs obligation to
complete the merger will not be satisfied;
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37
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the right of HSS to terminate the merger agreement in certain
circumstances, including for certain breaches by us of our
representations, warranties, covenants and agreements in the
merger agreement;
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the risk that the financing contemplated by the debenture
purchase agreement between HSS and SIBL is not obtained;
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the fact that under the terms of the merger agreement, we cannot
solicit other acquisition proposals and must pay to HSS a
termination fee of $3.0 million if the merger agreement is
terminated under certain circumstances, which, in addition to
being costly, might have the effect of discouraging other
parties from proposing an alternative transaction that might be
more advantageous to our stockholders than the merger;
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the fact that, unless the merger agreement is terminated, we are
required to submit the merger agreement to a vote of our
stockholders even if our Board of Directors changes its
recommendation;
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the fact that the income realized by stockholders as a result of
the merger generally will be taxable to our stockholders;
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the interests that our directors and executive officers have or
may have with respect to the merger, in addition to their
interests as stockholders of Emageon generally, as described in
The Merger Interests of Emageon Directors and
Executive Officers in the Merger; and
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the fact that, pursuant to the merger agreement, we are subject
to a variety of other restrictions on the conduct of our
business prior to closing of the merger or termination of the
merger agreement, which may delay or preclude actions that would
be advisable if we were to remain an independent company.
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The foregoing discussion of the factors considered by our
Strategic Alternatives Committee and Board of Directors is not
intended to be exhaustive, but rather includes material factors
that the Strategic Alternatives Committee and Board considered
in approving and recommending the merger and related proposals.
In view of the wide variety of factors considered by our
Strategic Alternatives Committee and Board in connection with
their evaluation of these transactions and the complexity of
these factors, the Strategic Alternatives Committee and Board
did not consider it practical to, nor did it attempt to,
quantify, rank or otherwise assign any specific or relative
weights to the specific factors they considered in reaching
their determination, except that, as noted above, our Board of
Directors put significant weight on the recommendation of the
Strategic Alternatives Committee as well as the financial
presentations and fairness opinion delivered to the Strategic
Alternatives Committee. Our Strategic Alternatives Committee and
Board considered all these factors as a whole, and determined
that the transaction was in the best interests of Emageon and
its stockholders. In considering the factors described above,
individual directors may have assigned different weights to
different factors.
It should be noted that portions of the explanation of our
Strategic Alternatives Committee and Board of Directors
reasoning and other information presented in this section are
forward-looking in nature and, therefore, should be read along
with the factors discussed under the caption Cautionary
Statement Regarding Forward Looking Statements on
page 15 of this proxy statement.
For the reasons set forth above, our Board of Directors
unanimously approved and declared advisable the merger
agreement, the merger and the other transactions contemplated by
the merger agreement, declared that it is in the best interest
of our stockholders that we enter into the merger agreement and
consummate the merger and the other transactions contemplated by
the merger agreement, determined that the merger is advisable
and fair to Emageon and its stockholders and recommended that
our stockholders vote FOR adoption of the merger
agreement and FOR the proposal to adjourn the
special meeting, if necessary or appropriate, to solicit
additional proxies.
Opinion
of SunTrust Robinson Humphrey
The Strategic Alternatives Committee of our Board of Directors
engaged SunTrust Robinson Humphrey pursuant to a letter
agreement dated May 23, 2007 to assist the Strategic
Alternatives Committee in its evaluation of various strategic
alternatives that may be available to Emageon. Pursuant to this
engagement,
38
SunTrust Robinson Humphrey and Emageon management began a
targeted marketing process, as more fully described above under
The Merger Background of the
Merger. On July 11, 2008, Emageon announced that the
Strategic Alternatives Committee had selected Jefferies as Lead
Advisor and SunTrust Robinson Humphrey as Co-Advisor to assist
the Strategic Alternatives Committee to evaluate all strategic
options available for Emageon. Following this announcement,
Jefferies and Emageon conducted an extensive marketing process,
and Emageon eventually entered into an agreement and plan of
merger with Health Systems Solutions, Inc. On October 12,
2008, SunTrust Robinson Humphrey delivered its oral opinion to
the Strategic Alternatives Committee, and subsequently confirmed
in writing on October 13, 2008 that, as of the date of the
written opinion and based upon and subject to the factors and
assumptions set forth in the opinion, the merger consideration
was fair from a financial point of view to the holders of shares
of Emageon common stock.
The full text of SunTrust Robinson Humphreys written
opinion to the Strategic Alternatives Committee, dated
October 13, 2008, which sets forth the procedures followed,
assumptions made, matters considered and limitations on the
review undertaken, is attached as Annex B to this proxy
statement and is incorporated herein by reference. The summary
of the SunTrust Robinson Humphrey opinion set forth in this
proxy statement is qualified in its entirety by reference to the
full text of the opinion. Holders of Emageon common stock are
encouraged to read the SunTrust Robinson Humphrey opinion
carefully in its entirety.
SunTrust Robinson Humphreys opinion was rendered at the
request and for the benefit of the Strategic Alternatives
Committee in its evaluation of the merger and relates solely to
the fairness, from a financial point of view, of the merger
consideration to be received by holders of Emageon common stock
in the merger. The opinion does not address the relative merits
of the merger as compared to alternative transactions or
strategies that may be available to Emageon nor does it address
Emageons underlying decision to engage in the merger or
any other aspect or implication of the merger or any other
agreement, arrangement or understanding entered into by Emageon
or any other person in connection with the merger. The opinion
does not constitute a recommendation to any holder of Emageon
common stock as to how such holder should vote on the merger.
In arriving at its opinion, SunTrust Robinson Humphrey, among
other things:
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reviewed the merger agreement and certain other related
agreements;
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reviewed certain publicly available information concerning
Emageon;
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reviewed certain financial and operating information with
respect to the business, operations and prospects of Emageon
furnished to SunTrust Robinson Humphrey by Emageon;
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reviewed historical trading information with respect to Emageon
common stock;
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reviewed certain historical and projected financial information
for Emageon and selected publicly traded companies that SunTrust
Robinson Humphrey deemed relevant;
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reviewed certain historical information relating to premiums
paid in acquisitions of selected publicly traded companies that
SunTrust Robinson Humphrey deemed relevant;
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had discussions with the management of Emageon concerning its
business, operations, financial condition and prospects; and
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undertook such other studies, analyses and investigations as
SunTrust Robinson Humphrey deemed appropriate.
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In arriving at its opinion, SunTrust Robinson Humphrey assumed
and relied upon, without independent investigation or
verification, the accuracy and completeness of the financial and
other information furnished or discussed with it by Emageon.
With respect to the financial forecasts of Emageon furnished to
or discussed with SunTrust Robinson Humphrey, SunTrust Robinson
Humphrey assumed that they were reasonably prepared on bases
reflecting the then best currently available estimates and
judgments of the management of Emageon as to the future
financial performance of Emageon. In arriving at its opinion,
SunTrust Robinson Humphrey did not conduct a physical inspection
of the properties and facilities of Emageon and SunTrust
Robinson Humphrey did not make, nor was it provided with any
evaluations or appraisals of the assets or
39
liabilities, if any, contingent or otherwise, of Emageon. With
respect to certain contingent or potential tax and environmental
liabilities, SunTrust Robinson Humphrey relied, without
independent investigation or verification, upon the assessments
of Emageons management and counsel. SunTrust Robinson
Humphrey also assumed that the merger will be consummated in
accordance with the terms of the merger agreement and that all
material governmental, regulatory or other consents and
approvals necessary for the consummation of the merger will be
obtained without any adverse effect on Emageon or on the
expected benefits of the merger.
The SunTrust Robinson Humphrey opinion is necessarily based upon
business, economic, market and other conditions as they existed
on and could be evaluated as of the date of its opinion.
SunTrust Robinson Humphrey did not express an opinion as to the
underlying valuation, future performance or long-term viability
of Emageon. Subsequent developments may affect SunTrust Robinson
Humphreys opinion and SunTrust Robinson Humphrey does not
have any obligation to update or revise its opinion.
In preparing its opinion, SunTrust Robinson Humphrey performed a
variety of financial and other analyses, including those
described below. This summary is not a complete description of
the analyses underlying SunTrust Robinson Humphreys
opinion. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances
and, therefore, is not readily susceptible to summary
description. Accordingly, SunTrust Robinson Humphrey believes
that its analyses and all relevant factors must be considered as
an integrated whole and that selecting portions of its analyses
or factors, without considering all analyses and factors, could
create a misleading or incomplete view of the processes
underlying such analyses and SunTrust Robinson Humphreys
opinion.
In performing its analyses, SunTrust Robinson Humphrey
considered general business, economic, industry and market
conditions (financial and otherwise), many of which are beyond
the control of Emageon. No company, transaction or business used
in SunTrust Robinson Humphreys analyses as a comparison is
identical to Emageon or the merger and, accordingly, the
analyses necessarily involve complex considerations and
judgments concerning differences in financial and operating
characteristics of the companies and transactions reviewed and
other factors that would affect the market values of the
relevant companies and Emageon. While the results of each
analysis were taken into account in reaching its overall
conclusion with respect to fairness, SunTrust Robinson Humphrey
did not make separate or quantifiable judgments regarding
individual analyses. The estimates contained in these analyses
and the valuation ranges indicated by any particular analysis
are illustrative and not necessarily indicative of actual values
or predictive of future results or values, which may be
significantly more or less favorable than those suggested by
such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually
may be sold. Accordingly, these analyses and estimates are
inherently subject to substantial uncertainty.
SunTrust Robinson Humphreys opinion and analyses were only
one of many factors considered by the Strategic Alternatives
Committee and the Board of Directors in their evaluation of the
merger and should not be viewed as determinative of the views of
the Strategic Alternatives Committee or the Board of Directors
with respect to the merger.
SunTrust Robinson Humphrey did not recommend any specific merger
consideration to the Strategic Alternatives Committee or that
any specific merger consideration constituted the only
appropriate merger consideration for the merger. The opinions
and financial analyses of SunTrust Robinson Humphrey were only
one of many factors considered by the Strategic Alternatives
Committee in its evaluation of the proposed merger and should
not be viewed as determinative of the views of the Strategic
Alternatives Committee, the board of directors or management
with respect to the merger or the merger consideration.
The following is a summary of the material financial and other
analyses performed by SunTrust Robinson Humphrey in connection
with the preparation of its opinion dated October 13, 2008
and presented by SunTrust Robinson Humphrey to the Strategic
Alternatives Committee and Board of Directors on
October 12, 2008. This summary includes certain information
presented in tabular format. In order to fully understand such
financial analysis, the table must be read together with the
accompanying text. The table does not constitute a complete
description of the financial analysis. Considering the data set
forth in the table without considering
40
the full narrative description of the analysis, including the
methodologies and assumptions underlying the analysis, could
create a misleading or incomplete view of the financial analysis
performed by SunTrust Robinson Humphrey.
Selected
Companies Analysis
SunTrust Robinson Humphrey calculated ratios of firm value and
equity value to certain historical and projected financial data
for selected publicly traded companies in the Imaging Technology
industry that were considered by SunTrust Robinson Humphrey to
have, for purposes of its analyses, operations similar to
certain operations of Emageon. For purposes of its analysis,
SunTrust Robinson Humphrey defined firm value as the market
value of the relevant entitys outstanding equity
securities (sometimes referred to herein as equity value) plus
the value of its outstanding indebtedness and certain other
liabilities less the amount of any cash and cash equivalents on
its most recent financial statements. The selected publicly
traded companies in the Imaging Technology industry used for
this analysis were:
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Allscripts Healthcare Solutions Inc.
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Computer Programs & Systems Inc.
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NightHawk Radiology Holdings, Inc.
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Virtual Radiologic Corporation
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Vital Images Inc.
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Merger Healthcare Incorporated
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AMICAS Inc.
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Mediware Information Systems Inc.
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Aspyra Inc.
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For the selected publicly traded companies, SunTrust Robinson
Humphrey calculated firm value as a multiple of the relevant
entitys latest twelve months, or LTM, and
projected 2008 and 2009 revenues, and earnings before interest,
taxes, depreciation and amortization, or EBITDA. All
multiples were based on closing stock prices as of
October 8, 2008. Historical revenues and EBITDA results
were based on publicly available financial information for the
selected companies. Projected revenues and EBITDA estimates for
the selected publicly traded companies were based on consensus
research analyst estimates published by Thomson Reuters.
SunTrust Robinson Humphrey applied the multiples indicated by
the selected companies analysis to corresponding financial
data for Emageon, including projected financial data provided by
the management of Emageon. That analysis indicated (a) an
implied low and high value per share of Emageon common stock
based on the projected 2008 revenue multiples of the selected
companies of $1.63 and $3.26, (b) an implied low and high
value per share of Emageon common stock based on the projected
2009 revenue multiples of the selected companies of $1.78 and
$3.56, and (c) an implied low and high value per share of
Emageon common stock based on the projected 2009 EBITDA
multiples of the selected companies of $1.26 and $2.21, in each
case as compared to the proposed merger consideration of $2.85
per share.
41
Selected
Transactions Analysis
SunTrust Robinson Humphrey reviewed implied transaction
multiples for the following 14 selected merger and acquisition
transactions completed since January 1, 2005:
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Acquiror
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Target
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Health Care Service Corporation
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MEDecision, Inc.
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St. Jude Medical Inc.
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EP Medsystems Inc.
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Bio-Imaging Technologies Inc.
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Phoenix Data Systems, Inc.
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Zimmer Holdings Inc.
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ORTHOsoft Inc.
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AMICAS, Inc.
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Inspiration Technology Inc. Radiology Practice
Software
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Battery Ventures
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Quovadx Inc.
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NightHawk Radiology Holdings, Inc.
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Teleradiology Diagnostic Service, Inc.
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Sage Software, Inc.
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Emdeon Practice Services
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Koninklijke Philips Electronics
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Witt Biomedical Corporation
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Allscripts Healthcare Solutions Inc.
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A4 Health Systems, Inc.
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Emageon Inc.
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Camtronics Medical Systems, Ltd.
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GE Healthcare Ltd.
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IDX Systems Corp.
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Merge Technologies Incorporated
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Cedara Software Corp.
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Elekta AB
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IMPAC Medical Systems, Inc.
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For each of the selected transactions, SunTrust Robinson
Humphrey calculated the ratio of the firm value of the target
based on the transaction consideration as a multiple of LTM
revenues, EBITDA and EBIT. The firm values of the targets were
based on the aggregate consideration paid in the relevant
selected transaction and where available, the revenues, EBITDA
and EBIT values for each of the target companies were based on
publicly available historical financial information.
SunTrust Robinson Humphrey applied the multiples indicated by
the selected transactions analysis to corresponding projected
year-end financial data for Emageon for 2008. That analysis
indicated an implied low and high value per share of Emageon
common stock based on the selected multiples of the selected
transactions of $3.25 and $8.13, in each case as compared to the
proposed merger consideration of $2.85 per share.
Premiums
Paid Analysis
SunTrust Robinson Humphrey reviewed the premiums paid in
approximately 60 selected mergers and acquisitions involving
publicly traded target companies from January 1, 2005 to
June 31, 2008 with a transaction value between
$50 million and $1.5 billion. SunTrust Robinson
Humphrey also reviewed approximately 10 selected mergers and
acquisitions involving publicly traded target companies in the
Imaging Technology industry. SunTrust Robinson Humphrey reviewed
the percentage premium paid for the common stock of the target
company in such transactions relative to the target
companys closing stock price one day and 30 days
prior to public announcement of the transaction.
SunTrust Robinson Humphrey applied the percentage premiums
indicated by the premiums paid analysis to the closing prices of
Emageon common stock one day and 30 days prior to
October 10, 2008. That analysis indicated (a) an
implied low and high value per share of Emageon common stock
based on selected one day premiums paid analysis of $2.56 and
$3.18 and (b) an implied low and high value per share of
Emageon common stock based on selected 30 day premiums paid
analysis of $2.76 and $3.43, in each case as compared to the
proposed merger consideration of $2.85 per share.
Discounted
Cash Flow Analysis
SunTrust Robinson Humphrey performed a discounted cash flow
analysis of Emageon based upon projections provided by
Emageons management for the fiscal years ending
December 31, 2009 through 2013, a weighted average cost of
capital for Emageon ranging from 16.3% to 20.3% and applied a
perpetual growth
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rate to Emageons projected free cash flow beyond fiscal
2013 ranging from 1.0% to 3.0%. That discounted cash flow
analysis indicated implied values per share of Emageon common
stock as follows:
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Discounted Present Value of Equity per Share
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Discount Rate
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1.0%
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2.0%
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3.0%
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16.3%
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$
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2.43
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$
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2.50
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$
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2.58
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18.3%
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$
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2.22
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$
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2.26
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$
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2.32
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20.3%
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$
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2.05
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$
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2.08
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$
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2.12
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Other
Analyses
SunTrust Robinson Humphrey also considered the historical market
prices and trading volumes for Emageons common stock as
compared to corresponding data for selected publicly traded
companies and selected market indexes, including the S&P
500 Index and the NASDAQ Index.
The Strategic Alternatives Committee retained SunTrust Robinson
Humphrey to act as its financial advisor and render a fairness
opinion in connection with the merger because of SunTrust
Robinson Humphreys experience and reputation and its
familiarity with Emageon and its business. SunTrust Robinson
Humphrey is a nationally recognized investment banking firm
regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, secondary
distributions of listed and unlisted securities and private
placements. In the ordinary course of its business, SunTrust
Robinson Humphrey and its affiliates may actively trade in debt
and equity securities of Emageon, as well as securities of
Health Systems Solutions, for its own account and for the
accounts of its customers and, accordingly, may at any time hold
a long or short position in such securities. In addition,
SunTrust Robinson Humphrey is acting as a Co-Advisor for
Emageon. During the past two years, SunTrust Robinson Humphrey
and its affiliates have not provided financial advisory and
financing services to Emageon or its affiliates other than with
respect to the services rendered in connection with the proposed
merger.
Under the terms of its engagement letter entered into with the
Strategic Alternatives Committee in connection with its
consideration of strategic alternatives, SunTrust Robinson
Humphrey provided the Strategic Alternatives Committee financial
advisory services and a fairness opinion in connection with the
merger. In consideration of such services, SunTrust Robinson
Humphrey will receive $350,000, which became payable upon
delivery of SunTrust Robinson Humphreys fairness opinion,
plus $412,940 to be paid if the merger is consummated at the
current price. SunTrust Robinson Humphrey would also earn more
or less compensation if the merger is consummated at a price
higher or lower than the current merger price. Emageon has also
agreed to reimburse SunTrust Robinson Humphrey for reasonable
out-of-pocket fees and expenses, including attorneys fees,
incurred in connection with its engagement and to indemnify
SunTrust Robinson Humphrey and related parties against
liabilities, including liabilities under the federal securities
laws, arising out of its engagement.
Financing
The total amount of funds necessary to complete the merger and
the related transactions is expected to be obtained through the
sale by HSS of convertible debentures to Stanford International
Bank, Limited, which we refer to as SIBL, pursuant to the terms
of a Convertible Secured Debenture Purchase Agreement, dated
October 12, 2008, which we refer to as the debenture
purchase agreement. HSS has advised us that SIBL beneficially
owns approximately 86% of HSSs outstanding common stock.
Under the debenture purchase agreement, on October 12,
2008, SIBL purchased from HSS an initial debenture in the
principal amount of $5 million in order to finance the
escrow deposit with The Bank of New York Mellon under the
deposit escrow agreement. In addition, subject to the closing of
the merger and the satisfaction of specified closing conditions,
SIBL will purchase from HSS a second debenture in the principal
amount of $65 million to finance the remainder of the
merger consideration, to pay costs and expenses related to the
merger and to fund a portion of the combined companys
working capital needs. SIBLs purchase of the second
debenture is subject to satisfaction of the closing conditions
in the merger agreement and certain other customary closing
conditions. The debenture purchase agreement also provides
43
that as and when agreed by HSS and SIBL following the closing of
the merger, SIBL will purchase additional debentures from HSS in
an aggregate principal amount of up to $15 million in order
to provide additional working capital to the combined company.
HSSs obligation to complete the merger is not contingent
on its ability to obtain financing.
The debentures will bear interest on the unpaid principal amount
outstanding at a rate of 6.0% per annum, with the principal
balance being due and payable five years from the date of
issuance. Interest on the debentures will accrue for the period
from the date of issuance through December 31, 2009, which
interest will be payable on or before January 1, 2010, and
thereafter interest will be payable quarterly in arrears. At any
time prior to the maturity date or the earlier conversion of a
debenture, HSS may (upon 30 days prior written notice
to each holder) redeem the debenture for an amount equal to the
aggregate principal amount outstanding plus any unpaid, accrued
interest. Additionally, each debenture will be convertible, at
the holders option, into such number of shares of common
stock of HSS equal to the quotient of the aggregate principal
amount outstanding over the then-current conversion price. The
conversion price is $5.00, subject to adjustment in accordance
with the terms of the debentures. The debentures also require
HSS to obtain the written approval of the holders prior to
taking certain corporate actions, including but not limited to,
the sale of HSS or a material portion of its assets, an
amendment to HSSs charter documents, a change in the
nature of HSSs business, the declaration or payment of any
dividend or distribution with respect to any of HSSs
equity securities, making certain acquisitions or capital
expenditures, entry into any material credit facility, issuance
of any material amount of debt, any public offering of
HSSs equity or debt securities or an expansion of the size
of HSSs Board of Directors.
Upon Stanfords purchase of the initial debenture, HSS also
issued to SIBL and certain of its assigns warrants to purchase
an aggregate of 528,000 shares of common stock with a term
of seven years, with exercise prices between $0.001 and $4.00
per share, subject to adjustment. Upon SIBLs purchase of
the second debenture, SIBL will receive warrants to purchase an
aggregate of 8,472,000 shares of common stock of HSS with a
term of seven years, with exercise prices between $0.001 and
$4.00 per share, subject to adjustment.
Interests
of Emageons Executive Officers and Directors in the
Merger
When considering the recommendation of our Board of Directors,
you should be aware that members of our Board of Directors and
Emageons executive officers have interests in the merger
other than their interests as our stockholders generally,
including those interests described below. These interests may
be different from, or in conflict with, your interests as
Emageon stockholders. The members of our Strategic Alternatives
Committee and our Board of Directors were aware of these
additional interests, and considered them, when they approved
the merger agreement. Except as described below, such persons
have, to our knowledge, no material interests in the merger that
differ from your interests generally.
Stock
Options
Under the merger agreement, at the effective time of the merger,
each outstanding option to acquire our common stock will become
fully vested and will be cancelled, and the holder of such
option will be entitled to receive an amount in cash, without
interest and less any applicable withholding tax, equal to the
product of the maximum number of shares of common stock subject
to such option with respect to which such option has not
previously been exercised, multiplied by the excess of $2.85
over the exercise price per share of such option.
44
The following table summarizes, as of November 12, 2008,
the outstanding vested and unvested options with exercise prices
of less than $2.85 per share held by our current, and certain of
our former, executive officers and directors and the
consideration that each of them will receive under the merger
agreement in connection with the cancellation of their options,
assuming, as applicable, continued employment through the
effective time of the merger:
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No. of Shares
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No. of Shares
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Underlying
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Exercise Price of
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Underlying
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Exercise Price of
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Resulting
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Name
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Vested Options
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Vested Options
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Unvested Options
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Unvested Options
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Consideration
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Executive Officers:
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Charles A. Jett, Jr.
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78,000
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$
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1.73
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$
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$
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87,360
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16,680
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2.52
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83,320
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2.52
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33,000
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John W. Wilhoite
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8,360
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2.52
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41,640
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2.52
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16,500
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Keith Stahlhut
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5,840
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2.52
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29,160
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2.52
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11,550
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W. Randall Pittman(1)
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Chris E. Perkins(2)
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Directors:
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Arthur P. Beattie
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7,500
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$
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1.86
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$
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7,425
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Roddy J.H. Clark
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7,500
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1.86
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7,425
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Fred C. Goad, Jr.
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7,500
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1.86
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7,425
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Bradley S. Karro
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7,500
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1.86
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7,425
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Mylle H. Mangum
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7,500
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1.86
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7,425
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Augustus K. Oliver
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7,500
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1.86
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7,425
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John W. Thompson
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7,500
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1.86
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7,425
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Benner Ulrich
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7,500
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1.86
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7,425
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Hugh H. Williamson, III
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7,500
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1.86
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7,425
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Douglas D. French(3)
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Totals
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108,880
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221,620
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$
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215,235
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(1) |
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Mr. Pittman resigned his positions as Chief Financial
Officer and Treasurer effective as of March 31, 2008 and
was succeeded by Mr. Wilhoite. |
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(2) |
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Mr. Perkins resigned his position as Chief Operating
Officer effective as of July 25, 2008. On July 29,
2008, Mr. Stahlhut was appointed to serve as our acting
Principal Operating Officer. |
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(3) |
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Mr. French resigned from the Board in June 2008 pursuant to
the terms of our agreement, dated June 22, 2008, with
Mr. Jett and affiliates of Oliver Press Partners, LLC that
terminated the proxy contest with respect to the election of
directors at our 2008 annual meeting of stockholders. |
Restricted
Stock Unit Awards
Under the merger agreement, at the effective time of the merger,
each outstanding restricted stock unit award will be cancelled,
and the holder will be entitled to receive an amount in cash,
without interest and less any applicable withholding tax, equal
to the maximum number of shares of common stock subject to such
restricted stock unit award, multiplied by the per share merger
consideration of $2.85. The holder also will be entitled to
receive any dividend equivalents accrued, but not yet
distributed, with respect to such restricted stock unit award
(other than any such dividend equivalents that are held in the
form of restricted stock units as of the effective time of the
merger).
45
The following table summarizes the estimated number of
restricted stock unit awards that would vest for our current,
and certain of our former, executive officers assuming continued
service through the effective time of the merger, as applicable,
and the consideration that each of them will receive under the
merger agreement in connection with such outstanding restricted
stock unit award. The following table assumes that the merger is
completed on December 31, 2008. There are no dividend
equivalents accrued, but not yet distributed, with respect to
any such stock unit award.
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No. of Restricted
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Resulting
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Name
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Stock Units
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Consideration
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Charles A. Jett, Jr.
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35,622
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$
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101,523
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John W. Wilhoite
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3,000
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8,550
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Keith Stahlhut
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3,000
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8,550
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W. Randall Pittman(1)
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Chris E. Perkins(2)
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Total
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41,622
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$
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118,623
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(1) |
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Mr. Pittman resigned his positions as Chief Financial
Officer and Treasurer effective as of March 31, 2008 and
was succeeded by Mr. Wilhoite. |
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(2) |
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Mr. Perkins resigned his position as Chief Operating
Officer effective as of July 25, 2008. On July 29,
2008, Mr. Stahlhut was appointed to serve as our acting
Principal Operating Officer. |
As of the date of this proxy statement, our directors did not
hold any restricted stock unit awards.
Severance
Payments to President and Chief Executive Officer
The employment agreement of Charles A. Jett, Jr., our
President and Chief Executive Officer, provides that if
Mr. Jett terminates his employment for any reason during
either the
60-day
period following a change in control of Emageon or the
30-day
period following the first anniversary of a change in control of
Emageon, or we terminate his employment other than for
cause, death or disability following a change in
control of Emageon, then Mr. Jett will be entitled to
receive, in addition to any earned but unpaid base salary and
other benefits accrued through the date of termination, a lump
sum payment that is equal to his then-current monthly base
salary plus the product of one-twelfth of his target annual
bonus (calculated as if all performance metrics had been
achieved) multiplied by the number of months in
Mr. Jetts severance period, as well as
group health and dental care during the severance period, among
other things. If we terminate Mr. Jetts employment
other than for cause, death or disability following
a change in control of Emageon, then the severance period under
his employment agreement is equal to the greater of
12 months or the number of months remaining under the term
of the employment agreement, which currently is 24 months.
If Mr. Jett terminates his employment during one of the
specified time periods following a change in control of Emageon,
then the severance period under his employment agreement is
equal to 12 months. The employment agreement also provides
for tax protection in the form of a gross-up payment to
reimburse Mr. Jett for any excise tax under Internal
Revenue Code Section 4999 as well as any additional income
and employment taxes resulting from any such reimbursement.
We have entered into a severance agreement with Mr. Jett
pursuant to which his employment with Emageon will be terminated
upon the effectiveness of the merger. Under the severance
agreement, in addition to receipt of his earned but unpaid base
salary and his other benefits accrued through the date of
termination, Mr. Jett will be entitled to receive the
following severance benefits, which are consistent with a
termination of his employment by Emageon other than for
cause following a change in control of Emageon:
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a lump sum payment equal to Mr. Jetts current monthly
base salary plus the product of one-twelfth of his target annual
bonus multiplied by 24 months;
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a lump sum payment equal to the cost for Mr. Jett to
maintain continuing family health and dental insurance for
24 months, less Mr. Jetts share of insurance
benefits under our current benefit plans;
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46
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a lump sum payment for maintenance of life insurance
coverage; and
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Mr. Jett will become fully vested in all stock options,
stock appreciation rights, restricted stock and restricted stock
units that he holds as of the date of termination.
|
The severance agreement also provides for tax protection in the
form of a gross-up payment to reimburse Mr. Jett for any
excise tax under Internal Revenue Code Section 4999 as well
as any additional income and employment taxes resulting from
such reimbursement. The
gross-up
payment is intended to place Mr. Jett in the same after-tax
position that he would have been if no excise tax had applied.
The following table shows the estimated cash amounts payable to
Mr. Jett based on an assumed termination date of
December 31, 2008. The table also shows the potential
estimated
gross-up
payment to which Mr. Jett is entitled in the event that any
benefit gives rise to an excise tax. The table does not include
the consideration resulting from the options or restricted stock
unit awards described in the preceding tables, although these
amounts have been taken into account to the extent they
constitute parachute payments under 280G of the Internal Revenue
Code of 1986, as amended, when estimating the potential
gross-up
payments set forth in the following table.
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Estimated
|
|
Payment or Benefit
|
|
Amount
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|
|
Severance Payment
|
|
$
|
1,235,000
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Payment for Healthcare Coverage
|
|
$
|
23,203
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|
Accrued Benefits
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$
|
33,943
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(1)
|
Payment for Life Insurance
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$
|
8,000
|
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Tax Gross-Up
|
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$
|
476,644
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(2)
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Total
|
|
$
|
1,776,790
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|
|
|
(1) |
|
Represents accrued but unpaid vacation time under Emageons
applicable vacation benefit plan. |
|
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|
(2) |
|
The amount shown is an estimate of the tax gross-up payment
payable to Mr. Jett. This amount is an estimate only, and
is calculated using the full market value of any restricted
stock that would vest upon such a termination and the difference
between the full market value and the exercise price of stock
options that would vest upon such a termination. Under the IRS
rules governing parachute payments, only a portion of this value
would likely be considered a parachute payment; a lower
parachute payment would result in a lower gross-up payment. For
purposes of this estimate, no value has been assigned to the
restrictive covenants to which Mr. Jett would be subject
under his employment and severance agreements. |
Employment
Agreement with Keith Stahlhut
HSS entered into an employment agreement on October 10,
2008 with Keith Stahlhut, our acting Principal Operating
Officer, for employment with HSS following the merger. Under the
employment agreement, upon the closing of the merger,
Mr. Stahlhut would be employed by HSS as the President of
the HSS Emageon division (a division of HSS that will consist of
the business of Emageon), and in that capacity, he will, subject
to the authority of the Chief Executive Officer of HSS,
supervise, control and have responsibility for the management of
that division.
The employment agreement is for a three year term beginning on
the date of closing of the merger, unless the employment
agreement is terminated earlier in accordance with its terms.
Under the employment agreement, Mr. Stahlhut will receive
an initial annual base salary in an amount 20% greater than his
current base salary as the acting Principal Operating Officer of
Emageon. In addition, Mr. Stahlhut will be eligible to
receive an annual performance bonus in an amount up to 50% of
his base salary if HSS achieves certain financial thresholds,
and an additional performance bonus, at the discretion of the
Board of Directors of HSS, if HSS exceeds those financial
thresholds. Mr. Stahlhut also will receive, subject to
certain requirements, a grant of options to purchase shares of
HSS common stock in an amount commensurate with his level of
responsibility (which amount has not yet been determined).
47
Under the employment agreement, Mr. Stahlhut is entitled to
severance benefits if his employment with HSS is terminated by
HSS other than for cause, or is terminated by
Mr. Stahlhut for good reason, including payment
of his then-current base salary for a period of 12 months
after termination.
Relationship
with Significant Stockholder
Our directors Augustus K. Oliver and Benner Ulrich are a
principal and employee, respectively, of Oliver Press Partners,
LLC, which, through its affiliates, is the beneficial owner of
approximately 16.64% of our outstanding common stock. On
June 22, 2008, we entered into an agreement with
Mr. Jett and affiliates of Oliver Press Partners
terminating the proxy contest with respect to our 2008 annual
meeting of stockholders. Under the terms of the agreement, among
other things, the size of our Board of Directors was ultimately
expanded to nine members, Mr. Jett and Douglas D. French
tendered their resignations from the Board of Directors and
Messrs. Oliver and Ulrich were appointed to the Board of
Directors. In addition, the Board of Directors agreed to appoint
Bradley S. Karro to the board of directors, subject to the
Boards review of Mr. Karros qualifications and
a background check of Mr. Karro. Further, Mr. Ulrich
and, upon his subsequent appointment to the board of directors,
Mr. Karro were added to the Strategic Alternatives
Committee by the Board of Directors and the Strategic
Alternatives Committee was reconstituted and recommenced its
evaluation of strategic alternatives for Emageon.
Other
Agreements
The employment agreement of John W. Wilhoite, our Chief
Financial Officer and Treasurer, provides for certain severance
payments to be made to Mr. Wilhoite if his employment is
terminated for various reasons, including if we terminate his
employment other than for cause, death or
disability, or he terminates his employment for good
reason. These arrangements are described in further
detail, and a copy of Mr. Wilhoites employment
agreement is included, in our Current Report on
Form 8-K
that was filed with the SEC on May 1, 2008.
Our current employment agreement with Keith Stahlhut, our acting
Principal Operating Officer, provides for certain severance
benefits for Mr. Stahlhut if his employment is terminated
by us without cause, or by Mr. Stahlhut for
good reason. As described above under
Employment Agreement with Keith
Stahlhut, Mr. Stahlhut has entered into a new
employment agreement with HSS regarding his employment with the
combined company following the merger and the current agreement
will be null and void as of the effective time of the merger.
Indemnification
and Insurance
The merger agreement provides that HSS and the surviving
corporation agree to defend, and to indemnify for any losses,
claims, costs and expenses, the present and former directors and
officers of Emageon and its subsidiaries in respect of
threatened or actual legal action arising out of the fact that
the indemnified person was an officer or director of Emageon or
any of its subsidiaries, to the fullest extent permitted by law
and required by the charter documents of Emageon and its
subsidiaries. The merger agreement also provides that, for a
period of six years after the effective time of the merger, the
certificate of incorporation and bylaws of the surviving
corporation in the merger, and those of its subsidiaries, will
have provisions no less advantageous with respect to the
elimination of liability of directors, indemnification of
officers and directors and advancement of expenses than the
provisions contained in the certificate of incorporation and
bylaws of Emageon and its subsidiaries as of the date of the
merger agreement.
The merger agreement provides that the surviving corporation in
the merger shall maintain in effect for a period of six years
after the effective time of the merger Emageons
directors and officers liability insurance and
fiduciary liability insurance in respect of acts or omissions
occurring at or before the effective time of the merger on terms
that are no less favorable in terms of coverage, deductible and
amount than those in the existing policies of Emageon.
Alternatively, Emageon or the surviving corporation may purchase
a six-year pre-paid tail policy to cover
Emageons officers and directors following the effective
time of the merger. In satisfying its obligations, the surviving
corporation is not obligated to pay annual premiums in excess of
200%
48
of the amount currently paid by Emageon, in which case the
surviving corporation agrees to obtain a policy offering the
maximum amount of coverage available for such annual 200% amount.
Post-Merger
Arrangements
As of the date of this proxy statement, other than the severance
agreement with Mr. Jett, none of our executive officers has
entered into any amendments or modifications to their existing
employment or severance agreements with us in connection with
the merger. In addition, as of the date of this proxy statement,
other than the employment agreement with Mr. Stahlhut, none
of our executive officers has entered into any agreement,
arrangement or understanding with HSS or any of its affiliates
regarding the terms and conditions of compensation, cash-based
incentives or employment or other engagement with the surviving
corporation.
However, we have been informed that HSS and Mr. Jett
anticipate that they will enter into an agreement for
Mr. Jett to provide consulting services to the combined
company following the merger, but the terms and conditions of
any such engagement are subject to further negotiation and
discussion and have not been finalized. In addition, HSS has
initiated discussions with certain members of our existing
senior management team in addition to Mr. Stahlhut and
Mr. Jett relating to the terms and conditions of new
agreements so as to encourage their retention with, or
engagement by, the surviving corporation after the effective
time of the merger. Although we believe certain of these members
of our existing senior management team are likely to enter into
new agreements prior to the completion of the merger, such
matters are subject to further negotiations and discussion and
no terms or conditions have been finalized.
Effective
Time of the Merger
The merger will become effective upon the filing of a
certificate of merger with the Secretary of State of the State
of Delaware, or at such later time as is agreed upon by HSS and
Emageon and specified in the certificate of merger. Unless we
otherwise agree with HSS in writing, the closing date of the
merger will not be later than the second business day after
satisfaction or waiver of the conditions to the closing of the
merger described in the merger agreement. We currently
anticipate that the merger will be completed in the fourth
quarter of 2008 or the first quarter of 2009; however, the
merger is subject to certain closing conditions, a delay in any
of which may result in a change in the anticipated completion
date.
Delisting
and Deregistration of Emageon Common Stock
If the merger is completed, our common stock will be
deregistered under the Exchange Act, we will no longer file
periodic reports with the SEC and our common stock will no
longer be traded on The NASDAQ Global Market.
Appraisal
Rights
Under the Delaware General Corporation Law, holders of our
common stock who do not vote to adopt the merger agreement will
have the right to seek appraisal of the fair value of their
shares as determined by the Delaware Court of Chancery, which we
refer to as the Chancery Court, if the merger is completed, but
only if they demand and perfect their rights in accordance with
Section 262 of the Delaware General Corporation Law.
The following description is intended as a brief summary of the
material provisions of the Delaware statutory procedures
required to be followed in order to perfect appraisal rights.
This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by
reference to Section 262 of the Delaware General
Corporation Law, the full text of which is included as
Annex E to this proxy statement.
ANY EMAGEON STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL
RIGHTS OR WHO WISHES TO PRESERVE HIS, HER OR ITS RIGHT TO DO SO
SHOULD REVIEW ANNEX E CAREFULLY AND SHOULD CONSULT HIS, HER
OR ITS LEGAL ADVISOR, BECAUSE FAILURE TO TIMELY COMPLY WITH THE
PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH
RIGHTS.
49
Section 262 of the Delaware General Corporation Law
requires that stockholders on the record date for the special
meeting be notified not less than 20 days before the
special meeting that appraisal rights will be available. A copy
of Section 262 of the Delaware General Corporation Law must
be included with the notice. This proxy statement constitutes
our notice to the holders of shares of our common stock of the
availability of appraisal rights in connection with the merger
in compliance with the requirements of Section 262 of the
Delaware General Corporation Law.
If you elect to demand appraisal of your shares, you must:
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|
|
be a holder of record of shares of common stock on the date of
such demand;
|
|
|
|
deliver to us a written demand for appraisal of your shares of
common stock PRIOR to the vote on adoption of the merger
agreement;
|
|
|
|
NOT vote or otherwise submit a proxy in favor of the merger
agreement;
|
|
|
|
continuously hold your shares of common stock through the
effective date of the proposed merger; and
|
|
|
|
file a petition demanding appraisal with the Chancery Court
within 120 days after the effective date of the merger.
|
Voting (in person or by proxy) against, abstaining from voting
on or failing to vote on the proposal to adopt the merger
agreement will not constitute a written demand for appraisal
within the meaning of Section 262 of the Delaware General
Corporation Law. The written demand for appraisal must be in
addition to and separate from any proxy or vote. If the written
demand for appraisal is made in accordance with the requirements
of Delaware law, the failure to vote against the merger
(i.e., abstaining) will not operate as a waiver of
the stockholders appraisal rights.
A demand for appraisal must be executed by or on behalf of the
holder of record, fully and correctly, as his, her or its name
appears on his, her or its certificate(s) or other instrument(s)
evidencing an interest in shares of our common stock, and must
state that such person intends thereby to demand appraisal of
his, her or its shares of common stock in connection with the
proposed merger. If the shares of common stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian
or custodian, execution of the demand must be made in that
capacity, and if the shares of common stock are owned of record
by more than one person, as in a joint tenancy or tenancy in
common, the demand must be executed by or on behalf of all joint
owners. An authorized agent, including an agent for two or more
joint owners, may execute a demand for appraisal on behalf of a
holder of record; however, the agent must identify the record
owner or owners and expressly disclose the fact that, in
executing the demand, the agent is acting as agent for such
owner or owners. Stockholders who hold their shares of common
stock in brokerage accounts or other nominee forms, and who wish
to exercise appraisal rights, are urged to consult with their
broker or such other nominee to determine the appropriate
procedures for the making of a demand for appraisal by such a
nominee.
All demands for appraisal should be made in writing and
addressed to Corporate Secretary, Emageon Inc., 1200 Corporate
Drive, Suite 200, Birmingham, Alabama 35242, and must be
received prior to the vote on the adoption of the merger
agreement. The demand must reasonably inform us of the identity
of the holder and the intention of the holder to demand
appraisal of his, her or its shares of common stock. If your
shares of common stock are held through a broker, trustee or
other nominee, and you wish to demand appraisal rights, you must
act promptly to instruct the applicable broker, trustee or other
nominee to follow the steps summarized in this section.
Within 10 days after the effective date of the merger, the
surviving corporation must give written notice of the date the
merger became effective to each holder who has properly filed a
written demand for appraisal and has not voted in favor of the
merger. Within 120 days after the effective date of the
merger, either the surviving corporation in the merger or any
holder who has complied with the requirements of
Section 262 of the Delaware General Corporation Law and who
is otherwise entitled to appraisal rights may file a petition in
the Chancery Court demanding a determination of the fair value
of the shares of common stock held by all holders entitled to
appraisal. Neither Emageon nor the other parties to the merger
agreement have any intention or obligation to file such a
petition. Accordingly, the failure of a holder to file a
petition in the
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Chancery Court demanding a determination of the fair value of
the shares within 120 days after the effective date of the
merger could nullify the holders previously written demand
for appraisal. Within 120 days after the effective date of
the merger, any holder of our common stock who has complied with
the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the surviving
corporation in the merger a statement setting forth the
aggregate number of shares not voted in favor of the merger and
with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. The
statement must be mailed to each such holder within 10 days
after a written request for the statement has been received by
the surviving corporation in the merger.
If a petition for appraisal is duly filed by a holder and a copy
of the petition is delivered to the surviving corporation in the
merger, the surviving corporation will then be obligated, within
20 days after receiving service of a copy of the petition,
to provide the Chancery Court with a duly verified list
containing the names and addresses of all holders who have
demanded an appraisal of their shares of common stock and with
whom agreements as to the value of their shares of common stock
have not been reached by the surviving corporation. After notice
to holders of our common stock who have demanded appraisal of
the time and place of the hearing of the petition, the Chancery
Court is empowered to conduct a hearing at which the Chancery
Court will determine those holders who have complied with
Section 262 of the Delaware General Corporation Law and who
have become entitled to appraisal rights. The Chancery Court may
require the holders who have demanded an appraisal for their
shares of common stock to submit their certificate(s) or other
instrument(s) evidencing an interest in shares of our common
stock to the Register in Chancery for notation of the pendency
of the appraisal proceedings, and if any stockholder fails to
comply with that direction, the Chancery Court may dismiss the
proceedings as to that holder.
After the court determines the stockholders entitled to
appraisal, the appraisal proceeding will be conducted in
accordance with the rules of the Chancery Court. Through such
proceeding, the Chancery Court will determine the fair value of
the shares, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with
interest, if any. Unless the Chancery Court, in its discretion,
determines otherwise for good cause shown, interest from the
effective date of the merger through the date of payment of the
judgment shall be compounded quarterly and shall accrue at 5%
over the Federal Reserve discount rate (including any surcharge)
as established from time to time during the period between the
effective date of the merger and the date of payment of the
judgment. When the fair value is determined, the Chancery Court
will direct the payment of the value, with interest, if any, to
the holders entitled to receive payment, upon surrender by such
holders of the certificate(s) or other instrument(s)
representing the applicable shares of our common stock.
In determining fair value, the Chancery Court is required to
take into account all relevant factors. You should be aware
that the fair value of your shares of common stock as determined
under Section 262 of the Delaware General Corporation Law
could be more, the same, or less than the amount of the merger
consideration that you are entitled to receive under the terms
of the merger agreement.
Costs of the appraisal proceeding may be imposed upon the
parties participating in the appraisal proceeding by the
Chancery Court as it deems equitable in the circumstances. Costs
do not include attorneys fees or expert witness fees or
expenses; however, upon the application of a holder, the
Chancery Court may order all or a portion of the expenses
incurred by any holder in connection with the appraisal
proceeding, including, without limitation, reasonable
attorneys fees and the fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal.
Any holder who has demanded appraisal rights will not, from and
after the effective date of the merger, be entitled to vote
shares of common stock subject to that demand for any purpose or
to receive payments of dividends or any other distribution with
respect to those shares, other than dividends or other
distribution payable to our stockholders of record in respect of
a record date prior to the effective date of the merger.
However, an appraisal demand may be withdrawn by a stockholder
within 60 days after the effective date of the merger
without the approval of the corporation surviving the merger, or
thereafter with the approval of the surviving corporation;
provided that the stockholder shall not have commenced an
appraisal proceeding with respect to such stockholders
shares or joined such a proceeding as a named party. Upon the
effective
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withdrawal of an appraisal demand by a stockholder, such
stockholder will be entitled to receive the merger
consideration. No appraisal proceeding in the Chancery Court
will be dismissed as to any stockholder without the approval of
the Chancery Court, and such approval may be subject to such
conditions as the Chancery Court deems just; provided, however,
that any stockholder who has not commenced an appraisal
proceeding as to such stockholders shares, or joined such
an appraisal proceeding as a named party, will retain the right
to withdraw his or her demand for appraisal within 60 days
after the effective date of the merger and to accept the merger
consideration. If the stockholder fails to perfect, effectively
withdraws or otherwise loses the appraisal right, the
stockholders shares will be converted into the right to
receive the merger consideration.
In view of the complexity of Section 262 of the Delaware
General Corporation Law, holders of shares of common stock who
may wish to pursue appraisal rights should promptly consult
their legal advisors.
Regulatory
Approvals
Under the merger agreement, we agreed with HSS to make, if
applicable, all appropriate filings with the United States
Federal Trade Commission, which we refer to as the FTC, and the
Antitrust Division of the United States Department of Justice,
which we refer to as the DOJ, under the HSR Act, and all
appropriate filings under foreign competition or merger control
laws. However, other than the filing of a certificate of merger
with the Secretary of State of the State of Delaware in order to
effect the merger, we do not believe that any regulatory filings
or applications, including under the HSR Act, are required to be
made in respect of the consummation of the merger.
If any lawsuit or legal proceeding is instituted that challenges
the merger agreement or the consummation of the transactions
contemplated by the merger agreement, each of the parties is
required under the merger agreement to use its reasonable best
efforts to defend or contest such lawsuit or proceeding.
Material
U.S. Federal Income Tax Consequences of the Merger
The following is a summary of certain U.S. federal income
tax consequences of the merger to stockholders of Emageon whose
shares of Emageon common stock are converted into the right to
receive cash in the merger. The following summary is based on
the Internal Revenue Code of 1986, as amended, Treasury
regulations promulgated thereunder, judicial decisions and
administrative rulings, all of which are subject to change,
possibly with retroactive effect. The summary applies only to
stockholders who hold shares of Emageon common stock as capital
assets and does not address all of the U.S. federal income
tax consequences that may be relevant to particular stockholders
in light of their individual circumstances or to stockholders
who are subject to special rules, including:
non-U.S. persons,
U.S. expatriates, insurance companies, dealers or brokers
in securities or currencies, tax-exempt organizations, financial
institutions, mutual funds, pass-through entities, and investors
in such entities, stockholders who hold their shares of Emageon
common stock as a hedge or as part of a hedging, straddle,
conversion, synthetic security, integrated investment, or other
risk-reduction transaction, or who are subject to alternative
minimum tax, or stockholders who acquired their shares of
Emageon common stock upon the exercise of employee stock options
or otherwise as compensation. Further, this discussion does not
address any U.S. federal estate and gift or alternative
minimum tax consequences or any state, local or foreign tax
consequences relating to the merger.
The
Merger
The receipt of cash pursuant to the merger will be a taxable
transaction for U.S. federal income tax purposes, and may
also be a taxable transaction under applicable state, local or
foreign income or other tax laws. Generally, for
U.S. federal income tax purposes, a stockholder will
recognize gain or loss equal to the difference between the
amount of cash received by the stockholder in the merger and the
stockholders adjusted tax basis in the shares of Emageon
common stock converted into cash in the merger. If shares of
Emageon common stock are held by a stockholder as capital
assets, gain or loss recognized by such stockholder will be
capital gain or loss, which will be long-term capital gain or
loss if the stockholders holding period for the shares of
Emageon common stock exceeds one year. Capital gains recognized
by an
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individual upon a disposition of a share of Emageon that has
been held for more than one year generally will be subject to a
maximum U.S. federal income tax rate of 15% or, in the case
of a share that has been held for one year or less, will be
subject to tax at ordinary income tax rates. For corporations,
capital gain is taxed at the same rate as ordinary income. In
addition, there are limits on the deductibility of capital
losses. The amount and character of gain or loss must be
determined separately for each block of Emageon common stock
(i.e., shares acquired at the same cost in a single
transaction) converted into cash in the merger.
Information
Reporting and Backup Withholding
Payments made to a stockholder whose shares of Emageon common
stock are exchanged for cash pursuant to the merger are subject
to information reporting and to backup withholding unless:
(i) the stockholder is a corporation or other exempt
recipient; or (ii) in the case of backup withholding, the
stockholder provides a correct taxpayer identification number,
and certifies that no loss of exemption from backup withholding
has occurred. The amount of any backup withholding from a
payment to a stockholder will be allowed as a credit against the
stockholders U.S. federal income tax liability and
may entitle the stockholder to a refund, provided that the
required information is furnished to the IRS.
THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET
FORTH ABOVE IS FOR GENERAL INFORMATION ONLY AND IS BASED ON THE
LAW IN EFFECT ON THE DATE HEREOF. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF
ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE
MERGER.
THE
MERGER AGREEMENT
The following sections describe the material provisions of the
merger agreement among Emageon, HSS and Merger Sub. The summary
of the material terms of the merger agreement below and
elsewhere in this proxy statement is qualified in its entirety
by reference to that agreement, a copy of which is attached to
this proxy statement as Annex A, and which is incorporated
by reference into this document. This summary may not contain
all of the information about the merger agreement that is
important to you as an Emageon stockholder. You are encouraged
to read carefully the merger agreement in its entirety.
The merger agreement has been included with this proxy
statement to provide you with information regarding its terms.
It is not intended to provide any factual, business or
operational information about Emageon. Such information can be
found elsewhere in this proxy statement and in the other public
filings Emageon makes with the SEC, which are available without
charge at
http://www.sec.gov.
The merger agreement contains representations and warranties
that Emageon, HSS and Merger Sub made to each other for purposes
of the merger agreement. These representations and warranties
were made as of specific dates, were solely for the benefit of
Emageon, HSS and Merger Sub, and may be subject to
qualifications, limitations and exceptions agreed to by the
contracting parties, including being qualified by confidential
disclosures exchanged among the parties in connection with the
negotiation and execution of the merger agreement. The
representations and warranties may have been made for the
purposes of allocating contractual risk among Emageon, HSS and
Merger Sub rather than establishing matters as facts, and may be
subject to contractual standards of materiality that may differ
from those generally applicable to disclosures to stockholders.
Emageons stockholders are not third-party beneficiaries
under the merger agreement, and you should not rely on the
representations and warranties, or any descriptions thereof, as
characterizations of the actual state of facts or condition of
Emageon or HSS or any of their respective subsidiaries or
affiliates. Information concerning the subject matter of the
representations and warranties may change after the date of the
merger agreement, which subsequent information may or may not be
fully reflected in Emageons public disclosures.
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The
Merger
Structure
Under the merger agreement, Merger Sub will be merged with and
into Emageon, and Emageon will survive the merger as a wholly
owned subsidiary of HSS. All of Emageons and Merger
Subs respective rights, and all of their respective
liabilities, will become those of Emageon as the surviving
entity in the merger.
Effective
Time
The closing of the merger will occur within two business days
after the satisfaction or, if permissible, waiver of all of the
closing conditions provided in the merger agreement, or on such
other date as HSS and Emageon may agree in writing. The merger
will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware, or at such
later time as is agreed upon in writing by HSS and Emageon and
specified in the certificate of merger.
Certificate
of Incorporation and Bylaws of Surviving
Corporation
As of the effective time of the merger, our certificate of
incorporation will be amended and restated to read as set forth
in the form attached to the merger agreement, and the bylaws of
Merger Sub will be the bylaws of the surviving corporation until
changed or amended in accordance with the terms thereof or by
applicable law.
Directors
and Officers of the Surviving Corporation
The directors and officers of Merger Sub immediately prior to
the effective time of the merger will be the initial directors
and officers, respectively, of the surviving corporation. The
directors and officers will serve until their respective
successors are duly elected or appointed and qualified or until
the earlier of their death, resignation or removal in accordance
with the certificate of incorporation or bylaws of the surviving
corporation.
Merger
Consideration; Conversion of Shares
Common
Stock
The merger agreement provides that each share of our common
stock outstanding immediately prior to the effective time of the
merger (other than shares owned by us, any of our subsidiaries,
HSS, Merger Sub or by holders properly exercising appraisal
rights under Delaware law) will be converted at the effective
time of the merger into the right to receive $2.85 in cash,
without interest and less any applicable withholding taxes.
Shares owned by us, any of our subsidiaries, HSS or Merger Sub
will be cancelled at the effective time of the merger without
any payment.
Treatment
of Stock Options and Stock-Based Awards
Stock
Options
At the effective time of the merger, each outstanding option to
acquire our common stock will become fully vested and will be
cancelled, and the holder of such option will be entitled to
receive an amount in cash, without interest and less any
applicable withholding tax, payable by the surviving corporation
as promptly as practicable following the effective time of the
merger, equal to the product of:
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the maximum number of shares of common stock subject to such
option with respect to which such option has not previously been
exercised, multiplied by
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the excess, if any, of $2.85 over the exercise price per share
of such option.
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Restricted
Stock
At the effective time of the merger, each outstanding share of
common stock held subject to a restricted stock agreement will
become fully vested and free of all restrictions and will be
cancelled and converted into the right to receive an amount in
cash, without interest and less any applicable withholding tax,
equal to the per share merger consideration of $2.85, which will
be payable by the surviving corporation as promptly as
practicable following the effective time of the merger.
Restricted
Stock Units
At the effective time of the merger, each outstanding restricted
stock unit award will be cancelled, and the holder will be
entitled to receive an amount in cash, without interest and less
any applicable withholding tax, payable as promptly as
practicable following the effective time of the merger, equal to:
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the maximum number of shares of common stock subject to such
restricted stock unit award, multiplied by the per share merger
consideration of $2.85, plus
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any dividend equivalents accrued, but not yet distributed, with
respect to such restricted stock unit award (other than any such
dividend equivalents that are held in the form of restricted
stock units as of the effective time of the merger).
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Payment
Procedures
Before the effective time of the merger, HSS will designate a
bank or trust company that is reasonably acceptable to us to act
as the paying agent under the merger agreement. On the closing
date, contemporaneously with the filing of the certificate of
merger with the Secretary of State of the State of Delaware, HSS
or Merger Sub will deposit, or cause to be deposited, in trust
with the paying agent cash in an amount equal to the aggregate
consideration payable in the merger. Before or promptly after
the effective time of the merger, but in no event more than
three business days after the effective time of the merger, the
paying agent will mail to each holder of record of shares of our
common stock immediately prior to the effective time a letter of
transmittal and instructions for use in effecting the surrender
of such holders Emageon stock certificates (or book-entry
shares) in exchange for cash. The letter of transmittal will
specify that delivery will be effected, and the risk of loss and
title to such certificates (or book-entry shares) will pass,
only upon proper delivery of the certificates (or book-entry
shares) to the paying agent.
Upon proper surrender to the paying agent of a stock certificate
(or book-entry share), together with a properly completed and
duly executed letter of transmittal and any other required
documents, you will be entitled to receive from the paying agent
$2.85 in cash, without interest and less any applicable
withholding tax, for each share represented by such stock
certificate (or each book-entry share), and the certificate (or
each such book-entry share) will be cancelled. No interest will
be paid or accrue on any merger consideration payable upon the
surrender of such certificates (or book-entry shares).
HSS, the surviving corporation and the paying agent will be
entitled to deduct and withhold from the consideration otherwise
payable to any holder of shares of Emageon common stock, stock
options, restricted stock or restricted stock units such amounts
that they are required to deduct and withhold with respect to
making such payment under the Internal Revenue Code, or any
other applicable state, local or foreign tax law.
If a transfer of shares of Emageon stock is not registered in
Emageons transfer records, the merger consideration to be
paid in respect of such transferred shares may be paid to the
transferee if the certificate (or each of the applicable
book-entry shares) is presented to the paying agent with all
documents required as evidence of the transfer and that all
applicable stock transfer taxes have been paid or are not
applicable.
If any share certificate for common stock has been lost, stolen
or destroyed, then before the owner will be entitled to receive
the merger consideration in respect of the shares represented by
that certificate, the owner of such certificate must sign an
affidavit claiming such certificate has been lost, stolen or
destroyed and, if required by the surviving corporation, post a
bond customary in amount and upon such terms as the
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surviving corporation may determine as indemnity against any
claim that may be made against the surviving corporation with
respect to that certificate.
At any time following the
18-month
anniversary of the effective time of the merger, the surviving
corporation may require the paying agent to deliver to it any
funds that have been made available to the paying agent for
payment of the merger consideration that have not been
distributed to former holders of our common stock. Any former
holders of our common stock who have not complied with the
above-described procedures may thereafter look only to the
surviving corporation (subject to abandoned property, escheat or
other similar laws) for payment of the merger consideration,
without interest, to which they are entitled upon surrender of
the certificates (or book-entry shares) held by them.
If any of our stockholders perfect appraisal rights with respect
to any of our shares, then we will treat those shares as
described under The Merger Appraisal
Rights.
Representations
and Warranties
The merger agreement contains certain representations and
warranties by each of the parties. These representations and
warranties relate to the following subject matters with respect
to each party and, as applicable, its subsidiaries:
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proper organization, good standing, and the power and authority
to own, lease and operate its assets and to carry on its
business;
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corporate power and authority to enter into and perform its
obligations under the merger agreement and to consummate the
merger and the other transactions contemplated by the merger
agreement, the due authorization and approval of the merger
agreement, and the enforceability of the merger agreement;
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required consents and approvals of, and filings with,
governmental entities as a result of the merger;
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the absence of any conflict with, or breach or violation of,
organizational documents, certain contracts and agreements,
permits and applicable law as a result of executing, delivering
and performing the merger agreement and consummating the merger;
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the absence of material legal actions or threats
thereof; and
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the accuracy of information supplied for inclusion in this proxy
statement.
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We also make a number of representations and warranties to HSS
and Merger Sub relating to, among other things:
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qualification and good standing in foreign jurisdictions;
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the vote of our stockholders that is required to adopt the
merger agreement;
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our capitalization, including outstanding common stock,
preferred stock, stock options, restricted stock and restricted
stock units, and the capitalization of our subsidiaries;
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our compliance with applicable laws, permits and judgments;
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possession of all material licenses and permits necessary to
own, operate and use our properties and assets and to conduct
our business;
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the absence of governmental investigations or proceedings;
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our filings and reports with the SEC and our compliance with
required disclosure controls and procedures and internal control
over financial reporting;
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our financial statements;
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the absence of certain undisclosed liabilities with respect to
us and our subsidiaries;
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the absence of certain changes to our business;
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certain specified types of contracts, including material
contracts, the validity and enforceability of those contracts,
our performance under and compliance with those contracts and
the existence of breaches and defaults under those contracts;
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matters relating to our benefit plans and agreements and
compliance with the Employee Retirement Income Security Act of
1974;
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our tax returns and other tax matters;
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our intellectual property;
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our insurance policies;
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title to our material real property and rights to our leasehold
interests in real property;
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the inapplicability of any takeover laws to the
merger and the other transactions contemplated by the merger
agreement;
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our receipt of a fairness opinion from SunTrust Robinson
Humphrey;
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our engagement of, and payment of fees to, brokers, finders and
investment bankers;
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the absence of certain transactions between us and any of our
affiliates;
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environmental matters;
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labor and employment matters and labor relations;
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the absence of certain unlawful or prohibited payments and
compliance with the provisions of the Foreign Corrupt Practices
Act of 1977; and
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our relationships with certain significant suppliers.
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HSS and Merger Sub also make a number of representations and
warranties to us relating to, among other things:
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the availability of funds sufficient to pay the aggregate merger
consideration;
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the debenture purchase agreement with SIBL, including its
enforceability and the conditions precedent to closing and
funding under that agreement;
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Merger Subs lack of prior operating activity;
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the solvency of HSS and the surviving corporation following the
merger;
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except as contemplated by the merger agreement and the schedules
thereto, the absence of agreements between HSS, Merger Sub or
any of their respective affiliates, on the one hand, and any of
our officers or directors, on the other hand; and
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not being an interested stockholder of Emageon (as
such term is defined in the Delaware General Corporation Law).
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Conduct
of Emageons Business Pending the Merger
Until the merger is completed or the merger agreement is
terminated, unless we obtain the prior written consent of HSS,
we have agreed that we will, and will cause each of our
subsidiaries to, conduct our operations in the ordinary course,
and use commercially reasonable efforts to maintain and preserve
intact our business organization, keep available the services of
our current officers, employees, consultants and independent
contractors, and preserve our goodwill and current relationships
with material customers, licensees and suppliers and other
persons and entities with which we have material business
relations.
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In addition, subject to certain limited exceptions, we have
agreed that, unless we obtain the prior written consent of HSS,
we will not, and will cause each of our subsidiaries not to,
take any of the following actions:
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amend our organizational documents;
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declare, set aside, or pay dividends on, or make other
distributions with respect to, our capital stock, or make any
payments to stockholders in their capacity as such;
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split, combine, subdivide or reclassify our capital stock;
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purchase, redeem, or otherwise acquire shares of our capital
stock or any other rights convertible or exchangeable into
shares of our capital stock, with certain exceptions;
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issue, grant, deliver, sell, pledge, transfer, convey, dispose
of or permit the imposition of any lien or other encumbrance on
any shares of our capital stock, any options, warrants or
securities exercisable or exchangeable for, or convertible into,
shares of our capital stock, or any outstanding stock
appreciation rights, stock awards, restricted stock, restricted
stock awards or similar rights with respect to shares of our
capital stock, with certain exceptions;
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increase the compensation or benefits payable to our directors,
officers or employees; enter into any new bonus or incentive
arrangement with our directors, officers or employees; grant or
pay severance or termination pay to our directors, officers or
employees; enter into new employment or severance agreements
with our directors, officers or employees; establish, adopt,
enter into, amend or take any action to accelerate rights under
existing benefit plans, or make any other change in any
compensation arrangement with any present or former employee,
officer, director, independent contractor, consultant, or
stockholder; or establish, terminate or materially amend any of
our benefit plans, subject to certain exceptions;
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sell, lease, license or otherwise dispose of or grant any liens
on any assets with values in excess of $50,000 individually or
$200,000 in the aggregate;
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license, lease, acquire, sublease, grant any lien affecting or
transfer any material interest in any material asset, other than
leases entered into in the ordinary course of business;
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amend, extend or terminate any leasehold interest in any
property other than in the ordinary course of business;
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make acquisitions of, capital contributions to or investments in
any business or any other entity;
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make purchases of material assets from another person or entity
other than purchases of current assets in the ordinary course of
business;
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incur, assume, guarantee or prepay any indebtedness for borrowed
money or offer, place or arrange any issue of debt securities or
commercial bank or other credit facilities, other than
short-term borrowings in the ordinary course of business
consistent with past practice under existing credit facilities
or as would not cause our aggregate outstanding indebtedness to
exceed $1,000,000;
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make any material loans, advances or capital contributions to,
or investments in, any other person or business entity, with
certain exceptions;
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authorize or make capital expenditures other than certain
specifically identified expenditures, or make capital
expenditures in the aggregate exceeding approximately $500,000
through December 31, 2008 and $250,000 after
December 31, 2008;
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change our financial accounting principles, policies or
procedures, other than as required by law or generally accepted
accounting principles, or write up, write down or write off the
book value of any of our assets;
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waive, release, assign, settle or compromise any material legal
action;
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settle or compromise any material tax audit, make or change any
material tax election or file any material amendment to a
material tax return;
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change any tax accounting period or any material tax accounting
method;
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enter into any material closing agreement, surrender any right
to claim a material tax refund or consent to any extension or
waiver of the limitation period applicable to any material tax
claim;
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satisfy, discharge, waive or settle any material right or
obligation;
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enter into, terminate or materially amend any material
contract; or
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eliminate any employee positions or terminate employees (except
for individual terminations based on such employees
failure to perform duties), or terminate the employment of two
or more employees.
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Conduct
of HSSs Business Pending the Merger
HSS and Merger Sub have agreed that, until the effective time of
the merger, they will not, directly or indirectly, knowingly
take or permit any action that would cause their representations
and warranties in the merger agreement to be untrue in any
material respect, or that would, or would reasonably be expected
to, individually or in the aggregate, prevent, materially delay
or materially impede the ability of HSS and Merger Sub to
complete the merger or the other transactions contemplated by
the merger agreement or the debenture purchase agreement.
No
Solicitation
In
General
We have agreed that we will not, will cause our officers,
directors and subsidiaries not to, and will not authorize our
representatives to:
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initiate, solicit or knowingly encourage or knowingly facilitate
the submission of any takeover proposal, or engage in
negotiations with respect to a takeover proposal;
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approve, recommend or endorse, or publicly propose to approve,
recommend or endorse, a takeover proposal;
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withdraw, modify or qualify, or publicly propose to withdraw,
modify or qualify, in a manner adverse to HSS and Merger Sub,
our Boards recommendation to our stockholders that they
adopt the merger agreement; or
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enter into any merger agreement, letter of intent, agreement in
principle or other agreement providing for a takeover proposal.
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However, until the merger agreement is adopted by our
stockholders, this non-solicitation covenant does not prohibit
us from furnishing information about Emageon and its
subsidiaries to, or from participating, engaging or assisting in
any manner in discussions or negotiations with, a third party in
respect of a takeover proposal if:
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we have received a written takeover proposal from such third
party;
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we have not intentionally or materially breached any of the
prohibitions of this non-solicitation covenant; and
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our Board or its Strategic Alternatives Committee:
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determines in good faith (after consultation with its financial
advisor and outside legal counsel) that the takeover proposal is
bona fide;
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determines in good faith (after consultation with its financial
advisor and outside legal counsel) that the takeover proposal
constitutes, or is reasonably expected to lead to, a superior
proposal; and
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determines in good faith (after consultation with outside legal
counsel) that the failure to furnish information to, and to
participate in discussions or negotiations with, such third
party could result in a violation of the Boards fiduciary
duties to our stockholders under applicable law.
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However, if non-public information is to be provided to such
third party, we must first enter into a confidentiality
agreement with such third party, the terms of which are not
materially less restrictive in the aggregate to the third party
than those contained in our confidentiality agreement with HSS,
and we must also provide to HSS any such non-public information
that was not previously provided to HSS.
We are required to promptly notify HSS within two business days
of the receipt of any takeover proposal, request for non-public
information concerning a takeover proposal or any bona fide
inquiry or request for discussions or negotiations regarding any
takeover proposal, and to disclose to HSS the material terms of
such takeover proposal, request or inquiry.
If our Board or its Strategic Alternatives Committee determines
in good faith (after consultation with its financial advisor and
outside legal counsel) that a takeover proposal constitutes a
superior proposal, and determines in good faith (after
consultation with outside legal counsel) that failing to take
action with respect to the superior proposal could result in a
violation of the Boards fiduciary duties to our
stockholders under applicable law, then the Board or the
Strategic Alternatives Committee may withdraw, modify or qualify
(or publicly propose to withdraw, modify or qualify), its
recommendation that our stockholders adopt the merger agreement,
recommend or endorse (or publicly propose to recommend or
endorse) a takeover proposal,
and/or cause
us to terminate the merger agreement to enter into a definitive
agreement with respect to the superior proposal, if:
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we provide HSS with three business days prior written
notice, and during such three business days we negotiate in good
faith with HSS to make adjustments to the merger agreement
(including the financial terms thereof) so that the takeover
proposal no longer constitutes a superior proposal; and
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in the event of a termination of the merger agreement, we pay a
termination fee of $3.0 million and enter into the new
definitive agreement simultaneously with the termination of the
merger agreement (as described under The Merger
Agreement Termination Fee below).
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If there are any material revisions to any applicable superior
proposal, we will be required to deliver a new written notice to
HSS and to comply with the requirements described above with
respect to the new written notice.
As long as we comply with the restrictions described above, the
merger agreement does not prohibit us from complying with our
disclosure obligations under federal or state law with regard to
a takeover proposal, including taking and disclosing to our
stockholders a position contemplated by
Rule 14d-9
and
Rule 14e-2(a)
promulgated under the Exchange Act, or from making any required,
in the good faith determination of our Board or its Strategic
Alternatives Committee, communication of the type contemplated
by
Rule 14d-9(f)
promulgated under the Exchange Act.
Definitions
of Takeover Proposal and Superior
Proposal
For the purposes of the merger agreement, a takeover
proposal means any proposal or offer from any person or
group other than HSS providing for the acquisition or purchase
of 20% or more of the value of our consolidated assets,
beneficial ownership of securities representing 20% or more of
our outstanding securities, a tender or exchange offer that if
consummated would result in any person or group beneficially
owning securities representing 20% or more of our outstanding
securities, or a merger, consolidation, share exchange, business
combination, recapitalization or similar transaction involving
Emageon (or any of our subsidiaries whose business constitutes
20% or more of our and our subsidiaries net revenues, net
income or assets, taken as a whole).
For the purposes of the merger agreement, a superior
proposal is a written takeover proposal (except, for
purposes of this definition, the references to 20% in the
definition of takeover proposal are changed to 50%) that our
Board of Directors (or its Strategic Alternatives Committee)
determines in good faith (after
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consultation with its financial advisor and outside legal
counsel) to be more favorable from a financial perspective
(taking into account such legal, financial, regulatory and other
aspects of such takeover proposal and the merger and the other
transactions contemplated by the merger agreement and such other
factors, matters and issues as are deemed relevant by our Board
of Directors or its Strategic Alternatives Committee, as
applicable, and the anticipated timing, conditions and prospects
for completion of such takeover proposal) to our stockholders
than the merger and the other transactions contemplated by the
merger agreement (taking into account all of the terms of any
proposal by HSS to amend or modify the terms of the merger and
the other transactions contemplated by the merger agreement) and
that is likely to be consummated if accepted.
Further
Action; Reasonable Best Efforts
Subject to the terms and conditions of the merger agreement and
in accordance with applicable law, we, HSS and Merger Sub have
agreed to use our respective reasonable best efforts to take or
do, or cause to be taken or done, all actions and all things
necessary, proper or advisable to consummate the transactions
contemplated by the merger agreement as promptly as practicable.
Without limiting the foregoing, the parties have agreed to use
their reasonable best efforts to:
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obtain all necessary actions or non-actions, waivers, consents
and approvals of governmental entities;
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if applicable, make filings with the FTC and DOJ under the HSR
Act;
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if applicable, make appropriate filings under foreign
competition or merger control laws;
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obtain all consents, approvals and waivers from any third
parties necessary or advisable to be obtained in connection with
the transactions contemplated by the merger agreement (provided,
that, except with respect to certain specified contracts,
obtaining such consents, approvals and waivers is not required
as a condition to completing the merger);
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defend or contest any lawsuit or legal proceeding that
challenges the merger agreement or the consummation of the
transactions contemplated by the merger agreement; and
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promptly obtain the financing necessary to pay the merger
consideration.
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Financing;
Company Cooperation
HSS and Merger Sub have agreed to use their commercially
reasonable efforts to arrange the financing contemplated by the
debenture purchase agreement as promptly as practicable on the
terms and conditions described in the debenture purchase
agreement, including using reasonable best efforts to maintain
in effect the debenture purchase agreement, satisfy on a timely
basis all conditions applicable to them under the debenture
purchase agreement, and enforce their rights under the debenture
purchase agreement. Subject to the terms of the merger
agreement, HSS has agreed that it will not amend or modify the
debenture purchase agreement without our consent if the
amendment or modification would impose new or additional
conditions or otherwise be reasonably likely to materially delay
the financing of the merger consideration or the completion of
the merger.
We have agreed that we will provide, and will cause our
subsidiaries and our and their representatives to provide, at
HSSs sole expense and upon reasonable prior notice, all
reasonable cooperation as is customary and may be reasonably
requested by HSS in connection with the financing contemplated
by the debenture purchase agreement. HSS has agreed to indemnify
and hold us, our subsidiaries and our and their representatives,
harmless from liabilities, losses, costs and expenses suffered
or incurred in connection with the arrangement of the financing.
Indemnification
and Insurance
HSS and the surviving corporation have agreed to indemnify each
current and former Emageon director and officer for losses in
respect of legal actions to which he or she is made a party in
connection with his or her actions, before the effective time,
as an Emageon director or officer. Such indemnification will be
to the fullest extent permitted or required by, and subject to
exceptions and limitations imposed by, applicable law
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and Emageons organizational documents. For six years
following the effective time of the merger, the surviving
corporation will include in its organizational documents
provisions regarding the elimination of liability of directors,
indemnification of officers and directors and advancement of
expenses no less advantageous to these indemnified parties than
the corresponding provisions contained in Emageons
organizational documents on the date of the merger agreement.
HSS and Emageon have agreed that the surviving corporation will
maintain Emageons current directors and
officers liability insurance and fiduciary liability
insurance for six years following the effective time of the
merger on terms no less favorable than those of the policies in
effect on the date of the merger agreement. The surviving
corporation is not required, however, to pay annual premiums in
excess of 200% of the cost of the premiums for such policies on
the date of the merger agreement, and will notify covered
parties if such a cap is reached so that they may purchase
additional coverage if desired.
Employee
Benefits
HSS has agreed that the surviving corporation and its affiliates
will honor our benefit plans (including any severance,
retention, change of control or similar plans), agreements and
offer letters, other than commitments to grant equity
compensation, in accordance with their terms as in effect
immediately prior to the effective time of the merger, subject
to any amendment or termination that may be expressly permitted
by the terms of any such plan.
HSS also agreed that, from the effective time of the merger
until the first anniversary of the effective time of the merger,
the surviving corporation will provide all persons who are
employees of Emageon and its subsidiaries as of the effective
time of the merger and who continue employment with the
surviving corporation benefits under employee benefit plans and
other fringe benefits, other than equity based compensation, no
less favorable in the aggregate, on a group basis, than the
benefits provided by Emageon immediately prior to the effective
time of the merger. The surviving corporation is not required,
however, to maintain any particular plan, and is not prevented
from making changes to plans consistent with the plans
terms.
HSS has agreed that our employees (and those of any of our
subsidiaries) who continue employment with the surviving
corporation will receive credit, to the extent recognized in a
similar plan in which such employee participated immediately
prior to the effective time of the merger, for all service with
Emageon and its affiliates for all purposes, including
determining eligibility to participate, level of benefits and
vesting under the employee benefit plans of the surviving
corporation, to the extent that such credit would not result in
a duplication of accrual of benefits for the same period of
service. In addition, HSS has agreed that each such employee
will be eligible to participate, without a waiting period, in
any new benefit plan that replaces coverage under a comparable
benefit plan in which he or she participated immediately prior
to the effective time of the merger, and that the surviving
corporation will use commercially reasonable efforts to have
pre-existing condition exclusions and actively-at-work
requirements for such new plans waived for such employees to the
extent they were waived or inapplicable under such comparable
pre-effective time plans. The surviving corporation is required
to take into account any eligible expenses incurred by each such
employee during the portion of the plan year of a pre-effective
time plan for purposes of satisfying deductibles, coinsurance
and maximum out-of-pocket requirements under any corresponding
new plan.
Conditions
to Closing
Conditions
to Each Partys Obligation to Complete the
Merger
Each partys obligation to complete the merger is subject
to the satisfaction or waiver of the following conditions:
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the merger agreement must have been adopted by our stockholders;
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if applicable, the waiting period (and any extensions thereof)
under the HSR Act must have expired or been terminated, and, if
any competition or merger control laws of any foreign
jurisdiction are applicable, the approval or consent of the
applicable governmental entity under such laws must have been
obtained;
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no governmental entity shall have enacted or issued any law or
order making the merger illegal or otherwise preventing or
prohibiting the consummation of the merger; and
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no governmental entity shall have commenced and not withdrawn
any proceeding seeking to enjoin or otherwise prohibit the
consummation of the merger.
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Additional
Conditions to HSSs and Merger Subs Obligations to
Complete the Merger
HSSs and Merger Subs obligations to complete the
merger are subject to the satisfaction by us, or waiver by HSS,
of the following additional conditions:
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our representations and warranties in the merger agreement that
are qualified by materiality or by reference to a material
adverse effect must be true and correct, and our other
representations and warranties must be true and correct in all
material respects, in each case as of the closing date, as
though made on the closing date (except to the extent a
representation or warranty is expressly made as of an earlier
date, in which case as of such date);
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we must have performed in all material respects all obligations,
and complied in all material respects with the agreements and
covenants, that are required to be performed or complied with by
us under the merger agreement on or prior to the effective time
of the merger;
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HSS must have received a certificate dated the closing date and
signed on behalf of Emageon by one of our senior executive
officers to the effect that the conditions with respect to our
representations and warranties, and conditions with respect to
our obligations, have been satisfied;
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there must not have occurred any material adverse effect with
respect to us since the date of the merger agreement; and
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all waivers or consents must have been obtained with respect to
certain specified contracts.
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Additional
Conditions to Our Obligation to Complete the
Merger
Our obligation to complete the merger is subject to satisfaction
by HSS or Merger Sub, or waiver by us, of the following
additional conditions:
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HSSs and Merger Subs representations and warranties
in the merger agreement that are qualified by materiality or by
reference to a material adverse effect must be true and correct,
and their other representations and warranties must be true and
correct in all material respects, in each case as of the closing
date, as though made on the closing date (except to the extent a
representation or warranty is expressly made as of an earlier
date, in which case as of such date);
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HSS and Merger Sub must have performed in all material respects
all obligations, and complied in all material respects with the
agreements and covenants, that are required to be performed or
complied with by them under the merger agreement on or prior to
the effective time of the merger; and
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we must have received a certificate dated the closing date and
signed on behalf of HSS by a senior executive officer of HSS to
the effect that the conditions with respect to HSSs and
Merger Subs representations and warranties, and the
conditions with respect to their obligations, have been
satisfied.
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Consummation of the merger is not conditioned on HSSs
obtaining financing.
Termination
of the Merger Agreement
Termination
by Emageon and/or HSS
The merger agreement may be terminated and the merger may be
abandoned at any time before the effective time of the merger by
the mutual written consent of Emageon and HSS. The merger
agreement may be terminated by either Emageon or HSS, upon
written notice to the other and assuming that no failure by the
terminating party to fulfill any of its obligations under the
merger agreement has been a principal cause of or resulted in
the failure of a condition to the merger, if:
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the effective time of the merger is not on or before
March 31, 2009;
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the merger agreement is submitted to, but is not adopted by, our
stockholders at a duly convened stockholders meeting; or
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any law or governmental entity prohibits consummation of the
merger, or any final non-appealable order restrains, enjoins or
otherwise prohibits consummation of the merger, and the
terminating party has used its reasonable best efforts to remove
or avoid such prohibition or order.
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Termination
by HSS
The merger agreement may be terminated by HSS by written notice
to Emageon before the effective time of the merger if:
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our Board withdraws, modifies or qualifies, or publicly proposes
to withdraw, modify or qualify, in a manner adverse to HSS and
Merger Sub, our Boards recommendation to our stockholders
that they adopt the merger agreement;
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our Board approves, recommends or endorses, or proposes publicly
to recommend or endorse, any takeover proposal other than the
merger;
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our Board enters into any letter of intent or similar document
or any contract accepting any takeover proposal;
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we fail to include in this proxy statement the recommendation of
our Board of Directors that our stockholders vote
FOR adoption of the merger agreement;
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we intentionally and knowingly materially breach any of our
non-solicitation and related obligations with respect to
takeover proposals; or
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we breach any representation, warranty, covenant or agreement in
the merger agreement in a manner that would give rise to the
failure of a closing condition and such breach is incapable of
being cured by March 31, 2009 (provided that neither HSS
nor Merger Sub also is then in material breach of the merger
agreement in a manner that would give rise to the failure of a
closing condition).
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Termination
by Emageon
The merger agreement may be terminated by Emageon by written
notice to HSS before the effective time of the merger if:
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a breach of any representation, warranty, covenant or agreement
on the part of HSS or Merger Sub set forth in the merger
agreement shall have occurred which would prevent HSS or Merger
Sub from consummating the transactions contemplated by the
merger agreement, and such breach is incapable of being cured by
March 31, 2009 (provided that we are not also then in
material breach of the merger agreement in a manner that would
give rise to the failure of a closing condition);
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all conditions to closing have been satisfied, other than those
conditions that by their terms are to be satisfied at the
closing, or waived, and neither HSS nor Merger Sub receives, on
or before the day designated for closing, the proceeds of the
financing under the debenture purchase agreement in an amount
sufficient to consummate the transactions contemplated by the
merger agreement; or
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before our stockholders adopt the merger agreement, we receive a
takeover proposal and our Board of Directors or its Strategic
Alternatives Committee determines that the takeover proposal is
a superior proposal and that failing to take action with respect
to the superior proposal would constitute a breach of the
Boards fiduciary duties to our stockholders under
applicable law, if:
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we provide HSS with three business days prior written
notice, and during such three business days we negotiate in good
faith with HSS to make adjustments to the merger agreement
(including the financial terms thereof) so that the takeover
proposal no longer constitutes a superior proposal; and
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we pay to HSS a termination fee of $3.0 million and enter
into a definitive agreement with respect to such superior
proposal simultaneously with the termination of the merger
agreement.
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Expenses;
Termination Fee; Remedies
Expenses
The merger agreement provides that, in general, regardless of
whether the merger is consummated, all expenses incurred by the
parties in connection with the merger agreement and the merger
will be paid by the party incurring those expenses.
Termination
Fee
We will be required to pay to HSS a termination fee of
$3.0 million if:
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HSS terminates the merger agreement because:
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our Board withdraws, modifies or qualifies, or publicly proposes
to withdraw, modify or qualify, in a manner adverse to HSS and
Merger Sub, our Boards recommendation to our stockholders
that they adopt the merger agreement;
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our Board approves, recommends or endorses, or proposes publicly
to recommend or endorse, any takeover proposal other than the
merger;
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our Board enters into any letter of intent or similar document
or any contract accepting any takeover proposal;
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we fail to include in this proxy statement the recommendation of
our Board of Directors that our stockholders vote
FOR adoption of the merger agreement; or
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we intentionally and knowingly materially breach any of our
non-solicitation and related obligations with respect to
acquisition proposals;
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we terminate the merger agreement because our Board or its
Strategic Alternatives Committee determines that it has received
a superior proposal, and to enter into a definitive agreement
with respect to the superior proposal; or
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a bona fide takeover proposal is made known publicly and not
withdrawn before the merger agreement is terminated, and
(i) the merger agreement is terminated because the
effective time of the merger is not on or before March 31,
2009, the merger agreement is submitted to, but is not adopted
by, our stockholders at a duly convened stockholders meeting, or
we breach any representation, warranty, covenant or agreement in
the merger agreement in a manner that would give rise to the
failure of a closing condition and such breach is incapable of
being cured by March 31, 2009, and (ii) within
12 months after the merger agreement is terminated, we or
any of our subsidiaries enters into a definitive agreement
providing for the implementation of that takeover proposal or
consummates that takeover proposal.
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For purposes of determining whether a termination fee is payable
by us, the references to 20% in the definition of takeover
proposal are changed to 50%. If HSS receives payment of the
termination fee upon any such termination of the merger
agreement, HSS, Merger Sub and their affiliates are precluded
from any other remedy against us, our affiliates or
representatives at law or in equity or otherwise.
Remedies
Under the terms of the deposit escrow agreement, which is
described below under the heading The Merger
Agreement Other Agreements, we are entitled to
the $5.0 million deposited thereunder with the escrow
agent, including any interest or investment proceeds thereof, as
a non-exclusive remedy if we either terminate the merger
agreement because HSS has not received the proceeds of its
financing within two business days of our satisfaction of our
obligations under the merger agreement, or we terminate the
merger agreement and HSS is finally determined by a final
non-appealable order of a court of competent jurisdiction to
have intentionally breached any of its representations,
warranties, covenants or other agreements set forth in the
merger agreement.
Each of the parties to the merger agreement is entitled to an
injunction to prevent breaches of the merger agreement and to
enforce specifically the terms and provisions of the merger
agreement, including the requirements that each party take all
actions pursuant to the merger agreement as are necessary on its
part to
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consummate the merger, and HSSs obligations with respect
to arranging, enforcing and consummating its financing under the
debenture purchase agreement.
Material
Adverse Effect
For purposes of the merger agreement, a material adverse
effect as it relates to Emageon means any event, change,
occurrence or effect, individually or when taken together with
all other events, changes, occurrences or effects, (i) that
would reasonably be expected to materially impair the ability of
Emageon to consummate the merger, or (ii) is or reasonably
would be expected to be materially adverse to the business,
financial condition, results of operations, assets, liabilities
or properties of Emageon and its subsidiaries, taken as a whole,
other than any event, change, occurrence or effect relating to
or resulting from:
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changes or developments in the economic, business, financial or
regulatory environment affecting the industries in which we
operate, so long as such changes or developments do not have a
materially disproportionate effect on us and our subsidiaries,
taken as a whole;
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terrorist acts, war, natural disasters or acts of God, so long
as such acts or occurrences do not have a materially
disproportionate effect on us and our subsidiaries, taken as a
whole;
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changes in domestic or international economic conditions or
financial, credit or securities markets, so long as such changes
do not have a materially disproportionate effect on us and our
subsidiaries, taken as a whole;
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the suspension of trading generally on the New York Stock
Exchange, American Stock Exchange or NASDAQ;
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changes in applicable law or generally accepted accounting
principles or the enforcement or interpretation thereof after
the date of the merger agreement, so long as such changes do not
have a materially disproportionate effect on us and our
subsidiaries, taken as a whole;
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the identity of HSS or any of its affiliates as the acquiror of
Emageon;
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the failure to meet public expectations, projections, forecasts
or estimates for any period ending on or after the date of the
merger agreement;
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any change, in and of itself, in the market price or trading
volume of our common stock after the date hereof;
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acts or omissions of HSS or Merger Sub following the date of the
merger agreement; or
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the taking of any action required by the merger agreement, or
taking or not taking any action at the request of, or with the
express written consent of, HSS.
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Amendment
and Waiver
The merger agreement may be amended at any time by the written
agreement of Emageon, HSS and Merger Sub, but after approval of
our stockholders has been obtained, no amendment can be made
that by law requires further approval by our stockholders
without such approval, and any amendment must be duly authorized
and approved by each of HSS and Merger Sub. Either Emageon or
HSS may extend the time for performance of the other
partys obligations, waive any inaccuracies in the other
partys representations and warranties in the merger
agreement or in any document delivered under the merger
agreement, or, unless prohibited by law, waive compliance with
any of the covenants or conditions contained in the merger
agreement.
Other
Agreements
In addition to the agreements described above, we and HSS have
agreed in the merger agreement to take several other actions,
including those listed below.
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We agreed to provide HSS information concerning our business and
to give HSS access to our books, records, properties and
personnel and to cause our subsidiaries to do the same.
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We agreed to notify HSS and Merger Sub of the receipt of certain
communications from governmental entities or third parties
relating to the merger and the transactions contemplated by the
merger
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agreement; the commencement or threat in writing of certain
legal actions, events, changes or occurrences that would affect
our ability to satisfy conditions to the closing of the merger;
material failures to comply with or satisfy any covenant,
condition or agreement under the merger agreement; and the
occurrence of an event that would reasonably be expected to have
a material adverse effect on us or reasonably be expected to
cause a condition to the closing of the merger not to be
satisfied.
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HSS and Merger Sub agreed to notify us of the receipt of certain
communications from government entities or third parties
relating to the merger and the transactions contemplated by the
merger agreement; the commencement or threat in writing of
certain legal actions, events, changes or occurrences that would
affect their ability to satisfy conditions to the closing of the
merger; material failures to comply with or satisfy any
covenant, condition or agreement under the merger agreement; and
the occurrence of an event that would reasonably be expected to
cause a condition to the closing of the merger not to be
satisfied.
|
|
|
|
Subject to certain exceptions, except as would violate
applicable law or the rules or regulations of any securities
exchange, we and HSS agreed that no public release or
announcement will be issued by either of us without the prior
written consent of the other.
|
|
|
|
We agreed to use our reasonable best efforts to obtain and
deliver to HSS at the closing resignations of those of our
directors and officers, and those of our subsidiaries, as are
designated by HSS.
|
|
|
|
We agreed to convene and hold a stockholders meeting as
promptly as reasonably practicable after the SEC confirms that
it has no further comments on this proxy statement. We are
required to hold the stockholders meeting regardless of
whether our Board of Directors changes its recommendation
regarding the merger, unless the merger agreement is terminated.
|
Voting
Agreements
In connection with the execution of the merger agreement, HSS
and Merger Sub entered into Voting Agreements with the following
officers, directors and stockholder of Emageon:
Charles A. Jett, President and Chief Executive Officer
Keith Stahlhut, Principal Operating Officer
John W. Wilhoite, Chief Financial Officer and Treasurer
Arthur P. Beattie, director
Roddy J. H. Clark, director
Fred C. Goad, director
Bradley S. Karro, director
Mylle H. Mangum, director
Augustus K. Oliver, director
John W. Thompson, director
Benner Ulrich, director
Hugh H. Williamson, III, Chairman of the Board of
Directors
Oliver Press Partners, LLC, an affiliate of Messrs. Oliver
and Ulrich
The voting agreements provide that in any circumstance in which
the vote, consent or approval of our stockholders is sought with
respect to the merger agreement or a takeover proposal, each
officer, director or stockholder will vote (or cause to be
voted), in person or by proxy, or deliver (or cause to be
delivered) a written consent (i) in favor of the adoption
of the merger agreement and any related proposal in furtherance
thereof, as reasonably requested by HSS; (ii) against any
action, proposal or agreement that is in opposition to, or to
the knowledge of the officer, director or stockholder (based
upon the advice of counsel) is competitive or materially
inconsistent with, the merger or to the knowledge of the
officer, director or stockholder (based upon the advice of
counsel) would result in a breach of any covenant,
representation or warranty or any other obligation or agreement
of Emageon contained in the merger agreement, or of the officer,
director or stockholder contained in the voting agreement; and
(iii) against any takeover proposal and against any other
action, agreement or transaction that the officer, director or
stockholder knows would impede, interfere with, delay, postpone,
discourage, frustrate the purposes of or adversely affect the
merger or the other transactions contemplated by the merger
agreement or the voting agreement or the performance by Emageon
of its
67
obligations under the merger agreement or by the officer,
director or stockholder of its obligations under the voting
agreement.
The voting agreements will terminate upon the earlier of
(i) the closing of the merger agreement; (ii) the
termination of the merger agreement in accordance with its
terms; (iii) six months after the date of execution of the
voting agreements; or (iv) at the option of the officer,
director or stockholder, upon amendment, waiver or modification
of the terms of the merger agreement or any amendment, waiver or
modification of the terms of the merger agreement that changes
the form of or decreases the amount of payment from what is set
forth in the merger agreement.
The voting agreements also required the officers, directors and
stockholder to deliver an irrevocable proxy to designees of HSS.
The irrevocable proxy enables HSS to vote the shares of the
officer, director or stockholder as specified above. As of the
record date for the special meeting, the officers, directors and
stockholder who entered into the voting agreements collectively
held and were entitled to vote 3,794,387 shares of Emageon
common stock which represents approximately 17.69% of the
outstanding Emageon common stock entitled to vote at the special
meeting. None of the officers, directors and stockholder who are
parties to the voting agreements was paid consideration in
connection with the voting agreements. A copy of the form of
voting agreement is attached as Annex C to this proxy
statement.
Deposit
Escrow Agreement
In connection with the merger agreement, on October 21,
2008, we entered into a Deposit Escrow Agreement with HSS and
The Bank of New York Mellon, as the escrow agent, under which
HSS deposited $5.0 million with the escrow agent. We are
entitled to the deposit, including any interest or investment
proceeds thereof, as a non-exclusive remedy if we either
terminate the merger agreement because HSS has not received the
proceeds of its financing within two business days of our
satisfaction of our obligations under the merger agreement, or
we terminate the merger agreement and HSS is finally determined
by a final non-appealable order of a court of competent
jurisdiction to have intentionally breached any of its
representations, warranties, covenants or other agreements set
forth in the merger agreement. A copy of the deposit escrow
agreement is attached as Annex D to this proxy statement.
68
PROPOSAL 2
AUTHORITY TO ADJOURN THE SPECIAL MEETING
The
Adjournment Proposal
If at the special meeting of stockholders, the number of shares
of Emageon common stock represented and voting in favor of
adoption of the merger agreement is insufficient to adopt that
proposal under the Delaware General Corporation Law, we may move
to adjourn the special meeting in order to enable our Board of
Directors to solicit additional proxies in respect of such
proposal. In that event, we will ask our stockholders to vote
only upon the adjournment proposal, and not the proposal
regarding the adoption of the merger agreement.
In this proposal, we are asking you to authorize the holder of
any proxy solicited by our Board of Directors to vote in favor
of granting discretionary authority to the proxy or
attorney-in-fact to adjourn the special meeting to another time
and place for the purpose of soliciting additional proxies. If
the stockholders approve the adjournment proposal, we could
adjourn the special meeting and any adjourned session of the
special meeting and use the additional time to solicit
additional proxies, including the solicitation of proxies from
stockholders that have previously voted. Among other things,
approval of the adjournment proposal could mean that, even if we
had received proxies representing a sufficient number of votes
against the adoption of the merger agreement to defeat that
proposal, we could adjourn the special meeting without a vote on
the merger agreement and seek to convince the holders of those
shares to change their votes to votes in favor of adoption of
the merger agreement.
Failure of this proposal to pass will not affect the ability of
the holder of any proxy solicited by us to adjourn the special
meeting in the event insufficient shares of Emageon common stock
are represented to establish a quorum, or for any other lawful
purpose.
Vote
Required and Board Recommendation
Approval of the proposal to adjourn the special meeting for the
purpose of soliciting proxies, if necessary, requires the
affirmative vote of the holders of a majority of the shares
voted on such proposal. Abstentions and broker non-votes will
have no effect on the proposal to adjourn the special meeting.
For the reasons set forth in this proxy statement, our Board
of Directors recommends that our stockholders vote
FOR the proposal to adjourn the special meeting, if
necessary or appropriate, to solicit additional proxies.
69
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to us
with respect to the beneficial ownership of our common stock as
of November 12, 2008 by (i) each member of our Board
of Directors, (ii) our named executive officers,
(iii) all of our directors and executive officers as a
group, and (iv) any person who is known by us to be the
beneficial owner of more than 5% of our common stock as defined
in accordance with
Rule 13d-3
under the Exchange Act.
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Beneficially
|
|
|
Percent
|
|
Beneficial Owner
|
|
Owned(1)(2)
|
|
|
Owned(3)
|
|
|
Non-Employee Directors(4)
|
|
|
|
|
|
|
|
|
Arthur P. Beattie
|
|
|
21,909
|
(5)
|
|
|
*
|
|
Roddy J.H. Clark
|
|
|
21,424
|
(5)
|
|
|
*
|
|
Fred C. Goad, Jr.
|
|
|
21,909
|
(5)
|
|
|
*
|
|
Bradley S. Karro
|
|
|
|
|
|
|
*
|
|
Mylle H. Mangum
|
|
|
21,909
|
(5)
|
|
|
*
|
|
Augustus K. Oliver
|
|
|
3,569,360
|
(6)
|
|
|
16.64
|
%
|
John W. Thompson
|
|
|
151,029
|
(5)(7)
|
|
|
*
|
|
Benner Ulrich
|
|
|
|
(8)
|
|
|
*
|
|
Hugh H. Williamson, III
|
|
|
28,560
|
(5)
|
|
|
*
|
|
Named Executive Officers(4)
|
|
|
|
|
|
|
|
|
Charles A. Jett, Jr.
|
|
|
675,852
|
(5)
|
|
|
3.06
|
%
|
W. Randall Pittman
|
|
|
15,083
|
(5)(9)
|
|
|
*
|
|
John W. Wilhoite
|
|
|
27,572
|
(5)(9)
|
|
|
*
|
|
Chris E. Perkins
|
|
|
6,751
|
(5)(10)
|
|
|
*
|
|
Keith Stahlhut
|
|
|
77,891
|
(5)(10)
|
|
|
*
|
|
All Directors and Executive Officers as a Group
(12 Persons)
|
|
|
4,617,415
|
(11)
|
|
|
20.73
|
%
|
Five Percent or Greater Stockholders
|
|
|
|
|
|
|
|
|
Health Systems Solutions, Inc.(12)
|
|
|
4,617,415
|
|
|
|
20.73
|
%
|
Oliver Press Partners, LLC(6)
Oliver Press Investors, LLC
Augustus K. Oliver
Clifford Press
|
|
|
3,569,360
|
|
|
|
16.64
|
%
|
Accipiter Capital Management, LLC (13)
Candens Capital, LLC
Gabe Hoffman
|
|
|
2,846,202
|
|
|
|
13.27
|
%
|
Deerfield Capital, L.P. (14)
Deerfield Management Company, L.P.
James E. Flynn
|
|
|
2,428,000
|
|
|
|
11.32
|
%
|
D.E. Shaw & Co., L.P. (15)
David E. Shaw
|
|
|
1,448,967
|
|
|
|
6.76
|
%
|
Prescott Group Capital Management, L.L.C.(16)
|
|
|
1,294,724
|
|
|
|
6.04
|
%
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
Except as indicated in the footnotes to this table, the persons
listed have sole voting and investment power with respect to all
shares of common stock beneficially owned by them. |
|
|
|
(2) |
|
Does not include outstanding restricted stock unit awards which
vest within 60 days after November 12, 2008 but for
which the settlement date is one year following the final
vesting date under the award agreement therefor. |
70
|
|
|
(3) |
|
The percentage of shares beneficially owned is based on
21,449,459 shares of common stock outstanding as of
November 12, 2008. Shares of common stock subject to
options that are currently exercisable or exercisable within
60 days after November 12, 2008 are deemed to be
outstanding and beneficially owned by the person holding the
options for the purpose of computing the number of shares
beneficially owned and the percentage of ownership of such
person, but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person. |
|
|
|
(4) |
|
The address for each non-employee director and named executive
officer is 1200 Corporate Drive, Suite 200, Birmingham,
Alabama 35242. |
|
|
|
(5) |
|
Includes, for the respective beneficial owner, beneficial
ownership of the following numbers of shares that may be
acquired by such beneficial owner upon the exercise of stock
options that are currently exercisable or exercisable within
60 days after November 12, 2008: |
|
|
|
|
|
Beneficial Owner
|
|
Shares
|
|
Arthur P. Beattie
|
|
|
19,909
|
|
Roddy J.H. Clark
|
|
|
19,424
|
|
Fred C. Goad, Jr.
|
|
|
19,909
|
|
Bradley S. Kano
|
|
|
|
|
Mylle H. Mangum
|
|
|
19,909
|
|
Augustus K. Oliver
|
|
|
|
|
John W. Thompson
|
|
|
17,000
|
|
Benner A. Ulrich
|
|
|
|
|
Hugh H. Williamson, III
|
|
|
17,000
|
|
Charles A. Jett, Jr.
|
|
|
611,232
|
|
W. Randall Pittman
|
|
|
|
|
John W. Wilhoite
|
|
|
27,572
|
|
Chris E. Perkins
|
|
|
|
|
Keith Stahlhut
|
|
|
71,073
|
|
|
|
|
(6) |
|
Information based on a Schedule 13D/A jointly filed with
the SEC on October 21, 2008 by Oliver Press Partners, LLC,
Oliver Press Investors, LLC, Augustus K. Oliver and Clifford
Press, who shared, as of October 21, 2008, voting and
dispositive power over 100 shares held by Davenport
Partners, L.P., a Delaware limited partnership,
2,934,600 shares owned by JE Partners, a Bermuda
partnership, and 634,660 shares owned by Oliver Press
Master Fund LP, a Cayman Islands limited partnership. The
address for these parties is 152 West 57th Street, New
York, New York 10019. |
|
(7) |
|
Does not include shares held by the Marianna Thompson Trust, the
beneficiary of which is Mr. Thompsons former spouse,
or shares held by two grantor retained annuity trusts, the
beneficiaries of which are Mr. Thompsons adult
children. Mr. Thompson has no pecuniary interest in these
trusts, and no voting or dispositive power with respect to the
shares held by these trusts. |
|
(8) |
|
Mr. Ulrich is an employee of Oliver Press Partners, LLC
which, through its affiliates, is the beneficial owner of
3,569,360 shares of common stock. See Note 5.
Mr. Ulrich does not exercise any voting, investment or
other authority with respect to the shares of common stock
beneficially owned by Oliver Press Partners, LLC, and disclaims
beneficial ownership of such shares. |
|
(9) |
|
Mr. Wilhoite was appointed as Chief Financial Officer and
Treasurer of Emageon effective as of March 31, 2008.
Mr. Wilhoite succeeded Mr. Pittman, who resigned those
positions effective as of March 31, 2008. |
|
(10) |
|
Mr. Perkins resigned as Chief Operating Officer of Emageon
effective as of July 25, 2008. On July 29, 2008,
Mr. Stahlhut was appointed to serve as Emageons
Principal Operating Officer until such time as a successor Chief
Operating Officer is appointed. |
|
|
|
(11) |
|
Includes options for 823,028 shares of common stock subject
to stock options that are currently exercisable or exercisable
within 60 days after November 12, 2008. |
71
|
|
|
(12) |
|
Oliver Press Partners, LLC and each of our current executive
officers and directors entered into voting agreements with HSS
obligating them to vote their shares, among other things, in
favor of the merger agreement, and with respect to which such
persons granted certain designees of HSS a proxy granting such
designees the right to vote on each such persons behalf
with regard to such matters. Includes options with respect to
823,028 shares that may be acquired by such executive
officers and directors upon the exercise of stock options that
are currently exercisable or exercisable within 60 days
after November 12, 2008. See the section of this proxy
statement entitled The Merger Agreement Other
Agreements beginning on page 66 and Annex C
hereto. |
|
|
|
(13) |
|
Information based on a Form 4 filed with the SEC on
October 28, 2008 by Candens Capital, LLC, a Delaware
limited liability company, Accipiter Capital Management, LLC, a
Delaware limited liability company, Gabe Hoffman, Accipiter Life
Sciences Fund, LP, a Delaware limited partnership, Accipiter
Life Sciences Fund (Offshore), Ltd., a Cayman Islands company,
Accipiter Life Sciences Fund II, LP, a Delaware limited
partnership, Accipiter Life Sciences Fund II (Offshore),
Ltd., a Cayman Islands company, and Accipiter Life Sciences
Fund II (QP), LP, a Delaware limited partnership, which
share voting and investment power over certain shares. The
address for these parties is 666
5th
Avenue, 35th Floor, New York, New York 10103. |
|
(14) |
|
Information based on a Form 3 filed with the SEC on
November 27, 2007 by Deerfield Capital, L.P., Deerfield
Management Company, James E. Flynn, Deerfield Special Situations
Fund, L.P., and Deerfield Special Situations
Fund International Limited, who share voting and investment
power over certain shares held through Deerfield Special
Situations Fund and Deerfield Special Situations
Fund International. The address for these parties is 780
Third Avenue, 37th Floor, New York, New York 10017. |
|
(15) |
|
Information based on a Schedule 13G/A filed with the SEC on
January 11, 2008 by D.E. Shaw Valence Portfolios, L.L.C., a
Delaware limited liability company, D.E. Shaw & Co.,
L.P., a Delaware limited partnership, D.E. Shaw Composite
Portfolios, L.L.C., a Delaware limited liability company, D.E.
Shaw & Co., L.P., a Delaware limited partnership, and
David E. Shaw with respect to shares over which D.E. Shaw
Valence Portfolios, D.E. Shaw & Co., L.P. and David
Shaw share voting and investment power. The address for these
parties is 120 W. 45th Street, Tower 45, 39th Floor,
New York, New York 10036. |
|
(16) |
|
Information based upon a
Schedule 13F-HR
filed with the SEC on June 30, 2008 by Prescott Group
Capital Management, L.L.C., an Oklahoma limited liability
company, Prescott Group Aggressive Small Cap, L.P., an Oklahoma
limited partnership, Prescott Group Aggressive Small Cap II,
L.P., an Oklahoma limited partnership, and Phil Frohlich, who
share voting and investment power over shares purchased through
the account of Prescott Group Aggressive Small Cap Master Fund,
G.P., an Oklahoma general partnership. The address for these
parties is 1924 South Utica, Suite 1120, Tulsa, Oklahoma
74104-6529. |
72
FUTURE
STOCKHOLDER PROPOSALS
We will hold an annual meeting of stockholders in 2009 only if
the merger is not completed. In the event a stockholder desires
to have a proposal considered for presentation at the 2009
Annual Meeting of Stockholders and included in our proxy
statement and form of proxy card used in connection with that
meeting, the proposal must be forwarded in writing to the
Corporate Secretary of Emageon at our principal executive
offices so that it is received no later than January 20,
2009. Any such proposal must comply with the requirements of
Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as
amended. In addition, for any proposal or nomination for
director that a stockholder wishes to present at the 2009 Annual
Meeting, regardless of whether the stockholder is seeking to
have such proposal included in our proxy statement, notice as
required by our bylaws must be received by the Corporate
Secretary of Emageon at our principal executive offices no later
than February 22, 2009; if such notice is not timely
received, the matter or nomination will not be considered at the
2009 Annual Meeting. Notwithstanding the foregoing, if the
number of directors to be elected to our Board of Directors is
increased and there is no public announcement by us naming all
of the nominees for director or specifying the size of the
increased Board of Directors on or before April 14, 2009, a
stockholders notice of a nomination for director at the
2009 Annual Meeting will be considered timely, but only with
respect to nominees for any new positions created by such
increase, if it is delivered to the Corporate Secretary at the
principal executive offices of Emageon not later than the close
of business on the 10th day following the day on which such
public announcement is first made by us.
OTHER
MATTERS
At this time, we know of no other matters to be submitted to our
stockholders at the special meeting or any adjournment or
postponement of the special meeting. If any other matters
properly come before the special meeting or any adjournment or
postponement of the special meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they
represent in accordance with their judgment.
WHERE YOU
CAN FIND MORE INFORMATION
Emageon and HSS file annual, quarterly, and special reports,
proxy statements, and other information with the Securities and
Exchange Commission. You may read and copy any reports,
statements or other information that Emageon and HSS file with
the SEC at the SECs public reference room at the following
location:
Public
Reference Room
100 F Street, N.E.
Washington, D.C. 20549
Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. These SEC
filings are also available to the public from commercial
document retrieval services and at the Internet World Wide Web
site maintained by the SEC at
http://www.sec.gov.
We incorporate by reference into this proxy statement any
Current Reports on
Form 8-K
filed by us under the Exchange Act after the date of this proxy
statement and before the date of the special meeting. This means
that we can disclose important information to you by referring
you to those documents. The information incorporated by
reference is considered to be a part of this proxy statement,
and later information that we file with the SEC will update and
supersede that information. However, information furnished under
Items 2.02 and 7.01 of any Current Report on
Form 8-K,
including related exhibits, is not and will not be incorporated
by reference into this proxy statement.
73
You may obtain any of the documents we file with the SEC,
without charge, by requesting them in writing or by telephone
from us at the following address or telephone number:
Emageon Inc.
1200 Corporate Drive, Suite 200
Birmingham, Alabama 35242
Attn: Corporate Secretary
(205) 980-9222
You should not send in your Emageon share certificates until
you receive the transmittal materials from the paying agent.
You should rely only on the information contained in this proxy
statement and the annexes hereto. We have not authorized anyone
to provide you with information that is different from what is
contained in this proxy statement. This proxy statement is dated
November 14, 2008. You should not assume that the
information contained in this proxy statement is accurate as of
any date other than that date (or as of an earlier date if so
indicated in this proxy statement). Neither the mailing of this
proxy statement to stockholders nor the issuance of cash in the
merger creates any implication to the contrary. This proxy
statement does not constitute a solicitation of a proxy in any
jurisdiction where, or to or from any person to whom, it is
unlawful to make a proxy solicitation.
If you have any questions about this proxy statement, the
special meeting or the merger or need assistance with voting
procedures, you should contact:
Morrow and
Co., LLC
Stockholders call: (800) 662-5200
Brokers or Banks call: (203) 658-9400
or
Emageon Inc.
1200 Corporate Drive, Suite 200
Birmingham, Alabama 35242
Attn: Corporate Secretary
(205) 980-9222
BY ORDER OF THE BOARD OF DIRECTORS
Emageon Inc.
John W. Wilhoite
Corporate Secretary
Birmingham, Alabama
November 14, 2008
74
ANNEX A
EXECUTION
COPY
AGREEMENT
AND PLAN OF MERGER
by and among
HEALTH SYSTEMS SOLUTIONS, INC.,
HSS ACQUISITION CORP.
and
EMAGEON INC.
Dated as of October 13, 2008
Table of
Contents
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I DEFINITIONS
|
|
|
A-1
|
|
Section 1.1
|
|
Certain Definitions
|
|
|
A-1
|
|
Section 1.2
|
|
Interpretation
|
|
|
A-7
|
|
|
|
|
|
|
ARTICLE II THE MERGER
|
|
|
A-7
|
|
Section 2.1
|
|
The Merger
|
|
|
A-7
|
|
Section 2.2
|
|
Effect of the Merger on Capital Stock
|
|
|
A-8
|
|
Section 2.3
|
|
Surrender of Certificates and Book-Entry Shares
|
|
|
A-8
|
|
Section 2.4
|
|
Dissenting Shares
|
|
|
A-10
|
|
Section 2.5
|
|
Treatment of Company Equity Awards
|
|
|
A-10
|
|
Section 2.6
|
|
Certificate of Incorporation and Bylaws
|
|
|
A-11
|
|
Section 2.7
|
|
Directors and Officers of Surviving Corporation
|
|
|
A-11
|
|
|
|
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
|
|
|
A-11
|
|
Section 3.1
|
|
Organization; Power; Qualification
|
|
|
A-11
|
|
Section 3.2
|
|
Corporate Authorization; Enforceability
|
|
|
A-12
|
|
Section 3.3
|
|
Capitalization; Equity Awards
|
|
|
A-12
|
|
Section 3.4
|
|
Subsidiaries
|
|
|
A-13
|
|
Section 3.5
|
|
Required Filings and Consents
|
|
|
A-13
|
|
Section 3.6
|
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Non Contravention
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A-14
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Section 3.7
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Compliance with Laws and Permits
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A-14
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Section 3.8
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|
Financial Reports and SEC Documents
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|
A-14
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Section 3.9
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Undisclosed Liabilities
|
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|
A-15
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Section 3.10
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Absence of Certain Changes
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A-15
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Section 3.11
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Litigation
|
|
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A-16
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Section 3.12
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Contracts
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A-16
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Section 3.13
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Benefit Plans
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A-17
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Section 3.14
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Taxes
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|
A-19
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Section 3.15
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Intellectual Property
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A-20
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Section 3.16
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Insurance
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A-21
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Section 3.17
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Real Property
|
|
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A-21
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Section 3.18
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|
Takeover Statutes; No Rights Agreement
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|
|
A-21
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Section 3.19
|
|
Opinion of Financial Advisor
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|
|
A-21
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Section 3.20
|
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Brokers and Finders
|
|
|
A-22
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|
Section 3.21
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|
Interested Party Transactions
|
|
|
A-22
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Section 3.22
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|
Environmental Matters
|
|
|
A-22
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Section 3.23
|
|
Employee Matters
|
|
|
A-22
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Section 3.24
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Certain Payments
|
|
|
A-23
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Section 3.25
|
|
Suppliers
|
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|
A-23
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Section 3.26
|
|
Information in the Company Proxy Statement
|
|
|
A-23
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Section 3.27
|
|
No Other Representations or Warranties
|
|
|
A-23
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|
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|
|
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB
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A-24
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Section 4.1
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Organization and Power
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A-24
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Section 4.2
|
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Corporate Authorization
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A-24
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A-i
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Page
|
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Section 4.3
|
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Enforceability
|
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A-24
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Section 4.4
|
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Required Filings and Consents
|
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A-24
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Section 4.5
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Non Contravention
|
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|
A-24
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Section 4.6
|
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Absence of Litigation
|
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A-25
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Section 4.7
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Financing
|
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A-25
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Section 4.8
|
|
Operations of Parent and Merger Sub
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|
A-25
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Section 4.9
|
|
Solvency
|
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A-25
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Section 4.10
|
|
Management Agreements
|
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A-26
|
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Section 4.11
|
|
No Other Representations and Warranties
|
|
|
A-26
|
|
Section 4.12
|
|
Information in the Company Proxy Statement
|
|
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A-26
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|
|
|
|
|
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ARTICLE V COVENANTS
|
|
|
A-26
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Section 5.1
|
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Conduct of Business of the Company
|
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A-26
|
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Section 5.2
|
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Access to Information; Confidentiality
|
|
|
A-29
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Section 5.3
|
|
Limitations on Solicitation
|
|
|
A-29
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|
Section 5.4
|
|
Notices of Certain Events
|
|
|
A-31
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Section 5.5
|
|
Stockholders Meeting; Proxy Material
|
|
|
A-31
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|
Section 5.6
|
|
Employees; Benefit Plans
|
|
|
A-32
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Section 5.7
|
|
Directors and Officers Indemnification and Insurance
|
|
|
A-33
|
|
Section 5.8
|
|
Reasonable Efforts
|
|
|
A-35
|
|
Section 5.9
|
|
Public Announcements
|
|
|
A-36
|
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Section 5.10
|
|
Fees and Expenses
|
|
|
A-37
|
|
Section 5.11
|
|
Takeover Statutes
|
|
|
A-37
|
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Section 5.12
|
|
Financing
|
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|
A-37
|
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Section 5.13
|
|
Resignations
|
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|
A-38
|
|
Section 5.14
|
|
Conduct of Business of Parent and Merger Sub Pending the Merger
|
|
|
A-38
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Section 5.15
|
|
Control of Operations
|
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A-38
|
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Section 5.16
|
|
Voting Agreement
|
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|
A-38
|
|
Section 5.17
|
|
Transfer Taxes
|
|
|
A-38
|
|
|
|
|
|
|
ARTICLE VI CONDITIONS TO THE MERGER
|
|
|
A-38
|
|
Section 6.1
|
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Conditions to the Obligations of Each Party
|
|
|
A-38
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|
Section 6.2
|
|
Conditions to Obligations of Parent and Merger Sub
|
|
|
A-39
|
|
Section 6.3
|
|
Conditions to Obligation of the Company
|
|
|
A-39
|
|
Section 6.4
|
|
Frustration of Closing Conditions
|
|
|
A-39
|
|
|
|
|
|
|
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER
|
|
|
A-40
|
|
Section 7.1
|
|
Termination by Mutual Consent
|
|
|
A-40
|
|
Section 7.2
|
|
Termination by Either Parent or the Company
|
|
|
A-40
|
|
Section 7.3
|
|
Termination by Parent
|
|
|
A-40
|
|
Section 7.4
|
|
Termination by the Company
|
|
|
A-40
|
|
Section 7.5
|
|
Effect of Termination
|
|
|
A-41
|
|
Section 7.6
|
|
Payment of Fees Following Termination
|
|
|
A-41
|
|
Section 7.7
|
|
Amendment
|
|
|
A-42
|
|
Section 7.8
|
|
Extension; Waiver
|
|
|
A-42
|
|
A-ii
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE VIII MISCELLANEOUS
|
|
|
A-42
|
|
Section 8.1
|
|
Survival
|
|
|
A-42
|
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Section 8.2
|
|
Governing Law
|
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|
A-42
|
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Section 8.3
|
|
Submission to Jurisdiction
|
|
|
A-42
|
|
Section 8.4
|
|
Waiver of Jury Trial
|
|
|
A-43
|
|
Section 8.5
|
|
Notices
|
|
|
A-43
|
|
Section 8.6
|
|
Entire Agreement
|
|
|
A-44
|
|
Section 8.7
|
|
No Third Party Beneficiaries
|
|
|
A-44
|
|
Section 8.8
|
|
Severability
|
|
|
A-44
|
|
Section 8.9
|
|
Assignment
|
|
|
A-44
|
|
Section 8.10
|
|
Specific Performance
|
|
|
A-44
|
|
Section 8.11
|
|
Time of Essence
|
|
|
A-45
|
|
Section 8.12
|
|
Counterparts; Effectiveness
|
|
|
A-45
|
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|
|
|
|
|
VOTING AGREEMENT
|
|
|
EXHIBIT A
|
|
COMPANY CERTIFICATE
|
|
|
EXHIBIT B
|
|
COMPANY OFFICERS, DIRECTORS AND AFFILIATES
|
|
|
EXHIBIT C
|
|
DEPOSIT ESCROW PROVISIONS
|
|
|
EXHIBIT D
|
|
A-iii
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement) is dated as of October 13,
2008 by and among HEALTH SYSTEMS SOLUTIONS, INC., a
Nevada corporation (Parent), HSS
ACQUISITION CORP., a Delaware corporation and a direct,
wholly-owned subsidiary of Parent (Merger
Sub), and EMAGEON INC., a Delaware corporation
(the Company).
RECITALS:
WHEREAS, the parties intend that Merger Sub be merged
with and into the Company (the Merger), with
the Company surviving the Merger as a direct wholly-owned
subsidiary of Parent, upon the terms and conditions of this
Agreement, and in accordance with the General Corporation Law of
the State of Delaware (the DGCL);
WHEREAS, the board of directors of the Company (the
Company Board), acting upon the
recommendation of the Strategic Alternatives Committee, has
approved this Agreement and declared it advisable to enter into
this Agreement, and has resolved to recommend that the
stockholders of the Company adopt this Agreement;
WHEREAS, the board of directors of Parent and the board
of directors and stockholders of Merger Sub have approved and
adopted this Agreement and declared it advisable for Parent and
Merger Sub, respectively, to enter into this Agreement;
WHEREAS, concurrently with the execution of this
Agreement, and as a condition and inducement to Parent and
Merger Sub entering into this Agreement and incurring the
obligations set forth herein, Parent is entering into a voting
agreement with certain executive officers and directors, and
Affiliates thereof, of the Company in the form of
Exhibit A attached hereto (the Voting
Agreement);
WHEREAS, concurrently with the execution of this
Agreement, and as a condition and inducement to the
Companys willingness to enter into this Agreement,
Stanford Financial Group is entering into the Purchase Agreement
with Parent and Parent has agreed to enter into the Deposit
Escrow Agreement with the Company; and
WHEREAS, the parties desire to make certain
representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe certain
conditions to the Merger, as set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of
the representations, warranties, covenants and agreements
contained in this Agreement, Parent, Merger Sub and the Company,
intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain
Definitions.
(a) For purposes of this Agreement:
Affiliate means, with respect to any
Person, any other Person that directly or indirectly controls,
is controlled by or is under common control with, such first
Person. For the purposes of this definition, control
(including, with correlative meanings, the terms
controlling, controlled by and
under common control with), as applied to any
Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting
securities, by Contract or otherwise.
Business Day means, any day, other
than a Saturday, Sunday or a day on which banking institutions
are generally closed.
A-1
Company Material Adverse Effect means
any event, change, occurrence or effect (each, a
Change), individually or when taken together with
all other Changes, that is or reasonably would be expected to
(i) be materially adverse to the business, financial
condition, results of operations, assets, liabilities, or
properties of the Company and its Subsidiaries, taken as a
whole, other than any Change relating to or resulting from:
(A) Changes or developments in the economic, business,
financial or regulatory environment affecting the industries in
which the Company and its Subsidiaries operate, so long as such
Changes or developments do not adversely affect the Company and
its Subsidiaries, taken as a whole, in a materially
disproportionate manner relative to other participants in the
industries or markets in which they operate, (B) any
occurrence or threats of terrorist acts or an outbreak or
escalation of hostilities or war (whether declared or not
declared) or any natural disaster or act of God affecting the
United States, so long as each of the foregoing do not adversely
affect the Company and its Subsidiaries, taken as a whole, in a
materially disproportionate manner relative to other
participants in the industries or markets in which they operate,
(C) Changes in the national or world economy or national or
foreign financial, credit or securities markets as a whole, so
long as such Changes do not adversely affect the Company and its
Subsidiaries, taken as a whole, in a materially disproportionate
manner relative to other participants in the industries or
markets in which they operate, (D) the suspension of
trading in securities generally on the New York Stock Exchange,
American Stock Exchange or NASDAQ, (E) Changes in
applicable Law or GAAP or the enforcement or interpretation
thereof after the date hereof, so long as such Changes do not
adversely affect the Company and its Subsidiaries, taken as a
whole, in a materially disproportionate manner relative to other
participants in the industries or markets in which they operate,
(F) the identity of Parent or any of its Affiliates as the
acquiror of the Company, (G) the failure of the Company to
meet any public expectations, projections, forecasts or
estimates of revenues or earnings for any period ending on or
after the date hereof (it being understood, however, that any
Change contributing, directly or indirectly, to such failure
may, except as provided in any of subsections (A), (B), (C),
(D), (E), (F), (H), (I) or (J) of this definition, be
deemed to constitute or be taken into account in determining
whether a Company Material Adverse Effect has occurred),
(H) any Change, in and of itself (it being understood,
however, that any facts underlying such Change may, except as
provided in any of subsections (A), (B), (C), (D), (E), (F),
(G), (I) or (J) of this definition, be deemed to
constitute or be taken into account in determining whether a
Company Material Adverse Effect has occurred), in the market
price or trading volume of the equity securities of the Company
on or after the date hereof, (I) acts or omissions of
Parent or the Merger Sub after the date of this Agreement, or
(J) taking any action required by this Agreement, or taking
or not taking any action at the request of, or with the express
written consent of, Parent; or (ii) materially impair the
ability of the Company to consummate the Merger.
Company Termination Fee means
$3,000,000.
Contract means any contract,
agreement, license, note, bond, mortgage, indenture, commitment,
lease or other instrument or obligation, whether written or oral.
Deposit Escrow Agreement means that
certain deposit escrow agreement by and among Parent, the
Company and an escrow agent to be selected by Parent and
reasonably acceptable to the Company, which shall be in
customary form and shall contain provisions substantially the
same as the provisions set forth on Exhibit D
attached hereto, to be entered into as soon as reasonably
practicable following the date hereof, providing for a deposit
upon the execution thereof by Parent (or an Affiliate or
Representative thereof) of $5,000,000 to an escrow account,
subject to the terms and conditions set forth therein.
Environmental Laws means any and all
applicable federal, state or local statutes, regulations,
ordinances, codes or permits of the United States, or any state,
local, or municipal governmental entity, regulating or imposing
liability or standards of conduct concerning protection of the
environment (including indoor air, ambient air, surface water,
groundwater, land surface, subsurface strata, or plant or animal
species) or human health as affected by the environment or
Hazardous Substances (including employee health and safety).
A-2
Hazardous Substance means all
explosive or radioactive substances, materials or wastes,
hazardous or toxic substances, materials or wastes, friable
asbestos, friable asbestos-containing materials, toxic mold,
petroleum or any fraction thereof, and all other substances,
materials or wastes that are regulated pursuant to any
applicable Environmental Law.
Intellectual Property means shall mean
(a) all patents and patent applications, and all patents
issuing thereon, including utility, model and design patents and
certificates of invention, together with all reissue patents,
patents of addition, divisionals, renewals, continuations,
continuations-in-part,
substitutions, additions, extensions, including supplemental
protection certificates, registrations, confirmations,
re-examinations and all foreign counterparts of the forgoing
which are in the process of being prepared, and all inventions
and improvements disclosed therein; (b) all know-how,
including without limitation as they exist anywhere in the
world, trade secrets, formulae, ideas, concepts, inventions and
invention disclosures not subject to (a) above, whether or
not patentable, discoveries, innovations, improvements, results,
reports, information and data (including without limitation all
business and technical information, and information and data
relating to research, development, analytical methods,
processes, formulations and compositions), research summary
data, research raw data, laboratory and programmer notebooks,
methods, procedures, proprietary technology and information,
operating and maintenance manuals, engineering and other
drawings and sketches, manufacturing and production processes
and techniques, designs, specifications, and blueprints;
(c) customer lists, supplier lists, pricing information,
cost information, business and marketing research, plans,
protocols, information and proposals, and the like not subject
to (b) above; (d) registered and unregistered
trademarks, service marks, trade dress, trade names, brand
names, designs, logos, commercial symbols and corporate names,
and all goodwill associated therewith, and the right to recover
for past infringement thereof, heretofore or hereafter filed or
having legal force in any country of the world;
(e) copyrights and all works of authorship, whether or not
registered or copyrightable, and all applications,
registrations, and renewals in connection therewith, including
all rights to the foregoing throughout the world;
(f) databases, graphics and schematics; (g) all
Software and all copyrights therein throughout the world;
(h) all application programming interfaces, access to
proprietary databases or other information sources; (i) all
domain names, Internet addresses and other computer identifiers,
web sites, URLs, web pages, registrations for any of the
foregoing and similar rights and items, as they exist anywhere
in the world; and (j) all copies and tangible embodiments
of the foregoing, whether whole or partial (in whatever form or
medium, including, but not limited to, electronic media).
Knowledge means, when used with
respect to the Company, the actual knowledge of the Persons set
forth in Section 1.1(a) of the Company Disclosure Letter
after due inquiry. Knowledge means, when used with
respect to Merger Sub and Parent, the actual knowledge of the
Persons set forth in Section 1.1(a) of the Acquiror
Disclosure Letter after due inquiry.
Laws means any domestic or foreign
laws, statutes, ordinances, rules or regulations enacted,
issued, adopted, promulgated or applied by any Governmental
Entity that are applicable to the Persons or Persons referenced.
Liens means any mortgages, deeds of
trust, liens (statutory or other), pledges, security interests,
collateral security arrangements, charges, restrictions on
voting or transfer, or other encumbrances that are material to
the specific property referenced.
Merger Sub Material Adverse Effect
means any Change that, individually or in the aggregate with all
other Changes, materially impairs the ability of Parent or
Merger Sub to consummate the Merger.
Order means any order, judgment,
injunction, award or decree adopted or imposed by, including any
consent decree, settlement agreement or similar written
agreement with, any Governmental Entity.
Permit means any permit, license,
approval, franchise, agreement, qualification, authorization or
registration of any Governmental Entity.
Permitted Liens means (i) Liens
for Taxes, assessments and governmental charges or levies not
yet due and payable or that are being contested in good faith
and by appropriate proceedings;
A-3
(ii) mechanics, carriers, workmens,
repairmens, materialmens or other Liens or security
interests that secure a liquidated amount that are being
contested in good faith and by appropriate proceedings;
(iii) leases, subleases and licenses (other than capital
leases and leases underlying sale and leaseback transactions);
(iv) pledges or deposits to secure obligations under
workers compensation Laws or similar legislation or to
secure public or statutory obligations; (v) pledges and
deposits to secure the performance of bids, trade contracts,
leases, surety and appeal bonds, performance bonds and other
obligations of a similar nature, in each case in the ordinary
course of business; (vi) easements, covenants and rights of
way (unrecorded and of record) and other similar restrictions of
record, and zoning, building and other similar restrictions;
(vii) any other Liens that do not secure a liquidated
amount, that have been incurred or suffered in the ordinary
course of business and that would not, individually or in the
aggregate, have a material effect on, or materially affect the
use or benefit to the owner of, the assets or properties to
which they specifically relate; (viii) licenses of or other
agreements related to Intellectual Property which are not
intended to secure an obligation; and (ix) such other Liens
that in the aggregate are not material.
Person means any individual,
corporation, limited or general partnership, limited liability
company, limited liability partnership, trust, association,
joint venture, Governmental Entity or other entity or group
(which term will include a group as such term is
defined in Section 13(d)(3) of the Exchange Act).
Representatives means, when used with
respect to Parent, Merger Sub or the Company, the directors,
officers, members, managers, employees, consultants,
accountants, legal counsel, investment bankers, agents and other
representatives of Parent, Merger Sub or the Company, as
applicable, and their respective Subsidiaries.
Requisite Stockholder Vote means the
adoption of this Agreement by the affirmative vote of the
holders of a majority of the voting power of the shares of
Common Stock outstanding and entitled to vote thereon.
Software means all computer programs,
including operating systems, application programs, software
tools, and firmware and software imbedded in equipment,
including both object code and source code.
Strategic Alternatives Committee means
the committee of the Company Board, the members of which are not
affiliated with Parent or Merger Sub and are not members of the
Companys management, that was empowered by the Company
Board on April 24, 2007, and reconstituted on June 22,
2008, for the purpose of, among other things, evaluating, and
making a recommendation to the full Company Board with respect
to potential strategic alternatives for the Company, including
this Agreement and the transactions contemplated hereby,
including the Merger, and shall include any successor committee
to the Strategic Alternatives Committee existing as of the date
of this Agreement or any reconstitution thereof.
Subsidiary means, when used with
respect to Parent, Merger Sub or the Company, any other Person
(whether or not incorporated) that Parent, Merger Sub or the
Company, as applicable, directly or indirectly owns or has the
power to vote or control more than 50% of any class or series of
capital stock or other equity interests of such Person.
Superior Proposal means any written
Takeover Proposal that the Company Board (or the Strategic
Alternatives Committee, as applicable) determines in its good
faith judgment (after consultation with its financial advisor
and outside legal counsel) (i) to be more favorable from a
financial perspective (taking into account such legal,
financial, regulatory and other aspects of such Takeover
Proposal and the Merger and other transactions contemplated by
this Agreement and such other factors, matters and issues, as
are deemed relevant by the Company Board (or the Strategic
Alternatives Committee, as applicable), and the anticipated
timing, conditions and prospects for completion of such Takeover
Proposal) to the Companys stockholders than the Merger and
the other transactions contemplated by this Agreement (taking
into account all of the terms of any proposal by Parent to amend
or modify the terms of the Merger and the other transactions
contemplated by this Agreement), except that all percentages in
the definition of Takeover Proposal shall be
increased to 50% and (ii) is likely (based on
the good faith belief of the
A-4
Company Board (or the Strategic Alternatives Committee)) to be
consummated on the terms set forth therein if accepted.
Takeover Proposal means any proposal
or offer from any Person or group of Persons other than Parent
that provides for, in a single transaction or a series of
related transactions, any direct or indirect acquisition or
purchase of (i) 20% or more of the value (as determined by
the Company Board) of the consolidated assets of the Company and
its Subsidiaries, (ii) beneficial ownership of securities
representing 20% or more (by vote or value) of the outstanding
securities of the Company, (iii) any tender offer, self
tender offer or exchange offer that if consummated would result
in any Person or group of Persons beneficially owning securities
representing 20% or more (by vote or value) of the outstanding
securities of the Company, or (iv) any merger,
consolidation, share exchange, business combination,
recapitalization or similar transaction involving the Company
(or any Subsidiary or Subsidiaries of the Company whose business
constitutes 20% or more of the net revenues, net income or
assets of the Company and its Subsidiaries, taken as a whole).
Tax means any and all federal, state,
local, foreign and other taxes, levies, fees, duties, and
similar charges (including any interest, fines, assessments,
penalties or additions to tax imposed in connection therewith or
with respect thereto) imposed, assessed or collected by or under
the authority of any Governmental Entity.
Tax Returns means any and all reports,
returns, declarations, elections, disclosures, estimates,
information reports or returns or statements required to be
supplied to a taxing authority in connection with Taxes.
(b) For purposes of this Agreement, the following terms
have the meanings set forth in the Sections listed below:
|
|
|
Defined Term
|
|
Section
|
|
Acquiror Disclosure Letter
|
|
Article IV
|
Affiliate Transaction
|
|
3.21
|
Agreement
|
|
Preamble
|
Alternative Acquisition Agreement
|
|
5.3(d)
|
Antitrust Division
|
|
5.8(a)
|
Book-Entry Shares
|
|
2.2(c)
|
Certificate
|
|
2.2(c)
|
Certificate of Merger
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2.1(b)
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Change
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1.1(a)
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Closing
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2.1(b)
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Closing Date
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2.1(b)
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Excluded Shares
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2.2(a)
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Financing
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4.7(a)
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Foreign Merger Control Laws
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3.5
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FTC
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5.8(a)
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GAAP
|
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3.8(c)
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Governmental Entity
|
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3.5
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HSR Act
|
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3.5
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Indemnified Parties
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5.7(a)
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Indemnifying Party
|
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5.7(a)
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IRS
|
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3.13(a)
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Leases
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3.17
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Code
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2.3(c)
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COBRA
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3.13(d)
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A-5
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Defined Term
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Section
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Common Stock
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2.2(a)
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Company
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Preamble
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Company Benefit Plan
|
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3.13(a)
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Company Board
|
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Recitals
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Company Board Recommendation
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3.2(a)
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Company Certificate
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2.6(a)
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Company Disclosure Letter
|
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Article III
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Company Licensed Intellectual Property
|
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3.15(d)
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Company Organizational Documents
|
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3.6(a)
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Company Owned Intellectual Property
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3.15(a)
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Company Proxy Statement
|
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3.5
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Company Restricted Shares
|
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2.5(b)
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Company RSU
|
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2.5(c)
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Company SEC Documents
|
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3.8(a)
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Company Stock Option
|
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2.5(a)
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Company Stock Plans
|
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2.5(a)
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Company Stockholders Meeting
|
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3.5
|
Confidentiality Agreement
|
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5.2(a)
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Continuation Period
|
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5.6(a)
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D&O Insurance
|
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5.7(b)
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DGCL
|
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Recitals
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Dissenting Shares
|
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2.4
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Dissenting Stockholder
|
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2.4
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Effective Time
|
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2.1(b)
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Employee Benefits
|
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5.6(a)
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Employees
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5.6(a)
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Equity Award Amounts
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2.5(d)
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ERISA
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3.13(b)
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Exchange Act
|
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3.5
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Legal Action
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3.11
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Material Contract
|
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3.12(a)
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Measurement Date
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3.3(a)
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Merger
|
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Recitals
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Merger Consideration
|
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2.2(b)
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Merger Sub
|
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Preamble
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Multiemployer Plan
|
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3.13(a)
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NASDAQ
|
|
3.5
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New Plans
|
|
5.6(b)
|
New Purchase Agreement
|
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5.12(c)
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Notice Period
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5.3(d)
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Old Plans
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5.6(b)
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Outside Date
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7.2(a)
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Parent
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Preamble
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Paying Agent
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2.3(a)
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A-6
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Defined Term
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Section
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Payment Fund
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2.3(a)
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Pre-Closing Service
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5.6(b)
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Preferred Stock
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3.3(a)
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Purchase Agreement
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4.7(a)
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Real Property
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3.17
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Recommendation Change
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5.3(d)
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SEC
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3.5
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Securities Act
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3.5
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Shares
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2.2(b)
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SIBL
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4.7(a)
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Significant Suppliers
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3.25
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Solvent
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4.9
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SRO
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3.5
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SunTrust
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3.19
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Surviving Corporation
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2.1(a)
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Third Party Beneficiary
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8.7
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Treasury Regulations
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2.3(c)
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Voting Agreement
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Recitals
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Section 1.2 Interpretation.
(a) The headings in this Agreement are for reference only
and do not affect the meaning or interpretation of this
Agreement. Definitions apply equally to both the singular and
plural forms of the terms defined. All references in this
Agreement, the Company Disclosure Letter and the Acquiror
Disclosure Letter to Articles, Sections and Exhibits refer to
Articles and Sections of, and Exhibits to, this Agreement unless
the context requires otherwise. The words include,
includes and including are not limiting
and will be deemed to be followed by the phrase without
limitation. The phrases herein,
hereof, hereunder and words of similar
import will be deemed to refer to this Agreement as a whole,
including the Exhibits and Schedules hereto, and not to any
particular provision of this Agreement. The word or
will be inclusive and not exclusive unless the context requires
otherwise.
(b) The parties to this Agreement have been represented by
counsel during the negotiation and execution of this Agreement
and waive the application of any Laws or rule of construction
providing that ambiguities in any agreement or other document
will be construed against the party drafting such agreement or
other document.
ARTICLE II
THE MERGER
Section 2.1 The
Merger.
(a) On the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, at the
Effective Time, (i) Merger Sub will be merged with and into
the Company, (ii) the separate corporate existence of
Merger Sub will cease, and (iii) the Company will continue
its corporate existence under Delaware law as the surviving
corporation in the Merger (the Surviving
Corporation) and a direct wholly-owned subsidiary of
Parent. The Merger will have the effects set forth in this
Agreement and the applicable provisions of the DGCL.
(b) Unless otherwise mutually agreed in writing by the
Company and Parent, the closing of the Merger (the
Closing) will take place at the offices of
Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park
Avenue Tower, 65 East 55th Street, New York, New York, at
10:00 a.m., local time, within two (2) Business
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Days following the day on which all of the conditions set forth
in Article VI (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to
the satisfaction or waiver of those conditions) are satisfied
or, if permissible, waived in accordance with this Agreement, or
another date mutually agreed to in writing by Parent and the
Company. Subject to the provisions of this Agreement, at the
Closing, the Company and Parent will cause a certificate of
merger (the Certificate of Merger) to be
executed, acknowledged and filed with the Secretary of State of
the State of Delaware in accordance with Section 251 of the
DGCL. The Merger will become effective at such time as the
Certificate of Merger has been duly filed with the Secretary of
State of the State of Delaware or at such later date or time as
may be agreed by Parent and the Company in writing and specified
in the Certificate of Merger in accordance with the DGCL (the
date on which the Closing actually occurs being hereinafter
referred to as the Closing Date, and
the date and time at which the Merger becomes effective being
hereinafter referred to as the Effective
Time).
Section 2.2 Effect
of the Merger on Capital Stock. At the
Effective Time, as a result of the Merger and without any action
on the part of Merger Sub, Parent or the Company or any holder
of any securities of Merger Sub, Parent or the Company:
(a) Cancellation of Certain Common
Stock. Each share of common stock, par value
$0.001 per share, of the Company (the Common
Stock) that is owned by Merger Sub, Parent, the
Company (as treasury stock or otherwise) or any Subsidiary of
the Company (each an Excluded Share, and
collectively the Excluded Shares) will
automatically be cancelled and will cease to exist, and no
consideration will be delivered in exchange therefor.
(b) Conversion of Common
Stock. Each share of Common Stock (each share
of Common Stock, a Share and collectively,
the Shares), issued and outstanding
immediately prior to the Effective Time (other than Excluded
Shares and, except as provided in Section 2.4,
Dissenting Shares), will be converted into the right to receive
$2.85 in cash from the Surviving Corporation (through the Paying
Agent as provided in Section 2.3), without interest
(the Merger Consideration).
(c) Cancellation of Shares. At the
Effective Time, all Shares will cease to be outstanding, will be
cancelled and will cease to exist, and, in the case of
non-certificated shares represented by book-entry
(Book-Entry Shares), the names of the former
registered holders will be removed from the registry of holders
of such Shares, and, subject to Section 2.4, each
holder of a certificate formerly representing any such Shares
(each, a Certificate) and each holder
of a Book-Entry Share, in each case other than Excluded Shares
and Dissenting Shares, will cease to have any rights with
respect thereto, except the right to receive the Merger
Consideration in accordance with Section 2.3 and any
dividends declared with a record date prior to the Effective
Time that remain unpaid at the Effective Time and that are due
to such holder, in each case without interest.
(d) Conversion of Merger Sub Capital
Stock. Each share of common stock, par value
$0.001 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time will be converted into
one share of common stock, par value $0.001 per share, of the
Surviving Corporation.
Section 2.3 Surrender
of Certificates and Book-Entry Shares.
(a) Paying Agent. Prior to the
Effective Time, for the benefit of the holders of Shares (other
than Excluded Shares and Dissenting Shares), Parent will
(i) designate, or cause to be designated, a bank or trust
company that is reasonably acceptable to the Company (the
Paying Agent), and (ii) enter into a
paying agent agreement, in form and substance reasonably
acceptable to the Company, with such Paying Agent to act as
agent for the payment of the Merger Consideration in respect of
Certificates upon surrender of such Certificates (or effective
affidavits of loss in lieu thereof and a bond, if required,
pursuant to Section 2.3(f)) and the Book-Entry
Shares in accordance with this Article II from time
to time after the Effective Time. On the Closing Date,
contemporaneously with the filing of the Certificate of Merger,
Parent or Merger Sub will deposit, or cause to be deposited,
with the Paying Agent cash in the amount necessary for the
payment of the Merger Consideration pursuant to
Section 2.2(b) upon surrender of such Certificates
and Book-Entry Shares (such cash being herein referred to as the
Payment Fund). The Payment Fund shall
not be used for any purpose other than the payment of Merger
Consideration pursuant to Section 2.2(b) and the
terms of this
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Agreement. The Payment Fund shall be invested by the Paying
Agent as directed by the Surviving Corporation; provided,
however, that such investments shall be (i) in
obligations of, or guaranteed by, the United States or any
agency or instrumentality thereof and backed by the full faith
and credit of the United States, (ii) in commercial paper
obligations rated
A-1 or
P-1 or
better by Moodys Investors Service, Inc. or
Standard & Poors Corporation, respectively, or
(iii) in certificates of deposit, bank repurchase
agreements or bankers acceptances of commercial banks with
capital exceeding $10 billion (based on the most recent
financial statements of such bank which are then publicly
available). Any net profit resulting from, or interest or income
produced by, such investments shall be the property of and
payable to the Surviving Corporation.
(b) Payment Procedures. Prior to
or promptly after the Effective Time, but in no event more than
three (3) Business Days after the Effective Time, the
Surviving Corporation or Parent will cause the Paying Agent to
mail to each holder of record of Shares (other than Excluded
Shares and Dissenting Shares) a letter of transmittal in
customary form reasonably acceptable to the Company and Parent
(which shall specify that delivery will be effected, and risk of
loss and title to Certificates and Book-Entry Shares will pass,
only upon proper delivery of Certificates (or effective
affidavits of loss in lieu thereof and a bond, if required,
pursuant to Section 2.3(f)) or Book-Entry Shares, as
the case may be, to the Paying Agent) and instructions for use
in effecting the surrender of the Certificates (or effective
affidavits of loss in lieu thereof and a bond, if required,
pursuant to Section 2.3(f)) and Book-Entry Shares in
exchange for the Merger Consideration. Upon the proper surrender
of a Certificate (or effective affidavit of loss in lieu thereof
and a bond, if required, pursuant to Section 2.3(f))
or Book-Entry Share to the Paying Agent, together with a
properly completed letter of transmittal, duly executed, and
such other documents as may reasonably be requested by the
Paying Agent, the holder of such Certificate or Book-Entry Share
will be entitled to receive in exchange therefor cash in an
amount equal to the Merger Consideration (after giving effect to
any required tax withholdings) for each Share (other than
Excluded Shares and Dissenting Shares) formerly represented by
such Certificate or Book-Entry Share that such holder has the
right to receive pursuant to this Article II, and
the Certificate or Book-Entry Share so surrendered will be
cancelled. No interest will be paid or accrued on any amount
payable upon due surrender of the Certificates or Book-Entry
Shares. In the event of a transfer of ownership of Shares that
is not registered in the transfer records of the Company, the
Merger Consideration to be paid upon due surrender of the
Certificate or Book-Entry Share may be paid to such a transferee
if the Certificate or Book-Entry Share formerly representing
such Shares is presented to the Paying Agent, accompanied by all
documents required to evidence and effect such transfer and to
evidence that any applicable stock transfer Taxes have been paid
or are not applicable.
(c) Withholding Taxes; Transfer
Taxes. Parent, the Surviving Corporation or
the Paying Agent will be entitled to deduct and withhold from
amounts otherwise payable pursuant to this Agreement to any
holder of Shares, Company Stock Options, Company Restricted
Shares or Company RSUs, as the case may be, any amounts
required to be deducted and withheld with respect to such
payments under the Internal Revenue Code of 1986 (the
Code), and the rules and Treasury regulations
thereunder (the Treasury Regulations), or any
provision of state, local or foreign Tax law. Any amounts so
deducted and withheld will be timely paid to the applicable Tax
authority and will be treated for all purposes of this Agreement
as having been paid to the holder of the Shares, Company Stock
Options, Company Restricted Shares or Company RSUs, as the case
may be, in respect of which such deduction and withholding was
made. All stock transfer, real estate transfer, documentary,
stamp, recording and other similar Taxes (including interest,
penalties and additions to any such Taxes) incurred in
connection with the Merger shall be paid by Parent, and the
Company shall cooperate with Parent in preparing, executing and
filing any Tax Returns in respect of such Taxes.
(d) No Further Transfers. At the
close of business on the day on which the Effective Time occurs,
there will be no transfers on the stock transfer books of the
Company of Shares that were outstanding immediately prior to the
Effective Time other than to settle transfers of Shares that
occurred prior to such close of business. If, after such close
of business, Certificates or Book-Entry Shares are presented to
the Paying Agent, they will be cancelled and exchanged for the
Merger Consideration as provided in this Article II.
(e) Termination of Payment
Fund. Any portion of the Payment Fund that
remains undistributed to the holders of the Certificates or
Book-Entry Shares eighteen (18) months after the Effective
Time will be delivered to the Surviving Corporation, on demand,
and any holder of a Certificate or Book-Entry Share who
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has not theretofore complied with this Article II
will thereafter look only to the Surviving Corporation and
Parent for payment of such holders claims for Merger
Consideration. Notwithstanding the foregoing, to the fullest
extent permitted by applicable Law, none of Parent, Merger Sub,
the Company, the Surviving Corporation, the Paying Agent or any
other Person will be liable to any former holder of Shares for
any amount delivered to a public official pursuant to applicable
abandoned property, escheat or similar Laws.
(f) Lost, Stolen or Destroyed
Certificates. In the event any Certificate
has 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 and, if required by the
Surviving Corporation, the posting by such Person of a bond in
customary amount and upon such terms as the Surviving
Corporation may reasonably determine are necessary as indemnity
against any claim that may be made against it with respect to
such Certificate, the Paying Agent will issue, in exchange for
such lost, stolen or destroyed Certificate, the Merger
Consideration pursuant to this Agreement.
Section 2.4 Dissenting
Shares. Notwithstanding any provision of this
Agreement to the contrary and to the extent provided under the
DGCL, any Shares outstanding immediately prior to the Effective
Time that are held by any stockholder that has neither voted in
favor of the adoption of this Agreement nor consented thereto in
writing and that has demanded properly in writing appraisal for
such Shares and otherwise properly perfected and not withdrawn
or lost such stockholders rights in accordance with
Section 262 of the DGCL (each such stockholder a
Dissenting Stockholder, and such Shares the
Dissenting Shares) will not be
converted into, or represent the right to receive, the Merger
Consideration. Such Dissenting Stockholders will be entitled to
receive payment of the appraised value of Dissenting Shares held
by them in accordance with the provisions of such
Section 262, except that all Dissenting Shares held by
stockholders who have failed to perfect or who effectively have
withdrawn or lost their rights to appraisal of such Dissenting
Shares pursuant to Section 262 of the DGCL will thereupon
be deemed to have been converted into, and represent the right
to receive, the Merger Consideration in the manner provided in
this Article II and will no longer be Dissenting
Shares. The Company will give Parent prompt notice of any
written demands for appraisal, attempted withdrawals of such
demands, and any other instruments served pursuant to applicable
Law received by the Company relating to stockholders
rights of appraisal. The Company will give Parent the
opportunity to participate in and direct all negotiations and
proceedings with respect to demands for appraisal. The Company
will not, except with the prior written consent of Parent, make
any payment with respect to any demands for appraisal of
Dissenting Shares, offer to settle or settle any such demands or
approve any withdrawal or other treatment of any such demands.
Section 2.5 Treatment
of Company Equity Awards.
(a) As of the Effective Time, each option to acquire shares
of Common Stock (a Company Stock Option)
under the Company Benefit Plans identified in
Section 3.13(a) of the Company Disclosure Letter pursuant
to which Shares can be issued (the Company Stock
Plans), whether vested or unvested, that is
outstanding immediately prior to the Effective Time shall become
vested (a complete list of which is set forth on
Section 2.5(a) of the Company Disclosure Letter as of the
date of this Agreement) with respect to the maximum number of
shares of Common Stock covered thereby and be cancelled, and the
holder of such Company Stock Option will be entitled to receive
from the Surviving Corporation an amount in cash equal to the
product of (i) the excess, if any, of the Merger
Consideration over the exercise price per Share of such Company
Stock Option multiplied by (ii) the maximum number of
Shares subject to such Company Stock Option with respect to
which such Company Stock Option shall not theretofore have been
previously exercised.
(b) At the Effective Time, each Share subject to a
restricted stock agreement under the Company Stock Plans (each,
a Company Restricted Share) that is
outstanding immediately prior to the Effective Time (a complete
list of which is set forth on Section 2.5(b) of the Company
Disclosure Letter as of the date of this Agreement) shall become
fully vested and free of all restrictions as of the Effective
Time and shall, as of the Effective Time, be cancelled and
converted into the right to receive the Merger Consideration in
accordance with Section 2.2.
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(c) As of the Effective Time, each restricted stock unit
award with respect to Shares granted by the Company under the
Company Stock Plans (each, a Company
RSU) that is outstanding immediately prior to the
Effective Time (a complete list of which is set forth on
Section 2.5(c) of the Company Disclosure Letter as of the
date of this Agreement) shall be cancelled, and the holder of
such Company RSU shall be entitled to receive from the Surviving
Corporation an amount in cash equal to (i) the Merger
Consideration multiplied by the maximum number of Shares subject
to such Company RSU as of the Effective Time plus (ii) any
dividend equivalents accrued with respect to such Company RSU
prior to the Effective Time but not yet distributed as of the
Effective Time (other than any such dividend equivalents that
are held in the form of Company RSUs as of the Effective Time).
(d) The amounts payable under Section 2.5(a),
Section 2.5(b) and Section 2.5(c) shall
be referred to herein as the Equity Award
Amounts. All Equity Award Amounts shall, subject to
Section 2.3(b), be paid by the Surviving Corporation
as promptly as practicable following the Effective Time, without
interest, except as necessary to comply with Section 409A
of the Code.
(e) The Company shall use reasonable efforts to ensure
that, as of the Effective Time, the Company Stock Plans shall
terminate and no person shall have any right under the Company
Stock Plans, except as set forth herein.
(f) Prior to the Effective Time, the Company Board (or a
committee thereof) will adopt such resolutions and will take
such other actions as shall be required to effect the actions
contemplated by this Section 2.5.
Section 2.6 Certificate
of Incorporation and Bylaws.
(a) At the Effective Time, the Companys certificate
of incorporation (the Company
Certificate), as in effect immediately prior to the
Effective Time, shall be amended and restated to read in its
entirety as set forth in Exhibit B attached hereto
and, as so amended, shall be the certificate of incorporation of
the Surviving Corporation until thereafter amended as provided
therein or by applicable Law; and
(b) The bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be amended and restated to
read in their entirety as the bylaws of Merger Sub (except that
the name shall change to the name of the Surviving Corporation)
and, as so amended, shall be the bylaws of the Surviving
Corporation until thereafter amended as provided therein or by
applicable Law.
Section 2.7 Directors
and Officers of Surviving Corporation. The
directors and officers of Merger Sub as of the Effective Time
shall, from and after the Effective Time, be the directors and
officers, respectively, of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance
with the certificate of incorporation or bylaws of the Surviving
Corporation.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except as set forth in the letter delivered to Parent and Merger
Sub by the Company concurrently with entering into this
Agreement (the Company Disclosure Letter),
the Company represents and warrants to Parent and Merger Sub as
follows:
Section 3.1 Organization;
Power; Qualification. The Company and each of
its Subsidiaries is a corporation, limited liability company or
other legal entity duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization.
Each of the Company and its Subsidiaries has the requisite
corporate or similar power and authority to own, lease and
operate its assets and to carry on its business as now
conducted. Each of the Company and its Subsidiaries is duly
qualified or licensed to do business as a foreign corporation,
limited liability company or other legal entity and is in good
standing (to the extent such concept is legally recognized) in
each jurisdiction where the character of the assets and
properties owned, leased or operated by it or the nature of its
business makes such qualification or license
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necessary, except where the failure to be so qualified or
licensed or in good standing would not reasonably be expected to
have a Company Material Adverse Effect.
Section 3.2 Corporate
Authorization; Enforceability.
(a) The Company has the requisite corporate power and
authority to enter into and to perform its obligations under
this Agreement and to consummate the Merger and the other
transactions contemplated by this Agreement, subject, in the
case of the Merger, to receipt of the Requisite Stockholder
Vote. The execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the Merger
and the other transactions contemplated hereby have been duly
and validly authorized by the Company Board, subject, in the
case of the Merger, to receipt of the Requisite Stockholder
Vote. No other corporate proceedings on the part of the Company
are necessary to approve this Agreement or to consummate the
Merger or the other transactions contemplated hereby other than,
in the case of the Merger, the Requisite Stockholder Vote and
the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware in accordance with the provisions
of the DGCL. Subject to Section 5.3(d), the Company
Board, acting upon the recommendation of the Strategic
Alternatives Committee, has unanimously, by resolutions adopted
at a meeting duly called and held, (i) approved and
declared advisable this Agreement and the transactions
contemplated hereby, (ii) determined that the terms of this
Agreement are fair to, and in the best interests of, the Company
and its stockholders, and (iii) resolved to recommend that
the Companys stockholders vote in favor of adoption of
this Agreement (the Company Board
Recommendation) and directed that the Agreement be
submitted to the holders of the Shares for their adoption of the
plan of merger contained in this Agreement at a stockholders
meeting duly called and held for such purpose. The Requisite
Stockholder Vote is the only vote of the holders of any class or
series of capital stock of the Company necessary for the Company
to adopt this Agreement and for the Company to consummate the
Merger and the other transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by
the Company and, assuming the due authorization, execution and
delivery of this Agreement by Parent and Merger Sub, constitutes
a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the
extent that the enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar Laws, now or hereafter in
effect, relating to creditors rights generally,
(ii) general principles of equity (regardless of whether
such enforcement is considered in a proceeding at law or in
equity), and (iii) the remedy of specific performance and
injunctive and other forms of equitable relief being subject to
the discretion of the Governmental Entity before which any
enforcement proceeding therefor may be brought.
Section 3.3 Capitalization;
Equity Awards.
(a) The Companys authorized capital stock consists
solely of 165,050,000 shares of Common Stock and
88,415,000 shares of preferred stock, par value $0.001 per
share, (the Preferred Stock). As of the close
of business on October 12, 2008 (the Measurement
Date), 21,423,344 shares of Common Stock were
issued and outstanding (including Company Restricted Shares),
all of which are validly issued, fully paid and nonassessable,
and no shares of Preferred Stock were issued or outstanding. As
of the Measurement Date, 175,755 shares of Common Stock and
no shares of Preferred Stock were held in the treasury of the
Company. No Shares are held by any Subsidiary of the Company. As
of the Measurement Date, Company Stock Options to purchase
2,516,017 shares of Common Stock were outstanding and
134,361 shares of Common Stock were subject to outstanding
Company RSUs. As of the date of this Agreement, except as set
forth in this Section 3.3, or in Section 3.3 of
the Company Disclosure Letter, there are no outstanding shares
of capital stock or securities or other rights convertible or
exchangeable into or exercisable for shares of capital stock of
the Company. From the Measurement Date through the date of this
Agreement, other than in connection with the issuance of Shares
pursuant to the exercise of Company Stock Options or settlement
of Company RSUs, in each case, outstanding as of the Measurement
Date, there have been no issuances of any securities of the
Company.
(b) Section 3.3 of the Company Disclosure Letter sets
forth a correct and complete list, as of the date of this
Agreement, of outstanding Company Restricted Shares, Company
Stock Options and Company RSUs,
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including the holder thereof, the date of grant, the term (in
the case of Company Stock Options), the number of Shares subject
to such Company Stock Option or Company RSU, the Company Stock
Plan under which such award was granted and, where applicable,
the exercise price.
(c) Except as set forth in this Section 3.3 and
except pursuant to the Company Stock Plans, there are no
preemptive or other outstanding rights, options, warrants,
conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements, calls or
commitments or rights of any kind that obligate the Company or
any of its Subsidiaries to issue, sell, or otherwise transfer to
any Person, or to repurchase, redeem or otherwise acquire from
any Person, any Shares, Preferred Stock, capital stock of any
Subsidiary of the Company, or securities or other rights
convertible or exchangeable into or exercisable for shares of
capital stock of the Company or any Subsidiary of the Company.
(d) There are no voting trusts or other agreements or
understandings to which the Company is a party with respect to
the voting of the Common Stock other than the Voting Agreement.
(e) There are no agreements or understandings requiring
consent or approval from the holder of any Company Stock
Options, Company Restricted Shares, Company RSUs or warrants to
purchase any Shares, Preferred Stock, or capital stock of the
Company or any of its Subsidiaries to effectuate the terms of
this Agreement.
Section 3.4 Subsidiaries. Section 3.4
of the Company Disclosure Letter lists each Subsidiary of the
Company as of the date of this Agreement and the jurisdiction of
organization of each such Subsidiary. All of the issued and
outstanding shares of capital stock, voting securities, profits
interests or other equity or equity-like interests of the
Companys Subsidiaries are directly or indirectly owned,
beneficially and of record, by the Company, free and clear of
all Liens, other than Liens created as a result of federal or
state securities laws, Liens for Taxes not yet due or that are
being contested in good faith and Liens imposed or granted
pursuant to or in connection with the Companys existing
credit facilities or other outstanding indebtedness, and all
such shares or interests have been duly authorized, validly
issued and fully paid and, in the case of shares of capital
stock issued by a corporate entity formed under the laws of the
United States, nonassessable, free of any preemptive rights.
Section 3.5 Required
Filings and Consents. The execution, delivery
and performance of this Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated by
this Agreement, including the Merger, will not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any international, foreign, national, federal,
state, provincial or local governmental, regulatory or
administrative authority, including the SEC and any
self-regulatory authority (SRO) (including
The NASDAQ Global Market, or any successor entity or entities
thereto (NASDAQ)), agency, commission or
court (each, a Governmental Entity),
other than: (i) the filing and recordation of the
Certificate of Merger with the Secretary of State of the State
of Delaware; (ii) applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the Exchange Act) or
the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the Securities
Act); (iii) any filings with, and approvals from,
relevant state securities administrators or related to the blue
sky laws of various states; (iv) the filing with the
Securities and Exchange Commission (the SEC)
of a proxy statement (the Company Proxy
Statement) relating to a special meeting of the
holders of the Companys Common Stock to consider the
adoption of this Agreement (the Company
Stockholders Meeting); (v) the filings or notices
required by, and any approvals required under the rules and
regulations of NASDAQ or other SROs; (vi) compliance with
and filings under (A) the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), if applicable, and (B) other applicable
competition or merger control Laws of any jurisdiction (the
Foreign Merger Control Laws); and
(vii) in such other circumstances where the failure to
obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not reasonably be
expected to have a Company Material Adverse Effect.
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Section 3.6 Non
Contravention. The execution, delivery and
performance of this Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated by
this Agreement, including the Merger, will not:
(a) conflict with or result in any breach of any provision
of the certificates of incorporation and bylaws (or the
equivalent organizational documents) of the Company or any of
its Subsidiaries, in each case as in effect on the date of this
Agreement (the Company Organizational
Documents);
(b) result in any violation, or the breach of, constitute a
default, give rise to any right of modification, termination,
cancellation or acceleration under, or result in the creation or
imposition of a Lien under, any Material Contract to which the
Company or any of its Subsidiaries is a party or by which any of
them is otherwise bound, except for such violations, breaches,
defaults, or rights of termination, cancellation or
acceleration, or the imposition of Liens, as to which requisite
waivers or consents have been obtained or will be obtained prior
to the Effective Time;
(c) contravene or conflict with, or result in any violation
or breach of, any material Permit of the Company or any of its
Subsidiaries; or
(d) violate in any material respect the provisions of any
Law or Order applicable to the Company or any of its
Subsidiaries.
Section 3.7 Compliance
with Laws and Permits.
(a) The Company and each of its Subsidiaries are and have
been since January 1, 2005 in compliance in all material
respects with applicable Laws.
(b) The Company and each of its Subsidiaries holds all
material Permits necessary for the ownership, operation and use
of the respective properties and assets of the Company and its
Subsidiaries and the conduct of their respective businesses as
currently conducted. All such material Permits are in full force
and effect and no suspension or cancellation of any of the
material Permits is pending or, to the Knowledge of the Company,
threatened.
(c) Since January 1, 2006, no Governmental Entity has,
to the Knowledge of the Company, initiated, and no Governmental
Entity has provided written notice to the Company or its
Subsidiaries of, any proceeding or investigation into the
business or operations of the Company or any of its
Subsidiaries, except, in the case of any proceeding or
investigation initiated or with respect to which written notice
was provided since the date of this Agreement, as would not,
individually or in the aggregate, be material to the Company and
its Subsidiaries taken as a whole.
Section 3.8 Financial
Reports and SEC Documents.
(a) The Company has filed or furnished all forms,
statements, certifications, reports and documents required to be
filed with, or furnished to, the SEC pursuant to the Exchange
Act since January 1, 2006 (the forms, statements, reports
and documents filed or furnished with the SEC since
January 1, 2006, including any exhibits and amendments
thereto, the Company SEC Documents). Each of
the Company SEC Documents, at the time of its filing or
furnishing (except as and to the extent such Company SEC
Document has been modified or superseded in any subsequent
Company SEC Document filed with, or furnished to, the SEC prior
to the date of this Agreement), complied in all material
respects with the applicable requirements of each of the
Exchange Act and the Securities Act. As of their respective
dates, except as and to the extent modified or superseded in any
subsequent Company SEC Document filed or furnished with the SEC
prior to the date of this Agreement, the Company SEC Documents
did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. To the
Companys Knowledge, as of the date of this Agreement, none
of the Company SEC Documents is the subject of ongoing SEC
review, outstanding SEC investigation or outstanding material
SEC comment.
(b) The Company maintains disclosure controls and
procedures as required by
Rule 13a-15
under the Exchange Act. These disclosure controls and procedures
were designed to ensure that (i) material information
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required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC, and (ii) all such information
is accumulated and communicated to the Companys management
as appropriate to allow timely decisions regarding disclosure
and to make the certifications of the principal executive
officer and principal financial officer of the Company required
under the Exchange Act with respect to such reports.
(c) The Company maintains internal control over financial
reporting as required by
Rule 13a-15
under the Exchange Act. This internal control over financial
reporting was designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States
(GAAP) (and includes policies and procedures
that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company, (ii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
GAAP, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management
and directors of the Company, and (iii) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
Companys assets that could have a material effect on its
financial statements.
(d) Each of the consolidated balance sheets, statements of
income, changes in stockholders equity and cash flows of
the Company and its Subsidiaries included in or incorporated by
reference into the Company SEC Documents (including any related
notes and schedules) (i) fairly presents in all material
respects the consolidated financial position of the Company and
its Subsidiaries as of the date of each such balance sheet, and
the results of operations and cash flows of the Company and its
Subsidiaries, as the case may be, for the periods set forth in
each such consolidated statement of income, changes in
stockholders equity and cash flows (subject, in the case
of unaudited statements, to the absence of notes and normal
year-end audit adjustments), and (ii) has in each case been
prepared in accordance with GAAP consistently applied during the
periods involved, except as may be noted therein or in the notes
thereto.
Section 3.9 Undisclosed
Liabilities. As of the date of this
Agreement, neither the Company nor any of its Subsidiaries has
any liabilities or obligations of any nature (whether or not
accrued, absolute, contingent or otherwise) that would be
required by GAAP to be reflected on a consolidated balance sheet
of the Company and its Subsidiaries (including the notes
thereto), other than (i) liabilities or obligations in the
amounts reflected on, or reserved against, in the Companys
consolidated balance sheet as of December 31, 2007 (or the
notes thereto) included in the Companys financial
statements, (ii) liabilities or obligations incurred in the
ordinary course of business since December 31, 2007,
(iii) liabilities or obligations that are not material to
the financial condition of the Company and its Subsidiaries,
taken as a whole, and (iv) liabilities or obligations
incurred by the Company in connection with the transactions
contemplated by this Agreement.
Section 3.10 Absence
of Certain Changes.
(a) From December 31, 2007 through the date of this
Agreement, the Company and its Subsidiaries have conducted their
respective businesses in all material respects in the ordinary
course of business consistent with past practice.
(b) From December 31, 2007 through the date of this
Agreement, there has not been a Company Material Adverse Effect,
and there has not been any Change that would reasonably be
expected to have a Company Material Adverse Effect.
(c) From December 31, 2007 through the date of this
Agreement, there have not been:
(i) any amendments or changes in the Company Organizational
Documents;
(ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of the Company or any of its Subsidiaries other
than in the ordinary course of business consistent with past
practice;
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(iii) any split, combination or reclassification of any of
the capital stock or other equity interest of the Company or any
of its Subsidiaries or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of the capital stock or other equity
interest of the Company or any of its Subsidiaries;
(iv) any material change in accounting methods, principles
or practices used by the Company affecting its assets,
liabilities or business, except insofar as may have been
required by a change in GAAP; or
(v) any action or event that would require Parents
consent under Section 5.1 if such action or event
had occurred after the date of this Agreement.
(d) Except (i) as required pursuant to the terms of
any Company Benefit Plan as in effect on December 31, 2007,
(ii) as required to comply with applicable Law (including
Section 409A of the Code) or (iii) in the ordinary
course of business consistent with past practice, since
December 31, 2007 through the date of this Agreement, there
has not been any (A) grant or payment of any severance or
termination benefits to any director, officer or employee of the
Company or any of its Subsidiaries, (B) material increase
in the compensation, perquisites or benefits payable to any
director, officer or employee of the Company or any of its
Subsidiaries, (C) grant of equity or equity-based awards
that may be settled in Shares, Preferred Stock or any other
securities of the Company or any of its Subsidiaries or the
value of which is linked directly or indirectly, in whole or in
part, to the price or value of any Shares, Preferred Stock or
other Company securities or Subsidiary securities, or
(D) acceleration in the vesting or payment of compensation
payable or benefits provided or to become payable or to be
provided to any current or former director, officer or employee
of the Company or any of its Subsidiaries.
Section 3.11 Litigation. There
are no material (a) claims, actions, suits, demand letters,
judicial, administrative or regulatory proceedings,
arbitrations, or hearings, notices of violation (each, a
Legal Action), or, to the Companys
Knowledge, investigations before any Governmental Entity pending
or, to the Knowledge of the Company, threatened, against the
Company or any of its Subsidiaries, or (b) outstanding
Orders against the Company or any of its Subsidiaries or by
which any property, asset or operation of the Company or any of
its Subsidiaries is bound or affected.
Section 3.12 Contracts.
(a) As of the date of this Agreement, neither the Company
nor any of its Subsidiaries is a party to or bound by any:
(i) material contract (as such term is defined
in Item 601(b)(10) of
Regulation S-K
promulgated under the Securities Act) to be performed in full or
in part after the date of this Agreement that has not been
filed, described, or incorporated by reference in the Company
SEC Documents;
(ii) employment agreement pursuant to which an employee is
entitled to receive a base salary in excess of $100,000 per year
(other than those that are terminable at will by the Company or
any of its Subsidiaries, as applicable, without cost, payment or
penalty);
(iii) loan or guaranty agreement, indenture or other
instrument, contract or agreement under which in excess of
$200,000 has been borrowed or loaned or any note, bond or other
evidence of indebtedness in excess of $200,000 has been issued,
other than guarantees by the Company of real property leases of
certain of its subsidiaries;
(iv) mortgage, security agreement, conditional sales
contract, capital lease or similar agreement with total payments
in excess of $200,000 per year or that effectively creates a
lien, encumbrance or security interest on any material assets of
the Company or any of its Subsidiaries;
(v) any Leases requiring the Company to make payments in
excess of $100,000 per year;
(vi) material partnership or joint venture agreement;
(vii) collective bargaining agreement;
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(viii) agreements relating to the acquisition of any
material assets or relating to the merger or consolidation of
the Company or any of its Subsidiaries with any other entity
that have (A) not been consummated as of the date hereof or
(B) that, if consummated as of the date hereof, have any
remaining outstanding monetary obligations in excess of $200,000;
(ix) investment banking agreement of any kind or nature
whatsoever;
(x) contract, whether as licensor or licensee, for the
license of any patent, know-how, trademark, trade name, service
mark, copyright or other intangible asset that provides for
payments by or to the Company or such Subsidiary in excess of
$100,000 per year (other than licenses of commercial
off-the-shelf computer software);
(xi) contract which contains any provision that would
prohibit or materially restrict the ability of the Company or
any of its Subsidiaries from engaging in business or from
competing with any other parties, including, but not limited to,
operating in any geographical area;
(xii) other agreements (other than those listed in
clauses (i) through (xi) above) (A) with a term
longer than one (1) year from the date hereof that involve
payments by the Company
and/or any
of its Subsidiaries in excess of $200,000 per year; or
(B) with a term less than one (1) year from the date
hereof that involve payments by the Company
and/or any
of its Subsidiaries in excess of $200,000, that are not
terminable without premium or penalty on less than
30 days notice;
(xiii) agreements or insurance policies providing for
indemnification of any officer or director of the Company or any
of its Subsidiaries, other than the existing directors and
officers insurance policies and the certificate of
incorporation and bylaws or other organizational documents, as
currently in effect, of the Company and each of its
Subsidiaries; or
(xiv) agreements evidencing a loan to any officer or
director of the Company or any of its Subsidiaries, other than
advances for expenses pursuant to the Companys standard
expense reimbursement policies.
Each contract, arrangement, commitment or understanding
described in clauses (i) through (xiv), filed in the
Company SEC Documents, or set forth in Section 3.12(a) of
the Company Disclosure Letter, is referred to herein as a
Material Contract.
(b) Each Material Contract is valid and binding on the
Company and any of its Subsidiaries that is a party thereto, as
applicable, and in full force and effect, other than any such
Material Contract that expires or is terminated after the date
hereof in accordance with its terms or amended (as permitted by
Section 5.1) by agreement with the counterparty
thereto (provided that, if any such Material Contract is so
amended or terminated in accordance with its terms after the
date hereof, then to the extent the representation and warranty
contained in this sentence is made or deemed made as of any date
that is after the date of such amendment or termination, the
reference to Material Contract in the first clause
of this sentence shall be deemed to be a reference to such
contract as so amended and shall be deemed to exclude any such
terminated contract). The Company and each of its Subsidiaries
has performed in all material respects all obligations required
to be performed by it to date under each Material Contract,
except where such noncompliance would not be material to the
Company and its Subsidiaries, taken as a whole. Neither the
Company nor any of its Subsidiaries nor, to the Knowledge of the
Company, any other party to any Material Contract: (A) is
in breach of or in default under any Material Contract, or
(B) knows of, or has received written notice of, the
existence of any event or condition which constitutes, or, after
notice or lapse of time or both, will constitute, a material
default on the part of such party under any such Material
Contract. True and complete copies of all written Material
Contracts and true and correct summaries of all oral Material
Contracts have been delivered or made available to Parent.
Section 3.13 Benefit
Plans.
(a) Section 3.13(a) of the Company Disclosure Letter
contains a list, as of the date of this Agreement, of each
employee benefit plan within the meaning of
Section 3(3) of ERISA, including each Multiemployer Plan
and each other stock purchase, stock option, restricted stock,
severance, retention, employment,
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consulting, change-of-control, bonus, incentive (equity-based or
otherwise), deferred compensation, welfare benefit, fringe
benefit and other benefit plan, agreement, program, policy,
commitment or other arrangement, whether or not subject to
ERISA, in each case sponsored, maintained or contributed to, or
required to be sponsored, maintained or contributed to, by the
Company or any of its Subsidiaries or with respect to which the
Company or any of its Subsidiaries has any material liability
(each, a Company Benefit Plan). No entity
other than the Company and its Subsidiaries is a member of the
Companys controlled group (within the meaning
of Section 414 of the Code). With respect to each such
Company Benefit Plan, and with respect to any Company Benefit
Plan that is a multiemployer plan within the meaning
of Section 3(37) of ERISA (a Multiemployer
Plan), to the extent in the Companys possession
or control, the Company has provided or made available to Parent
true, complete and correct copies of (i) each such Company
Benefit Plan; (ii) the most recent summary plan
descriptions for each such Company Benefit Plan for which a
summary plan description is required by applicable Law;
(iii) the three (3) most recent annual reports on
Form 5500 filed with the Internal Revenue Service
(IRS); (iv) if the plan is intended to
qualify under Section 401(a) of the Code, the most recent
determination letter or opinion letter received from the IRS;
(v) the most recent actuarial report
and/or
financial statements, to the extent that any such reports or
financial statements are required under applicable Law to be
prepared with respect to such Company Benefit Plan; and
(vi) any related trust agreement or funding instrument now
in effect or required in the future as a result of the
transactions contemplated by this Agreement.
(b) No Company Benefit Plan is subject to Title IV of
the Employment Retirement Income Security Act of 1974, as
amended (ERISA), or Section 412 of the
Code or is a Multiemployer Plan or a plan that has two or more
contributing sponsors, at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA.
(c) Each Company Benefit Plan that is intended to qualify
under Section 401(a) of the Code has been issued a
favorable determination letter or opinion letter by the IRS with
respect to such qualification, its related trust has been
determined to be exempt from taxation under Section 501(a)
of the Code and no such determination letter has been revoked
nor, to the Knowledge of the Company, has revocation been
threatened. Each Company Benefit Plan, other than a
Multiemployer Plan, has been established, funded and
administered in compliance, in all material respects, with its
terms and with the applicable provisions of ERISA, the Code and
other applicable Laws. All contributions required by applicable
Law to have been made by the Company or its Subsidiaries as of
the Effective Time with respect to each Company Benefit Plan in
respect of current or prior plan years have been made in all
material respects or, except as would not, individually or in
the aggregate, reasonably be expected to have a Company Material
Adverse Effect, such contributions have been accrued in all
material respects in accordance with GAAP.
(d) There are no Company Benefit Plans under which welfare
benefits are provided to past employees or made available to
present employees of the Company and its Subsidiaries beyond
their retirement or other termination of service, other than
coverage mandated by the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA),
Section 4980B of the Code, Title I of ERISA or any
similar state group health plan continuation Laws or other
applicable Laws or the full cost of which is paid by such
employees or their dependents.
(e) Except as provided in Section 2.5, neither
the execution and delivery by the Company of this Agreement nor
the consummation by the Company of the transactions contemplated
hereby (alone or in combination with any other event) would:
(i) result in any payment becoming due, or increase the
amount of any compensation or benefits due, to any current or
former employee of the Company or its Subsidiaries or with
respect to any Company Benefit Plan (except as required by
applicable Law); (ii) increase any benefits otherwise
payable under any Company Benefit Plan; (iii) result in the
acceleration of the time of payment or vesting of any such
compensation or benefits, other than vesting to comply with
Section 401(a) of the Code; (iv) trigger the funding
of any compensation or benefits due to any current or former
employee of the Company or its Subsidiaries (except as required
by applicable Law); (v) result in any excess
parachute payment within the meaning of Section 280G
of the Code pursuant to any Company Benefit Plan or other plan
or agreement as in effect on the date of this Agreement; or
(vi) result in any payment that would be nondeductible
under Code Section 162(m).
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(f) Except as would not, individually or in the aggregate,
reasonably be expected to result in a material liability, none
of the Company, any of its Subsidiaries, or any Company Benefit
Plan, nor to the Knowledge of the Company, any
disqualified person (as defined in Section 4975
of the Code) or party in interest (as defined in
Section 3(14) of ERISA) with respect to any Company Benefit
Plan, has engaged in any non-exempt prohibited transaction
(within the meaning of Section 4975 of the Code or
Section 406 of ERISA) with respect to any Company Benefit
Plan. With respect to any Company Benefit Plan, as of the date
of this Agreement, (i) no Legal Actions (including any
administrative investigation, audit or other proceeding by the
Department of Labor or the IRS but excluding routine claims for
benefits in the ordinary course) are pending or, to the
Knowledge of the Company, threatened, and (ii) to the
Knowledge of the Company, no events or conditions have occurred
or exist that would reasonably be expected to give rise to any
such Legal Actions, except in the case of both clauses (i)
and (ii), as would not, individually or in the aggregate,
reasonably be expected to result in a material liability.
(g) Each Company Benefit Plan that is a nonqualified
deferred compensation plan subject to Section 409A of the
Code, complies with (or with respect to the period prior to the
Closing was in good faith compliance with or availed itself of
transition relief with respect to) the requirements of Code
Section 409A(a)(2), (3), and (4) and any Internal
Revenue Service guidance issued thereunder and to the Knowledge
of the Company no amounts under any such Company Benefit Plan
are or have been subject to the interest and additional tax set
forth under Code Section 409A(a)(1)(B). The Company does
not have any actual or potential obligation to reimburse or
otherwise
gross-up any
Person for the interest or additional tax set forth under Code
Section 409A(a)(1)(B).
(h) Except where such misclassification would not result in
a material liability to the Company and its Subsidiaries, taken
as a whole, there are no individuals who would be treated as
employees of the Company or any of its Subsidiaries for purposes
of federal or state tax law who were characterized by the
Company or any of its Subsidiaries as independent contractors,
consultants, leased employees or similar non-employee
classification.
(i) Each Company Benefit Plan established or maintained for
the benefit of Canadian employees has been administered in
material compliance with all applicable Laws.
Section 3.14 Taxes.
(a) All material Tax Returns required to be filed by or
with respect to the Company or any of its Subsidiaries have been
properly prepared and timely filed and all such Tax Returns are
true, correct and complete in all material respects. There are
no adjustments relating to such Tax Returns that have been
proposed in writing by any Tax authority and there are no Tax
liens on any of the assets for Taxes that are not Permitted
Liens. The Company has delivered or made available to Parent
true and complete copies of all material federal, state, and
local income Tax Returns filed since January 1, 2006.
(b) The Company and its Subsidiaries have paid, or will
timely pay, all material Taxes required to be paid by any of
them shown as due and payable on such Tax Returns except to the
extent that such Taxes are being contested in good faith and the
Company, or the appropriate Subsidiary, has set aside reserves
in accordance with GAAP. The Company and its Subsidiaries have
provided, in all material respects, for any Taxes that are not
yet due and payable for all taxable periods on the most recent
financial statements contained in the Company SEC Documents to
the extent required by GAAP or in the case of foreign entities,
in accordance with generally applicable accounting principles in
the relevant jurisdiction.
(c) As of the date of this Agreement, there are no
outstanding agreements extending or waiving the statutory period
of limitations applicable to any claim for, or the period for
the collection, assessment or reassessment of, Taxes due from
the Company or any of its Subsidiaries for any taxable period
and, to the Knowledge of the Company, no request for any such
waiver or extension is currently pending. The Company has not
received any written requests for information by any Tax
authority that are currently outstanding that could adversely
affect the Taxes of the Company or any of its Subsidiaries; and
there are no proposed material reassessments received in writing
by the Company of any property owned by the Company or any of
its
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Subsidiaries or other proposals that could materially increase
the amount of any Tax to which the Company or any of its
Subsidiaries would be subject.
(d) As of the date of this Agreement, no audit or other
proceeding by any Governmental Entity is pending or, to the
Knowledge of the Company, threatened with respect to any Taxes
due from or with respect to the Company or any of its
Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries is a
party to any Tax sharing or similar Tax agreement (other than an
agreement exclusively between or among the Company and its
Subsidiaries) pursuant to which it will have any obligation to
make any payments on account of Taxes after the Closing Date.
Neither the Company nor any of its Subsidiaries has any
liability as a result of being or having been, before the
Closing Date, a member of an affiliated, consolidated, combined
or unitary group, other than a group of which the Company and
its Subsidiaries are currently members, or as a result of a Tax
sharing, Tax indemnity or Tax allocation agreement.
(f) Neither the Company nor any of its Subsidiaries has
participated in a listed transaction within the
meaning of Treasury
Regulation Section 1.6011-4,
other than a transaction exempted from the reporting
requirements of such Regulation.
(g) The Company and its Subsidiaries have timely withheld
and paid all material Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, shareholder, member or other
third party.
(h) The Company has not been a United States real property
holding corporation within the meaning of section 897(c)(2)
of the Code during the applicable period identified in
section 897(c) (1)(A)(ii) of the Code.
(i) The Company has not distributed stock of another Person
or has had its stock distributed by another Person in a
transaction that was purported or intended to be governed in
whole or in part by section 355 or 361 of the Code.
Section 3.15 Intellectual
Property.
(a) Section 3.15(a) of the Company Disclosure Letter
sets forth a list of all registered Intellectual Property and
material unregistered Intellectual Property which is owned by
the Company or its Subsidiaries and which is material to the
conduct of the business of the Company and its Subsidiaries, the
Company Owned Intellectual Property).
(b) The Company or one or more of its Subsidiaries owns or
otherwise has a valid right to use all Intellectual Property
necessary to conduct the business of the Company and its
Subsidiaries as such is conducted as of the date of this
Agreement.
(c) Except as would not reasonably be expected to have a
Company Material Adverse Effect, all registered Company
Intellectual Property has been duly registered
and/or
filed, as applicable, with each applicable Governmental Entity
in each applicable jurisdiction, all necessary affidavits of
continuing use have been filed, and all necessary maintenance
fees have been paid to continue all such rights in effect.
(d) To the Knowledge of the Company, none of the Company or
its Subsidiaries has infringed upon or otherwise violated, or is
infringing upon or otherwise violating, the Intellectual
Property rights of any third party. To the Knowledge of the
Company, no Person or any product or service of any Person is
infringing upon or otherwise violating any Company Owned
Intellectual Property. No licensor of any Intellectual Property
which is owned by the Company or its Subsidiaries and which is
material to the conduct of the business of the Company and its
Subsidiaries (Company Licensed Intellectual
Property) has notified the Company or any of its
Subsidiaries in writing that any Person or any product or
service of any Person is infringing upon or otherwise violating
in any material respect any Company Licensed Intellectual
Property.
(e) There are no outstanding Legal Actions instituted or
pending against the Company or any of its Subsidiaries or which,
to the Knowledge of the Company, have been threatened in
writing, with respect to the infringement or violation by the
Company or any of its Subsidiaries in any material respect of
the Intellectual Property rights of a third party. The Company
has not been notified in writing of any possible infringement or
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other violation, in any material respect, by the Company or any
of its Subsidiaries of the Intellectual Property rights of any
third party.
(f) The Company and its Subsidiaries have taken
commercially reasonable actions to protect, preserve and
maintain the Company Owned Intellectual Property and to maintain
the confidentiality and secrecy of their confidential
information, trade secrets and proprietary information under
applicable Law.
(g) To the extent that any Software that is owned by a
third party is distributed to customers of the Company or any of
its Subsidiaries together with the Company Owned Intellectual
Property, such third party rights have been identified in
Section 3.15(g) of the Company Disclosure Letter, all
necessary licenses have been obtained for, and no royalties or
payments are due from the Company or any of its Subsidiaries in
respect of, such Software.
(h) Except as would not reasonably be expected to have a
Company Material Adverse Effect (i) none of the source code
of the Company or any of its Subsidiaries has been published or
disclosed by the Company or any of its Subsidiaries except
pursuant to a non-disclosure agreement, and (ii) except for
source code provided to third party developers to make
modifications or derivative works for the benefit of the Company
or any of its Subsidiaries, no licenses or rights have been
granted to a third person to distribute, or to otherwise use to
create derivative works, the source code for any Software that
was authored by the Company and that is commercially available
from the Company or any of its Subsidiaries.
Section 3.16 Insurance. Section 3.16
of the Company Disclosure Letter lists each material insurance
policy maintained by the Company or its Subsidiaries. The
Company and its Subsidiaries are in compliance in all material
respects with respect to their obligations under any of such
insurance policies. Since January 1, 2006, neither the
Company nor any of its Subsidiaries has received any written
notice of cancellation or termination of any such policy or
rejection of any material claim thereunder.
Section 3.17 Real
Property. Section 3.17 of the Company
Disclosure Letter lists any and all (i) real property owned
by the Company and its Subsidiaries (the Real
Property) and (ii) leases (including subleases)
of real property and any modifications or amendments thereto
(the Leases), and with respect to the
Leases (A) the rent (base and additional) due and payable
thereunder and (B) the respective tenants
proportionate share for taxes and operating expenses. The
Company and each of its Subsidiaries have good, valid and
marketable fee title to the Real Property, free and clear of all
Liens, except for Permitted Liens and as expressly set forth on
Section 3.17 of the Company Disclosure Letter, and good and
valuable leasehold interests in the Leases. The Leases are in
good standing, valid and effective against the Company and each
of its Subsidiaries, as applicable, and there is not under any
Lease any existing material default by the Company or any of its
Subsidiaries or, to the Companys Knowledge, the
counterparties thereto, or any event which, with notice or lapse
of time or both, would become a material default by the Company
or any of its Subsidiaries or, to the Companys Knowledge,
the counterparties thereto. The Company and its Subsidiaries
have not entered into any agreements for the sale of the Real
Property and will not enter into any such agreements without
Parents and Merger Subs consent.
Section 3.18 Takeover
Statutes; No Rights Agreement.
(a) Assuming the accuracy of the representations and
warranties set forth in Section 4.10, the Company
and the Company Board have taken all necessary action, if any,
in order to render inapplicable any control share acquisition,
business combination or other similar anti-takeover provision
under the Company Certificate or the laws of Delaware or any
other jurisdiction that is, or is reasonably likely to become,
applicable to the Company as a result of the transactions
contemplated by this Agreement, including the Merger.
(b) The Company has not adopted a stockholder rights plan
or similar arrangement relating to accumulations of beneficial
ownership of Common Stock upon a change in control of the
Company.
Section 3.19 Opinion
of Financial Advisor. SunTrust Robinson
Humphrey, Inc. (SunTrust) has delivered to
the Strategic Alternatives Committee, and provided a copy
thereof to the Company Board, its written opinion (or oral
opinion confirmed in writing) to the effect that, as of the date
of this Agreement, the Merger Consideration is fair to the
stockholders of the Company from a financial point of view.
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Section 3.20 Brokers
and Finders. Other than SunTrust and
Jefferies & Company, Inc., no broker, finder or
investment banker is entitled to any brokerage, finders or
other fee or commission in connection with the Merger or the
other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of its
Subsidiaries.
Section 3.21 Interested
Party Transactions. Except for employment
Contracts entered into in the ordinary course of business
consistent with past practice or filed or incorporated by
reference as an exhibit to a Company SEC Document,
Section 3.21 of the Company Disclosure Letter sets forth a
list, as of the date hereof, of the Contracts or other
arrangements under which the Company or any of its Subsidiaries
has any existing or future liabilities required to be reported
by the Company pursuant to Item 404 of
Regulation S-K
promulgated by the SEC (each such Contract or other arrangement,
an Affiliate Transaction).
Section 3.22 Environmental
Matters.
(a) Neither the Company nor any of its Subsidiaries is the
subject of any federal, state, local or foreign investigation,
decree, order or judgment, and neither the Company nor any of
its Subsidiaries has received any written notice or claim, or
entered into any negotiations or agreements with any person,
relating to any material liability or remedial action under any
applicable Environmental Laws;
(b) The Company and its Subsidiaries have materially
complied and currently materially comply with all Environmental
Laws;
(c) Neither the Company nor any of its Subsidiaries has
manufactured, treated, stored, disposed of, arranged for or
knowingly permitted the disposal of, generated, handled or
released any Hazardous Substance or, to the Knowledge of the
Company, owned or operated any property or facility, in each
case in a manner that has given or would reasonably be expected
to give rise to any material liability under Environmental Laws;
(d) To the Knowledge of the Company, no Hazardous
Substances have been released or otherwise come to be located at
any property or facility owned or operated by the Company or any
of its Subsidiaries in a manner that is in material violation of
any Environmental Law or that has given or would reasonably be
expected to give rise to any liability under Environmental
Laws; and
(e) To the Knowledge of the Company, the Company and each
of its Subsidiaries holds and is in compliance, in all material
respects, with all Permits required to conduct its business and
operations under all applicable Environmental Laws.
Section 3.23 Employee
Matters.
(a) As of the date hereof, there are no labor or employment
claims, grievances, arbitration demands, actions, suits or
disputes pending or, to the Knowledge of the Company, threatened
involving the Company or any of its Subsidiaries and any of
their employees or former employees, other than those that would
not reasonably be expected to have a Company Material Adverse
Effect. Except as set forth on Section 3.23(a) of the
Company Disclosure Letter, there has been: (i) to the
Knowledge of the Company, no labor union organizing or
attempting to organize any employee of the Company or any of its
Subsidiaries into one or more collective bargaining units; and
(ii) no labor dispute, strike, work slowdown, work
stoppage, picketing, or lock out or other collective labor
action by or with respect to any employees of the Company or any
of its Subsidiaries pending or occurring since January 1,
2006 or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries. Neither the Company nor any
of its Subsidiaries is a party to, or bound by, any collective
bargaining agreement or other agreement with any labor
organization applicable to the employees of the Company or any
of its Subsidiaries and no such agreement is currently being
negotiated.
(b) The Company and its Subsidiaries (i) are in
compliance in all material respects with all applicable Laws,
regulations, policies and procedures, and collective bargaining
and other contractual obligations respecting employment and
employment practices, terms and conditions of employment,
including all such obligations relating to health and safety,
discrimination, harassment, immigration, compensation, and wages
and hours, and are not engaged in any unfair labor practice as
defined by the National Labor Relations Act, (ii) are not
liable in any material respect for any arrears of wages or any
penalty for failure to comply with
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any of the foregoing and (iii) are not liable for any
material payment to any trust or other fund or to any
governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other
benefit or obligations for employees (other than routine
payments to be made in the ordinary course of business and
consistent with past practice).
(c) To the Knowledge of the Company, no employee of the
Company or any of its Subsidiaries has provided or is providing
information to any law enforcement agency regarding the
commission or possible commission of any crime or the violation
or possible violation of any applicable Law involving the
Company or any of its Subsidiaries. None of the Company, any of
its Subsidiaries or, to the Knowledge of the Company, any
officer, employee, contractor, subcontractor or agent of the
Company or any of its Subsidiaries has discharged, demoted,
suspended, threatened, harassed or in any other manner
discriminated against an employee of the Company or any of its
Subsidiaries in the terms and conditions of employment because
of any act of such employee described in 18 O.K.
Section 1514A(a).
(d) Neither the Company nor any of its Subsidiaries:
(i) has had since January 1, 2006 any mass layoff of
employees, as defined under the Workers Adjustment and
Retraining Notification Act (WARN) (or other similar
state law); or (ii) has implemented since January 1,
2006 any early mass retirement or mass separation program.
Section 3.24 Certain
Payments. Neither the Company nor, to the
Knowledge of the Company, any of the directors, executive
officers, agent or employees of the Company or any of its
Subsidiaries acting in his or her capacity as a director,
executive officer, agent or employee of the Company or any of
its Subsidiaries (a) has used or is using any corporate
funds for any illegal contributions, gifts, entertainment or
other unlawful expenses relating to political activity,
(b) has used or is using any corporate funds for any direct
or indirect unlawful payments to any foreign or domestic
governmental officials or employees, (c) has violated or is
violating any provision of the Foreign Corrupt Practices Act of
1977, (d) has established or maintained, or is maintaining,
any unlawful fund of corporate monies or other properties, or
(e) has made any bribe, unlawful rebate, payoff, influence
payment, kickback or other unlawful payment of any nature,
except to the extent that, in the case of clauses (a) and
(d) above, such activities would not result in material
liability to the Company and its Subsidiaries taken as a whole.
Section 3.25 Suppliers. Section 3.25
of the Company Disclosure Letter sets forth the 10 largest
suppliers of the Company and its Subsidiaries, taken as a whole,
for the year ended December 31, 2007 based on aggregate
payments made to such suppliers by the Company and its
Subsidiaries during such period (the Significant
Suppliers). To the Knowledge of the Company, since
December 31, 2007 and through the date hereof, neither the
Company nor any of its Subsidiaries has received from any of the
Significant Suppliers any written notice of termination or
material alteration of any contract or business relationship
governed thereby.
Section 3.26 Information
in the Company Proxy Statement. The
information in the Company Proxy Statement will not contain
at the time the Company Proxy Statement is first mailed to
stockholders of the Company, or at the time of the Company
Stockholders Meeting, any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information
supplied in writing by or on behalf of the Parent or Merger Sub
that is contained in the Company Proxy Statement or any
amendment or supplement thereto.
Section 3.27 No
Other Representations or Warranties. Except
for the representations and warranties contained in this
Article III or in any certificates delivered by the
Company in connection with the Closing, each of Parent and
Merger Sub acknowledges that neither the Company nor any Person
on behalf of the Company makes or has made any other express or
implied representation or warranty with respect to the Company
or any of its Subsidiaries or with respect to any other
information provided or made available to Parent or Merger Sub
in connection with the transactions contemplated by this
Agreement.
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ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the letter delivered by Parent and Merger
Sub to the Company concurrently with the execution of this
Agreement (the Acquiror Disclosure Letter),
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
Section 4.1 Organization
and Power. Parent is a corporation, duly
organized, validly existing and in good standing under the Laws
of the State of Nevada and has the requisite power and authority
to own, lease and operate its assets and properties and to carry
on its business as now conducted and as it will be conducted
through the Effective Time. Merger Sub is a corporation, duly
organized, validly existing and in good standing under the Laws
of the State of Delaware and has the requisite power and
authority to own, lease and operate its assets and properties
and to carry on its business as now conducted and as it will be
conducted through the Effective Time.
Section 4.2 Corporate
Authorization. Parent and Merger Sub each
have the requisite corporate or other power and authority to
enter into and to perform their respective obligations under
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this
Agreement by each of Parent and Merger Sub and the consummation
by each of Parent and Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of each of Parent and
Merger Sub.
Section 4.3 Enforceability. This
Agreement has been duly executed and delivered by each of Parent
and Merger Sub and, assuming the due authorization, execution
and delivery of this Agreement by the Company, constitutes a
legal, valid and binding agreement of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in
accordance with its terms, except to the extent that the
enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
other similar Laws now or hereafter in effect relating to
creditors rights generally, (b) general principles of
equity (regardless of whether such enforcement is considered in
a proceeding at law or in equity), and (c) the remedy of
specific performance and injunctive and other forms of equitable
relief being subject to the discretion of the Governmental
Entity before which any enforcement proceeding therefor may be
brought.
Section 4.4 Required
Filings and Consents. The execution, delivery
and performance of this Agreement by each of Parent and Merger
Sub do not, and the consummation by each of Parent and Merger
Sub of the transactions contemplated by this Agreement, will
not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Entity other
than: (a) the filing and recordation of the Certificate of
Merger with the Secretary of State of the State of Delaware;
(b) applicable requirements of the Exchange Act or the
Securities Act; (c) compliance with and filings under
(i) the HSR Act and (ii) any applicable requirements
of any Foreign Merger Control Law; and (d) in such other
circumstances where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not reasonably be expected to have a Merger
Sub Material Adverse Effect.
Section 4.5
Non Contravention. The execution, delivery
and performance of this Agreement by each of Parent and Merger
Sub do not and the consummation by each of Parent and Merger Sub
of the transactions contemplated by this Agreement, including
the Merger, will not:
(a) conflict with, or result in any breach of any provision
of the certificate of incorporation, bylaws or other
organizational documents of either Parent or Merger Sub;
(b) result in any violation, or the breach of, or
constitute a default under, give rise to any right of
modification, termination, cancellation or acceleration under,
or result in the creation or imposition of a Lien, under any
Contract to which Parent or Merger Sub is a party or by which
any of them is otherwise bound, except for such violations,
breaches, defaults, or rights of termination, cancellation or
acceleration, or the imposition of Liens as to which requisite
waivers or consents have been obtained or will be obtained prior
to the Effective Time or which would not reasonably be expected
to have a Merger Sub Material Adverse Effect;
A-24
(c) contravene or conflict with, or result in any violation
or breach of, any Permit of Parent or Merger Sub except as would
not reasonably be expected to have a Merger Sub Material Adverse
Effect; or
(d) violate the provisions of any Law or Order applicable
to Parent or Merger Sub, except for any such violations that
would not reasonably be expected to have a Merger Sub Material
Adverse Effect.
Section 4.6
Absence of Litigation. As of the date of
this Agreement, there is no Legal Action pending, or to the
Knowledge of Parent, threatened, against Parent or any of its
Affiliates before any Governmental Entity that would or seeks to
materially delay the consummation of the Merger or otherwise
prevent or materially delay Parent or Merger Sub from performing
their obligations hereunder. As of the date hereof, neither
Parent nor any of its Affiliates is subject to any continuing
order of, consent decree, settlement agreement or other similar
written agreement with, any Governmental Entity, or any order,
judgment, injunction or decree of any Governmental Entity that
would or seeks to prevent or materially delay the consummation
of the Merger or otherwise prevent or materially delay Parent or
any of its Affiliates from performing their obligations
hereunder.
Section 4.7 Financing.
(a) At the Closing, Parent and Merger Sub will have
immediately available funds sufficient to pay the aggregate
Merger Consideration and any other payments contemplated by this
Agreement and to pay all fees and expenses related to the
Financing, the Merger or any other transactions contemplated by
this Agreement. True, complete and correct copies of the fully
executed Purchase Agreement by and between HSS and Stanford
International Bank Ltd., (SIBL) dated as of
the date of this Agreement (the Purchase
Agreement), pursuant to which SIBL has agreed, subject
to the terms and conditions thereof, to provide to Parent
and/or
Merger Sub the amounts set forth therein (the
Financing), have been provided to the
Company. The Purchase Agreement is the only agreement that has
been entered into by Parent or its Affiliates with respect to
the Financing that contain conditions to the closing of the
Financing. Except to the extent permitted by
Section 5.12(c), the Purchase Agreement has not been
amended or modified, and the respective obligations contained in
the Purchase Agreement have not been withdrawn or rescinded in
any respect. Except to the extent permitted by
Section 5.12(c), the Purchase Agreement, in the form
so delivered, is in full force and effect and is a legal, valid
and binding obligation of Parent
and/or
Merger Sub. No event has occurred which, with or without notice,
lapse of time or both, would constitute a default or breach on
the part of Parent
and/or
Merger Sub under any term or condition of the Purchase
Agreement. Parent
and/or
Merger Sub has fully paid any and all commitment fees or other
fees incurred in connection with the Purchase Agreement that
have become due and payable. In the event a New Purchase
Agreement is entered into, references in this Agreement to the
Purchase Agreement shall be deemed to be references to the New
Purchase Agreement.
(b) Subject to its terms and conditions, the Financing,
when funded in accordance with the Purchase Agreement, will
provide funds at the Closing and at the Effective Time
sufficient to consummate the Merger upon the terms contemplated
by this Agreement and to pay all related fees and expenses
associated therewith, including payment of all amounts under
Article II of this Agreement. There are no
conditions precedent or other contingencies to the funding of
the full amount of the Financing other than as set forth in the
Purchase Agreement. Parent and Merger Sub have no reason to
believe that any of the conditions precedent to the Financing
will not be satisfied in full in connection with the
consummation of the transactions contemplated by this Agreement
or that the Financing will not be available to Parent
and/or
Merger Sub on the Closing Date.
Section 4.8
Operations of Parent and Merger
Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this
Agreement and has not engaged in any business activities or
conducted any operations other than in connection with the
transactions contemplated by this Agreement.
Section 4.9
Solvency. After giving effect to all of
the transactions contemplated hereby, including the Financing,
any alternative financing, the payment of the aggregate Merger
Consideration and payment in respect of the Equity Award Amounts
contemplated by Section 2.5, and payment of all
related fees and expenses, each of Parent and the Surviving
Corporation will be Solvent. For the purposes of this
Section 4.9, the term Solvent
when used with respect to any Person, means that, as of any date
of determination, (a) the
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amount of the fair saleable value of the assets of
such Person on a going concern basis will, as of such date,
exceed (i) the value of all liabilities of such
Person, including contingent and other liabilities, as of
such date, as such quoted terms are generally determined in
accordance with applicable federal laws governing determinations
of the insolvency of debtors, and (ii) the amount that will
be required to pay the probable liabilities of such Person on
its existing debts (including contingent liabilities) as such
debts become absolute and matured, (b) such Person will not
have, as of such date, an unreasonably small amount of capital
for the operation of the businesses in which it is engaged or
proposed to be engaged following such date, and (c) such
Person will be able to pay its liabilities, including contingent
and other liabilities, as they mature. For purposes of this
definition, each of the phrases not have an unreasonably
small amount of capital for the operation of the businesses in
which it is engaged or proposed to be engaged and
able to pay its liabilities, including contingent and
other liabilities, as they mature means that such Person
will be able to generate enough cash from operations, asset
dispositions or refinancing, or a combination thereof, to meet
its obligations as they become due.
Section 4.10 Management
Agreements. Except as contemplated in this
Agreement, there are no Contracts, understandings or
arrangements between Parent or Merger Sub or any of their
Affiliates, on the one hand, and any member of the
Companys management or the Company Board, on the other
hand. Neither Parent nor Merger Sub, alone or together with any
other Person, has been at any time, or became, an
interested stockholder or has taken any action that
would cause any anti-takeover statute under the DGCL to be
applicable to this Agreement, the Merger or any other
transaction contemplated by this Agreement.
Section 4.11 No
Other Representations and Warranties. Except
for the representations and warranties contained in this
Article IV or in any certificates delivered by
Parent or Merger Sub in connection with the Closing, the Company
acknowledges that neither Parent, Merger Sub nor any Person on
behalf of Parent or Merger Sub makes or has made any other
express or implied representation or warranty with respect to
Parent or Merger Sub or with respect to any other information
provided or made available to the Company in connection with the
transactions contemplated by this Agreement.
Section 4.12 Information
in the Company Proxy Statement. The
information supplied by Parent and Merger Sub expressly for
inclusion in the Company Proxy Statement will not contain at the
time the Company Proxy Statement is first mailed to stockholders
of the Company, or at the time of the Company Stockholders
Meeting, any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, Parent and Merger Sub make no
representation or warranty with respect to any information
supplied in writing by or on behalf of the Company that is
contained in the Company Proxy Statement or any amendment or
supplement thereto.
ARTICLE V
COVENANTS
Section 5.1 Conduct
of Business of the Company. Except as
expressly contemplated by this Agreement, as set forth in
Section 5.1 of the Company Disclosure Letter or otherwise
required by Law, without the prior written consent of Parent
(which shall not be unreasonably withheld or delayed), from the
date of this Agreement until the earlier of the Effective Time
or the termination of this Agreement in accordance with
Article VII, the Company will, and will cause each
of its Subsidiaries to, (x) conduct its operations, in all
material respects, in the ordinary course of business, and
(y) use its commercially reasonable efforts to: maintain
and preserve intact its business organization, keep available
the services of its current officers, employees, consultants and
independent contractors, and preserve, in all material respects,
the Companys goodwill and its current relationships with
material customers, licensees and suppliers and other persons
and entities with which the Company has material business
relations. Without limiting the generality of the foregoing,
except with the prior written consent of Parent (which shall not
be unreasonably withheld or delayed), as expressly contemplated
by this Agreement or as set forth in Section 5.1 of the
Company Disclosure Letter or otherwise required by Law, from the
date of this Agreement until the earlier of the
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Effective Time or the termination of this Agreement in
accordance with Article VII, the Company will not,
and will cause each of its Subsidiaries not to, directly or
indirectly, take any of the following actions:
(a) amend the Company Organizational Documents;
(b) declare, set aside, or pay any dividend or make any
other distribution with respect to any shares of its capital
stock or otherwise make any payments to stockholders in their
capacity as such; provided, however, that this
Section 5.1(b) shall not apply to dividends or
distributions paid by a Subsidiary to the Company or any other
Subsidiary of the Company in the ordinary course of business;
(c) (i) split, combine, subdivide or reclassify its
capital stock, (ii) purchase, redeem, or otherwise acquire
any shares of its capital stock, or any securities or other
rights convertible or exchangeable into or exercisable for any
shares of its capital stock, other than (A) the acquisition
by the Company of shares of Common Stock in connection with the
surrender of shares of Common Stock by holders of Company Stock
Options in order to pay the exercise price of the Company Stock
Options, (B) the withholding of shares of Common Stock to
satisfy Tax obligations with respect to awards granted pursuant
to the Company Stock Plans, (C) the acquisition by the
Company of Company Stock Options, Company Restricted Shares and
Company RSUs in connection with the forfeiture of such awards,
or (D) the acquisition on the open market by the trustee of
the Companys 401(k) Plan of shares of Common Stock in
order to satisfy participant investment elections under the
Companys 401(k) Plan, (iii) issue, grant, deliver,
sell, pledge, transfer, convey, dispose of or permit the
imposition of any Lien or other encumbrance on any shares of its
capital stock, any options, warrants, securities exercisable,
exchangeable or convertible into any shares of its capital stock
or any outstanding stock appreciation rights, stock awards,
restricted stock, restricted stock awards, performance units,
phantom stock, profit participation or similar rights with
respect to the Company or any of its Subsidiaries or any shares
of the Companys capital stock, other than
(A) pursuant to the exercise of Company Stock Options and
settlement of Company RSUs outstanding as of the date of this
Agreement, (B) as required pursuant to any Company Benefit
Plan or (C) the sale by the trustee of the Companys
401(k) Plan of shares of Common Stock in order to satisfy
participant investment elections under the Companys 401(k)
Plan, or (iv) enter into any Contract, understanding or
arrangement with respect to the sale, voting, pledge,
encumbrance, disposition, acquisition, transfer, registration or
repurchase of its capital stock or such securities or other
rights, except in each case as permitted under
Section 5.1(d);
(d) except (i) in the case of officers, employees,
independent contractors and consultants of the Company or its
Subsidiaries in the ordinary course of business or as required
pursuant to existing written agreements, (ii) as required
pursuant to the terms of any Company Benefit Plan (or related
trust agreement), (iii) as necessary to comply with
Section 409A of the Code, (iv) as otherwise expressly
permitted by this Agreement, or (v) with the prior written
consent of Parent (which shall not be unreasonably withheld or
delayed), (A) increase the compensation or benefits payable
to any directors, officers or employees of the Company or its
Subsidiaries or enter into any new bonus or incentive
arrangement with directors, officers or employees of the Company
or its Subsidiaries, (B) grant or pay any severance or
termination pay to any of the directors, officers or employees
of the Company or its Subsidiaries, (C) enter into any new
employment or severance agreement with any directors, officers
or employees of the Company or its Subsidiaries,
(D) establish, adopt, enter into, amend or take any action
to accelerate rights or fund benefits under any Company Benefit
Plan, or (E) otherwise make any change in any compensation
arrangement or contract with any present or former employee,
officer, director, independent contractor, consultant, or
stockholder or establish, terminate or materially amend any
Company Benefit Plan or materially increase benefits (including
acceleration of benefits) under any Company Benefit Plan, or
grant any awards under any Company Benefit Plan, provided,
however, that the foregoing clauses (A), (C), (D) and
(E) shall not restrict the Company or any of its
Subsidiaries from entering into or making available to newly
hired employees or promoted employees, in each case in the
ordinary course of business, plans, agreements, benefits and
compensation arrangements that have a value that is consistent
with the Companys past practice of making compensation and
benefits available to newly hired or promoted employees in
similar positions;
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(e) sell, lease, license or otherwise dispose of or effect
a Lien on any assets with a value in excess of $50,000
individually or $200,000 in the aggregate, other than in the
ordinary course of business;
(f) license, lease, acquire, sublease, grant any Lien
(other than Permitted Liens) affecting
and/or
transfer any material interest in any material asset other than
leases entered into in the ordinary course of business, or enter
into any amendment, extension or termination of any leasehold
interest in any property other than in the ordinary course of
business;
(g) make any acquisitions of, capital contributions to, or
investments in, by purchase of stock or other equity interests,
or by merger, consolidation or other business combination, of
any business, corporation, partnership, limited liability
company, association, joint venture or other entity, or make any
purchases of any material property or assets from any Person
(other than a wholly-owned Subsidiary of the Company), other
than purchases of current assets in the ordinary course of
business;
(h) incur, assume, guarantee or prepay any indebtedness for
borrowed money or offer, place or arrange any issue of debt
securities or commercial bank or other credit facilities, other
than short-term borrowings by the Company in the ordinary course
of business pursuant to the Companys existing credit
facilities and consistent with past practice, or an incurrence
of indebtedness that does not cause the principal amount of
outstanding indebtedness of the Company to exceed $1,000,000 at
any time;
(i) make any material loans, advances or capital
contributions to, or investments in, any other Person, other
than contributions or investments (i) to or in
Subsidiaries, (ii) among Subsidiaries,
(iii) constituting advances of expenses to employees in the
ordinary course of business, or (iv) pursuant to Contracts
existing on the date of this Agreement;
(j) authorize or make any capital expenditure, other than
(i) as specifically provided on Schedule 5.1 to the
Company Disclosure Letter or (ii) capital expenditures of
approximately $500,000 through December 31, 2008,
consistent with the Companys 2008 Management Forecast, and
$250,000 following December 31, 2008, consistent with the
Companys 2009 Business Plan;
(k) change its financial accounting principles, policies or
procedures, other than as required by Law or GAAP, or write up,
write down or write off the book value of any assets of the
Company and its Subsidiaries, other than in any such case
(i) in the ordinary course of business, or (ii) as may
be required by Law or GAAP;
(l) waive, release, assign, settle or compromise any
material Legal Action, other than as reflected or reserved
against in the most recent audited financial statements of the
Company (or the notes thereto) included in the Company SEC
Documents (for amounts not in excess of such reserves);
(m) (i) settle or compromise any material Tax audit,
make or change any material Tax election or file any material
amendment to a material Tax Return, (ii) except as required
by applicable Law, change any annual Tax accounting period or
adopt or change any material Tax accounting method, or
(iii) enter into any material closing agreement, surrender
any right to claim a material refund of Taxes or consent to any
extension or waiver of the limitation period applicable to any
material Tax claim or assessment relating to the Company or its
Subsidiaries;
(n) other than as permitted hereunder, satisfy, discharge,
waive or settle any material right or obligation, other than in
the ordinary course of business;
(o) enter into, terminate or materially amend any Material
Contract (it being agreed, for avoidance of doubt, that ordinary
course licenses by the Company of its commercial off-the-shelf
computer software are not Material Contracts for purposes of
this Agreement);
(p) (i) eliminate the positions of any employees,
(ii) terminate the employment of employees except for
terminations of individual employees based on such
employees failure to properly perform his or her duties
and responsibilities, or (iii) terminate the employment of
two or more employees; or
(q) agree or commit to do any of the foregoing.
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Section 5.2 Access
to Information; Confidentiality.
(a) Subject to applicable Law and that certain
confidentiality agreement by and between the Company and Parent,
dated as of August 1, 2008 (the
Confidentiality Agreement), and solely
with respect to financing sources that are not a party to any
Confidentiality Agreement as of the date of this Agreement other
confidentiality provisions reasonably acceptable to the Company,
the Company will provide and will cause its Subsidiaries and its
and their respective Representatives to provide Parent and its
Representatives and financing sources, at Parents expense,
during normal business hours and upon reasonable advance notice
(i) such access to the officers, management employees,
offices, properties, books and records of the Company and such
Subsidiaries (so long as such access does not unreasonably
interfere with the operations of the Company or the performance
of their duties) as Parent reasonably may request, and
(ii) subject to applicable Law and the Companys
existing written policies with respect to the protection of
employee privacy and protection of attorney-client privilege and
attorney work product, all documents that Parent reasonably may
request.
(b) The Company makes no representation or warranty as to
the accuracy of any information provided pursuant to
Section 5.2(a), and neither Merger Sub nor Parent
may rely on the accuracy of any such information, in each case
other than as expressly set forth in the Companys
representations and warranties contained in
Article III.
(c) All non-public or otherwise confidential information
regarding the Company or any of its Subsidiaries obtained by
Parent or its Representatives shall be kept confidential by
Parent and its Representatives in accordance with the
Confidentiality Agreement.
Section 5.3 Limitations
on Solicitation.
(a) Subject to Section 5.3(b) and
Section 5.3(d):
(i) The Company shall not, shall cause its officers,
directors and Subsidiaries not to, and shall not authorize its
Representatives to initiate, solicit or knowingly encourage or
knowingly facilitate the submission of any Takeover Proposal, or
engage in negotiations with respect thereto.
(ii) The Company shall not, shall cause its officers,
directors, and Subsidiaries not to, and shall not authorize its
Representatives to approve or recommend, or publicly propose to
approve or recommend, a Takeover Proposal, or effect a
Recommendation Change, or enter into any merger agreement,
letter of intent, agreement in principle, purchase agreement,
option agreement or other similar agreement providing for a
Takeover Proposal.
(b) Notwithstanding anything to the contrary contained in
this Section 5.3, if prior to obtaining the
Requisite Stockholder Vote, (i) the Company has received a
written Takeover Proposal from a third party that the Company
Board (or the Strategic Alternatives Committee) determines in
good faith (after consultation with its financial advisor and
outside legal counsel) to be bona fide, (ii) the Company
has not intentionally or materially breached this
Section 5.3, (iii) the Company Board (or the
Strategic Alternatives Committee) determines in good faith
(after consultation with its financial advisor and outside legal
counsel) that such Takeover Proposal constitutes or is
reasonably expected to lead to a Superior Proposal, and
(iv) the Company Board (or the Strategic Alternatives
Committee) determines in good faith (after consultation with its
outside legal counsel) that the failure to take the actions
described in clauses (A) and (B) below could result in
a violation of its fiduciary duties to the stockholders of the
Company under applicable Law, then the Company may
(A) furnish information with respect to the Company and its
Subsidiaries to the Person making such Takeover Proposal, and
(B) participate, engage or assist in any manner in
discussions or negotiations with the Person making such Takeover
Proposal regarding such Takeover Proposal; provided,
however, the Company (x) will not, and will not
allow its Subsidiaries or authorize its or their Representatives
to, disclose any non-public information to such Person without
first entering into a confidentiality agreement with such Person
that contains confidentiality provisions that are not materially
less restrictive in the aggregate to such Person than those
provisions contained in the Confidentiality Agreement are to
Parent, and (y) will promptly provide to Parent any
non-public information concerning the Company or its
Subsidiaries provided to such other Person which was not
previously provided to Parent.
A-29
(c) Subject to the fiduciary duties of the Company Board,
in the event the Company receives: (i) any Takeover
Proposal or any bona fide proposal or offer with respect to a
Takeover Proposal; (ii) any request for non-public
information relating to the Company or any of its Subsidiaries
concerning a Takeover Proposal; or (iii) any bona fide
inquiry or request for discussions or negotiations regarding any
Takeover Proposal, the Company shall promptly, but in no event
later than two (2) Business Days thereafter, notify Parent
and disclose to Parent the material terms of such Takeover
Proposal, request or inquiry.
(d) Notwithstanding anything in
Section 5.3(a)(ii) to the contrary, if at any time
prior to obtaining the Requisite Stockholder Vote, (A) the
Company Board (or the Strategic Alternatives Committee)
determines in good faith (after consultation with its financial
advisor and outside legal counsel) that a Takeover Proposal
received by the Company constitutes a Superior Proposal, and
(B) the Company Board (or the Strategic Alternatives
Committee) determines in good faith (after consultation with its
outside legal counsel) that failing to take such action could
result in a breach of the fiduciary duties of the Company Board
under applicable Law, the Company Board (or the Strategic
Alternatives Committee) may (x) withdraw, modify or
qualify, or propose publicly to withdraw, modify or qualify, in
a manner adverse to Parent or Merger Sub, the Company Board
Recommendation, or recommend or endorse, or propose publicly to
recommend or endorse, any Takeover Proposal (a
Recommendation Change),
and/or
(y) cause the Company to terminate this Agreement in order
to enter into a definitive agreement with respect to such
Superior Proposal; provided, however, that the
Company shall not terminate this Agreement pursuant to the
foregoing clause (y) and any such purported termination
shall be void ab initio, unless in advance of or
concurrently with such termination the Company pays the Company
Termination Fee as required by Section 7.6(a)(ii)
and simultaneously with such termination enters into an
acquisition agreement, merger agreement or similar definitive
agreement (the Alternative Acquisition
Agreement) and terminates this Agreement in compliance
with Section 7.4(b) and provided,
further, that the Company Board may not make a
Recommendation Change or terminate this Agreement pursuant to
the foregoing clause (y) and any such purported termination
shall be void ab initio unless the Company shall have
provided prior written notice to Parent, at least three
(3) Business Days in advance (the Notice
Period), of its intention to take such action with
respect to such Superior Proposal, which notice shall specify
the material terms and conditions of such Superior Proposal.
During the Notice Period, the Company shall, and shall cause its
Representatives to, negotiate with Parent and Merger Sub in good
faith (to the extent Parent and Merger Sub desire to negotiate)
to make such adjustments in the terms and conditions of this
Agreement, and the Company Board shall take into account any
changes to the financial and other terms of this Agreement
proposed by Parent and Merger Sub (in the form of a binding,
written and complete proposal, including all exhibits, ancillary
agreements, schedules and necessary amendments to the terms of
this Agreement) in response to any such written notice by the
Company or otherwise, so that the Takeover Proposal ceases to
constitute a Superior Proposal (it being understood and agreed
that any amendment to the financial terms or other material
terms of such Superior Proposal shall require a new written
notice by the Company and a new three (3) Business Day
period).
(e) Subject to this Section 5.3 the Company
shall not terminate, waive, amend or modify any material
provision of any standstill or confidentiality agreement to
which it is a party that relates to a transaction of a type
described in the definition of Takeover Proposal;
provided, however, that the Company may permit to
be taken any of the actions prohibited under a standstill
agreement if the Company Board (or the Strategic Alternatives
Committee) determines in good faith, after consultation with
outside counsel, that failure to take such action would be
inconsistent with its fiduciary duties to the stockholders of
the Company under applicable Law.
(f) Nothing contained in this Section 5.3 shall
prohibit the Company Board (or the Strategic Alternatives
Committee) from (i) complying with its disclosure
obligations under United States federal or state Law with regard
to a Takeover Proposal, including taking and disclosing to the
stockholders of the Company a position with respect to any
tender or exchange offer by a third party pursuant to
Rule 14e-2(a)
or
Rule 14d-9
promulgated under the Exchange Act (or any similar communication
to stockholders) or (ii) making any required (based on the
good faith determination of the Company Board (or Strategic
Alternatives Committee)) stop, look and listen
communication or similar communication of the type contemplated
by
Rule 14d-9(f)
under the Exchange Act.
A-30
(g) The Company shall not take any action to exempt any
Person (other than Parent, Merger Sub and their respective
Affiliates) from the restrictions on business
combinations contained in Section 203 of the DGCL (or
any similar provisions of any other Law) or otherwise cause such
restrictions not to apply unless such actions are taken
simultaneously with a termination of this Agreement.
Section 5.4 Notices
of Certain Events.
(a) The Company will notify Parent and Merger Sub (and
provide copies if applicable) of (i) any written or, to the
Knowledge of the Company, oral communication from (x) any
Governmental Entity or (y) any third party alleging
that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement
(and the response thereto from the Company, its Subsidiaries or
its Representatives), (ii) any communication from any
Governmental Entity in connection with the transactions
contemplated by this Agreement (and the response thereto from
the Company, its Subsidiaries or its Representatives),
(iii) the commencement or threat, in writing, of any Legal
Action affecting the Company or any of its Subsidiaries or any
of their respective properties or assets, or, to the Knowledge
of the Company, any employee, agent, director or officer, in his
or her capacity as such, which if pending on the date hereof,
would have been required to have been disclosed by the Company
pursuant to this Agreement or which relates to the transactions
contemplated by this Agreement (and the response thereto from
the Company, its Subsidiaries or its Representatives),
(iv) any event, change, occurrence, circumstance or
development between the date of this Agreement and the Effective
Time of which causes, or would reasonably be expected to cause,
any condition to the obligations of the Company to effect the
Merger and the other transactions contemplated by this Agreement
not to be satisfied, (v) any material failure of the
Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder, and
(vi) the occurrence of an event which would reasonably be
expected to have a Company Material Adverse Effect or that would
otherwise reasonably be expected to cause a condition in
Article VI not to be satisfied. With respect to any
of the foregoing, the Company will consult with Parent and
Merger Sub and their Representatives so as to permit the Company
and Parent and their respective Representatives to cooperate to
take appropriate measures to avoid or mitigate adverse
consequences that may result from any of the foregoing.
(b) Parent and Merger Sub will notify the Company of
(i) any written or, to the Knowledge of Parent or Merger
Sub, oral communication from (x) any Governmental Entity or
(y) any third party alleging that the consent of such
Person (or another Person) is or may be required in connection
with the transactions contemplated by this Agreement (and the
response thereto from Parent and Merger Sub or their
Representatives), (ii) any communication from any
Governmental Entity in connection with the transactions
contemplated by this Agreement (and the response thereto from
Parent and Merger Sub or their Representatives), (iii) the
commencement or threat in writing of any Legal Actions affecting
Parent or any of its Affiliates that are related to the
transactions contemplated by this Agreement (and the response
thereto from Parent and Merger Sub or their Representatives),
(iv) any event, change, occurrence, circumstance or
development which causes, or would reasonably expected to cause
the Financing to become unavailable on the terms and conditions
contemplated in the Purchase Agreement or to otherwise be
delayed, (v) any event, change, occurrence, circumstance or
development between the date of this Agreement and the Effective
Time of which Parent or Merger Sub learns and which causes, or
is reasonably expected to cause, any condition to the
obligations of Parent or Merger Sub to effect the Merger and the
other transactions contemplated by this Agreement not to be
satisfied, (vi) any material failure of Parent or Merger
Sub to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; and
(vii) the occurrence of any event that would reasonably be
expected to cause a condition in Article VI not to
be satisfied. With respect to any of the foregoing, Parent and
Merger Sub will consult with the Company and its Representatives
so as to permit the Company and Parent and Merger Sub and their
respective Representatives to cooperate to take appropriate
measures to avoid or mitigate adverse consequences that may
result from any of the foregoing.
Section 5.5 Stockholders
Meeting; Proxy Material.
(a) Subject to the reasonable cooperation of Parent, in
connection with the Company Stockholders Meeting, the Company
will use its commercially reasonable efforts to, as soon as
reasonably practicable after the date of this Agreement, but in
any event no later than November 3, 2008, prepare and file
or cause to be
A-31
filed with the SEC the Company Proxy Statement. Each of Parent,
Merger Sub and the Company shall furnish all information
concerning itself and its Affiliates that is required to be
included in the Company Proxy Statement or that is
customarily included in proxy statements or other filings
prepared in connection with transactions of the type
contemplated by this Agreement. Each of Parent, Merger Sub and
the Company will use their commercially reasonable efforts to
respond as soon as reasonably practicable to any comments
received from the SEC with respect to the Company Proxy
Statement. Each party shall promptly notify the other party upon
the receipt of any comments from the SEC or its staff or any
request from the SEC or its staff for amendments or supplements
to the Company Proxy Statement and shall provide the other party
with copies of all correspondence between it and its
Representatives, on the one hand, and the SEC and its staff, on
the other hand relating to the Company Proxy Statement. The
Company shall give Parent and Merger Sub a reasonable
opportunity to comment on any correspondence with the SEC or its
staff or any proposed material to be included in the Company
Proxy Statement prior to transmission to the SEC or its staff.
If at any time prior to the Company Stockholders Meeting, any
information relating to Parent, Merger Sub, the Company or any
of their respective Affiliates, officers or directors, should be
discovered by Parent, Merger Sub or the Company which should be
set forth in an amendment or supplement to the Company Proxy
Statement so that the Proxy Statement shall not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading, the
party that discovers such information shall promptly notify the
other parties, and an appropriate amendment or supplement
describing such information shall be filed with the SEC and, to
the extent required by applicable law, disseminated to the
stockholders of the Company. The Company will mail or cause to
be mailed to its stockholders, as soon as reasonably practicable
after filing with the SEC, the Company Proxy Statement and all
other customary proxy or other materials for meetings such as
the Company Stockholders Meeting. The Company will provide
Parent and Merger Sub a reasonable opportunity to review and
comment upon the Company Proxy Statement, or any amendments or
supplements thereto, prior to mailing the Company Proxy
Statement to the Companys stockholders.
(b) The Company shall as soon as reasonably practicable
duly call, give notice of, convene and hold the Company
Stockholders Meeting for the purpose of obtaining the Requisite
Stockholder Vote as promptly as reasonably practicable after the
SEC confirms that it has no further comments on the Company
Proxy Statement. Except to the extent the Company Board (or
the Strategic Alternatives Committee) shall have withdrawn,
modified or qualified the Company Board Recommendation as
specifically permitted by Section 5.3(d) hereof, the
Company shall include in the Company Proxy Statement the Company
Board Recommendation and shall take all action that is both
reasonable and lawful to solicit the Requisite Stockholder Vote.
Notwithstanding anything to the contrary in the preceding
sentence and for the avoidance of doubt, at any time prior to
obtaining the Requisite Stockholder Vote, the Company may cancel
the Company Stockholders Meeting if this Agreement is terminated
before the meeting is held; provided, however, that the Company
may postpone or adjourn the meeting if required by any Order.
(c) The Company and Parent each agrees, as to itself and
its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or
incorporation by reference in the Company Proxy Statement and
any amendment or supplement thereto will, at the date of mailing
to stockholders and at the time of the Company Stockholders
Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
except that no covenant is made by the Company with respect to
statements made or incorporated by reference therein based on
information supplied by Parent or any of its Subsidiaries in
connection with the preparation of the Company
Proxy Statement for inclusion or incorporation by reference
therein. The Company agrees that the Company
Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act.
Section 5.6 Employees;
Benefit Plans.
(a) The Surviving Corporation and its Affiliates will honor
all Company Benefit Plans (including any severance, retention,
change of control and similar plans, agreements, offer letters,
offer summaries and other written arrangements, but excluding
any commitment, understanding or promise to grant equity
compensation) in accordance with their terms as in effect
immediately prior to the Effective Time, subject to any
amendment
A-32
or termination thereof that may be expressly permitted by the
terms of such Company Benefit Plans. During the period from the
Effective Date through the first (1st) anniversary of the
Effective Time (the Continuation Period), the
Surviving Corporation will provide all employees of the Company
and its Subsidiaries as of the Effective Time who continue
employment with the Surviving Corporation
(Employees) with benefits under employee
benefit plans (within the meaning of Section 3(3) of ERISA)
and other perquisites and fringe benefits (collectively,
Employee Benefits), other than equity based
compensation, that are no less favorable in the aggregate, on a
group rather than an individual basis, than the Employee
Benefits provided by the Company and its Subsidiaries as in
effect at the Effective Time; provided, however, that, subject
to the requirements of the portion of this sentence that
precedes this proviso, nothing herein shall (i) require
that the Surviving Corporation maintain or continue any
particular Company Benefit Plan or (ii) interfere with the
Surviving Corporations right or obligation to make changes
to any Company Benefit Plan or New Plan. Notwithstanding
anything to the contrary set forth herein, subject to
Section 5.6(a), nothing herein shall preclude the
Surviving Corporation from terminating the employment of any
Employee.
(b) For all purposes under the employee benefit plans of
the Surviving Corporation and its Affiliates providing benefits
to any Employees after the Effective Time (the New
Plans), the Surviving Corporation shall cause each
Employee to receive credit for all service with the Company and
its Affiliates before the Effective Time (including predecessor
or acquired entities or any other entities with respect to which
the Company and its Affiliates have given credit for prior
service) to the extent recognized in any similar Company Benefit
Plans in which such Employee participated immediately prior to
the Closing (such service, Pre-Closing
Service) for all purposes, including determining
eligibility to participate, level of benefits and vesting to the
extent such credit would result in a duplication of accrual of
benefits for the same period of service. In addition, and
without limiting the generality of the foregoing, (A) each
Employee immediately will be eligible to participate, without
any waiting time, in any New Plan to the extent coverage under
such New Plan replaces coverage under a similar or comparable
Company Benefit Plan in which such Employee participated
immediately before the Effective Time (such plans, collectively,
the Old Plans), and (B) for purposes of
each New Plan providing medical, dental, pharmaceutical, vision
and/or
disability benefits to any Employee, the Surviving Corporation
will cause or use its commercially reasonable efforts to cause
all pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such Employee and
his or her covered dependents, to the extent any such exclusions
or requirements were waived or were inapplicable under any
similar or comparable Company Benefit Plan, and the Surviving
Corporation will cause any eligible expenses incurred by such
Employee and his or her covered dependents during the portion of
the plan year of the Old Plan ending on the date such
Employees participation in the corresponding New Plan
begins to be taken into account under such New Plan for purposes
of satisfying all deductible, coinsurance and maximum
out-of-pocket requirements applicable to such Employee and his
or her covered dependents for the applicable plan year as if
such amounts had been paid in accordance with such New Plan.
(c) The provisions of this Section 5.6 are
solely for the benefit of the parties to this Agreement, and no
current or former employee, director, independent contractor or
consultant of the Company or its Subsidiaries or any other
Person associated therewith shall be regarded as a third party
beneficiary of this Section 5.6. No
provision of this Agreement shall be construed as amending any
Company Benefit Plan and any provisions hereof regarding Company
Benefit Plans shall not become effective unless and until the
Company Board or any other entity overseeing such Company
Benefit Plans takes such action as they deem necessary and
appropriate to implement such provisions. Neither the Company
Boards nor any other entities approval of this
Agreement, nor the execution of this Agreement by an officer or
director of the Company, shall constitute the required action.
Section 5.7 Directors
and Officers Indemnification and Insurance.
(a) In the event of any threatened or actual Legal Action,
whether civil, criminal or administrative, including any such
Legal Action or investigation in which any present or former
director or officer of the Company or any of its Subsidiaries
(together, the Indemnified Parties) is, or is
threatened to be, made a party based in whole or in part on, or
arising in whole or in part out of, or pertaining in whole or in
part to, any action or failure to take action by any such Person
in such capacity taken prior to the Effective Time (including
with respect to any action or failure to take action occurring
in connection with the approval of this
A-33
Agreement and the consummation of the Merger or any of the other
transactions contemplated hereby), Parent and the Surviving
Corporation (each, an Indemnifying Party)
will, jointly and severally, from and after the Effective Time,
indemnify, defend and hold harmless, as and to the fullest
extent permitted or required by applicable Law and required by
the Company Organizational Documents (or any similar
organizational document of the Company or any of its
Subsidiaries), and when applicable any indemnity agreements
applicable to any such Indemnified Party or any Contract between
an Indemnified Party and the Company or one of its Subsidiaries,
in each case, in effect on the date of this Agreement, against
any losses, claims, damages, liabilities, costs, reasonable
legal and other expenses (including reimbursement for reasonable
legal and other fees and expenses incurred in advance of the
final disposition of any Legal Action or investigation to each
Indemnified Party), judgments, fines and amounts paid in
settlement incurred by such Indemnified Party in connection with
such Legal Action or investigation. To the extent permitted by
applicable Law and the Company Organizational Documents, Parent
shall, or shall cause the Surviving Corporation to, promptly
advance all out-of-pocket expenses of each Indemnified Party in
connection with any such Legal Action or investigation as such
expenses (including reasonable attorneys fees and
disbursements) are incurred upon receipt from such Indemnified
Party of a request therefor; provided, however,
(if and to the extent required by the DGCL or other applicable
Law or the Company Organizational Documents) that such
Indemnified Party undertakes to repay such amount if it is
ultimately determined that such Indemnified Party is not
entitled to be indemnified under the DGCL or other applicable
Law or the Company Organizational Documents with respect to such
Legal Action or investigation. In the event any Legal Action or
investigation is brought against any Indemnified Party, Parent
and the Surviving Corporation shall each use all commercially
reasonable efforts to assist in the vigorous defense of such
matter; provided, however, that (i) neither
Parent nor the Surviving Corporation shall settle, compromise or
consent to the entry of any judgment in any Legal Action or
investigation (and in which indemnification could be sought by
such Indemnified Party hereunder) without the prior written
consent of such Indemnified Party if and to the extent such
settlement, compromise or judgment involves non-monetary relief
from such Indemnified Party and (ii) no Indemnifying Party
shall be liable for any settlement, compromise or consent to the
entry of any judgment in any Legal Action or investigation
effected without its prior written consent.
(b) For a period of six (6) years after the Effective
Time, the Surviving Corporation shall maintain in effect the
Companys current directors and officers
liability insurance and fiduciary liability insurance (the
D&O Insurance) in respect of acts or
omissions occurring at or prior to the Effective Time, covering
each Person currently covered by the D&O Insurance (a
complete and accurate copy of which has been heretofore made
available to Parent), on terms with respect to the coverage,
deductible and amounts no less favorable in the aggregate than
those of the D&O Insurance in effect on the date of this
Agreement; provided, however, that (x) in
satisfying its obligations under this Section 5.7(b)
the Surviving Corporation shall not be obligated to pay annual
premiums in excess of 200% of the amount currently paid by the
Company (which premiums are set forth in
Section 5.7(b) of the Company Disclosure Letter), it
being understood and agreed that the Surviving Corporation shall
nevertheless be obligated to provide the maximum amount of such
coverage as may be obtained for such annual 200% amount, and
(y) in the event of the application of clause (x), any
Indemnified Party, upon reasonable written notice thereof (which
notice shall be provided no later than thirty (30) days
prior to the Effective Time and shall set forth in reasonable
detail for each Person to be covered the policy coverage,
premiums, deductibles, limitations and other pertinent
information), who desires to obtain additional coverage such
that, when combined with the coverage obtained by the Surviving
Corporation in accordance with clause (x), it provides insurance
coverage equivalent to the D&O Insurance in effect on the
date hereof, may so elect and, if available the Surviving
Corporation shall acquire such additional coverage on behalf of
such Person; provided, however, that in the event
any Indemnified Party makes such an election, such Indemnified
Party shall pay the portion of the premium of such D&O
Insurance in excess of the amount which the Surviving
Corporation is obligated to pay pursuant to this
Section 5.7. At the Companys
option, the Company may purchase, prior to the Effective Time, a
six (6)-year pre-paid tail policy on terms and
conditions (in both amount and scope) providing substantially
equivalent benefits as the current D&O Insurance maintained
by the Company and its Subsidiaries with respect to matters
arising on or before the Effective Time, covering without
limitation the transactions contemplated hereby. In addition, if
the Company has not purchased any such policy, the Surviving
Corporation may acquire a six (6)-year pre-paid tail policy
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for Persons currently covered by D&O Insurance that is
consistent with the first sentence of this
Section 5.7(b). In either case, any such
policy, when fully paid for, shall be in lieu of satisfying the
Surviving Corporations obligations pursuant to the first
sentence of this Section 5.7(b). The
obligation to maintain insurance provided in this
Section 5.7(b) shall continue in full force and
effect for a period of not less than six (6) years
from and after the Effective Time; provided,
however, that in the event any claim or claims are
asserted or made within such six (6)-year period, the Surviving
Corporation shall ensure that such insurance remains in full
force and effect with respect to such claims until final
disposition thereof.
(c) Following the Effective Time, the Surviving Corporation
and each of its Subsidiaries shall include and maintain in
effect in their respective certificates of incorporation or
bylaws (or similar organizational documents) for a period of six
(6) years after the Effective Time, provisions regarding
the elimination of liability of directors (or their equivalent),
indemnification of officers and directors thereof and
advancement of expenses which are, with respect to each such
entity, no less advantageous to the Indemnified Parties than the
corresponding provisions contained in such organizational
documents as of the date of this Agreement.
(d) If the Surviving Corporation or any of its successors
or assigns shall (i) consolidate with or merge into any
other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or
(ii) transfer all or substantially all of its properties
and assets to any Person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of
the Surviving Corporation (or acquirer of such assets) shall
assume all of the obligations of the Surviving Corporation set
forth in this Section 5.7.
(e) The provisions of this Section 5.7 will
survive the Closing and are intended to be for the benefit of,
and will be enforceable by, each Indemnified Party and its
successors and representatives after the Effective Time and
their rights under this Section 5.7 are in addition
to, and will not be deemed to be exclusive of, any other rights
to which an Indemnified Party is entitled, whether pursuant to
Law, Contract, the Company Organizational Documents (or similar
organizational documents of the Surviving Corporation or any of
its Subsidiaries) or otherwise.
Section 5.8 Reasonable
Efforts.
(a) Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with applicable Laws, each
of the parties to this Agreement will use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to
ensure that the conditions set forth in Article VI
are satisfied and to consummate the transactions contemplated by
this Agreement as promptly as practicable, including
(i) obtaining all necessary actions or non-actions,
waivers, consents and approvals from any Governmental Entity,
(ii) if applicable, making, as promptly as practicable, an
appropriate filing with the United States Federal Trade
Commission (the FTC) and the Antitrust
Division of the United States Department of Justice (the
Antitrust Division) of a Notification and
Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby, as applicable, which filings
shall specifically request early termination of the waiting
period prescribed by the HSR Act, and submitting as promptly as
practicable any supplemental information requested in connection
therewith pursuant to the HSR Act, (iii) making, as
promptly as practicable, appropriate filings under any Foreign
Merger Control Law, if required, (iv) obtaining all
consents, approvals or waivers from, or taking other actions
with respect to, third parties necessary or advisable to be
obtained or taken in connection with the transactions
contemplated by this Agreement (provided, however, in no event
shall obtaining such consents, approvals or waivers be required
as a condition to Closing hereunder), (v) subject to first
having used its commercially reasonable efforts to negotiate a
reasonable resolution of any objections underlying such lawsuits
or other legal proceedings, defending and contesting any
lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation
of the transactions contemplated by this Agreement, including
seeking to have any stay or temporary restraining order entered
by any Governmental Entity vacated or reversed,
(vi) promptly obtaining (including drawing down) the
Financing
and/or any
alternative financing, and (vii) executing and delivering
any additional instruments necessary to consummate the
transactions contemplated hereby, and to fully carry out the
purposes of this Agreement.
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(b) Parent and Merger Sub and the Company will cooperate
and consult with each other in connection with the making of all
such filings, notifications and any other material actions
pursuant to this Section 5.8, subject to applicable
Law, by permitting counsel for the other party to review in
advance, and consider in good faith the views of the other party
in connection with, any proposed material written communication
to any Governmental Entity and by providing counsel for the
other party with copies of all filings and submissions made by
such party and all correspondence between such party (and its
advisors) with any Governmental Entity and any other information
supplied by such party and such partys Affiliates to or
received from any Governmental Entity in connection with the
transactions contemplated by this Agreement; provided,
however, that material may be redacted (x) as
necessary to comply with contractual arrangements, (y) as
necessary to address good faith legal privilege or
confidentiality concerns and (z) as necessary to comply
with applicable Law. Neither Parent and Merger Sub nor the
Company shall consent to any voluntary extension of any
statutory deadline or waiting period or to any voluntary delay
of the consummation of the transactions contemplated by this
Agreement at the behest of any Governmental Entity without the
consent of the other party (which consent shall not be
unreasonably withheld, delayed or conditioned).
(c) Each of Parent and Merger Sub and the Company will
promptly inform the other party upon receipt of any material
communication from the FTC, the Antitrust Division, or any
Governmental Entity regarding any of the transactions
contemplated by this Agreement. If Parent and Merger Sub or the
Company (or any of their respective Affiliates) receives a
request for additional information or documentary material from
any such Person that is related to the transactions contemplated
by this Agreement, then such party will endeavor in good faith
to make, or cause to be made, as soon as reasonably practicable
and after consultation with the other party, an appropriate
response in compliance with such request. The parties agree not
to participate, or to permit their Affiliates to participate, in
any substantive meeting or discussion with the FTC, the
Antitrust Division, or any Governmental Entity in connection
with the transactions contemplated by this Agreement unless,
except where prohibited by Law, it so consults with the other
party in advance and, to the extent not prohibited by the FTC,
the Antitrust Division, or such Governmental Entity, gives the
other party the opportunity to attend and participate. Each
party will advise the other party promptly of any
understandings, undertakings or agreements (oral or written)
which the first party proposes to make or enter into with the
FTC, the Antitrust Division, or any Governmental Entity in
connection with the transactions contemplated by this Agreement.
In furtherance and not in limitation of the foregoing, each
party will use its commercially reasonable efforts (i) to
resolve any objections that may be asserted with respect to the
transactions contemplated by this Agreement under any antitrust,
competition, premerger notification, trade regulation or merger
control Law, including (subject to first having used
commercially reasonable efforts to negotiate a resolution to any
such objections) contesting and resisting any action or
proceeding, and (ii) to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other Order,
whether temporary, preliminary or permanent, that is in effect
and that prohibits, prevents or restricts consummation of the
Merger or the other transactions contemplated by this Agreement
and to have such statute, rule, regulation, decree, judgment,
injunction or other Order repealed, rescinded or made
inapplicable so as to permit consummation of the transactions
contemplated by this Agreement.
Section 5.9 Public
Announcements. The initial press release
concerning this Agreement or the transactions contemplated
hereby shall be a joint press release and, thereafter, so long
as the Agreement remains in effect, the parties agree that no
public release or announcement concerning the transactions
contemplated by this Agreement shall be issued by either party
without the prior consent of the other party (which consent
shall not be unreasonably withheld, conditioned or delayed),
except as such release or announcement shall be required by Law
or the rules or regulations of any securities exchange in which
case the party required to make the release or announcement
shall use its commercially reasonable efforts to allow the other
party reasonable time to comment on such release or announcement
in advance of such issuance; provided, however, that each of
Parent and the Company may make any public statement in response
to specific questions by the press, analysts, investors or those
attending industry conferences or financial analyst conference
calls, so long as any such statements are not inconsistent with
previous public releases or announcements made by Parent or the
Company in compliance with this Section 5.9 and do
not reveal non-public information regarding the other party;
provided, further, however, that the Company may issue any
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public release or announcement, without prior consultation with
Parent, contemplated by, or with respect to any Recommendation
Change or any other action taken in connection with
Section 5.3.
Section 5.10 Fees
and Expenses. All expenses (including those
payable to Representatives) incurred by any party to this
Agreement or on its behalf in connection with this Agreement and
the transactions contemplated by this Agreement will be paid by
the party incurring those expenses, except as otherwise provided
in Section 5.7, Section 5.12 and
Section 7.6; provided, however, that
Parent shall pay any filing fee under the HSR Act, if applicable.
Section 5.11 Takeover
Statutes. If any takeover statute is or
becomes applicable to this Agreement, the Merger or the other
transactions contemplated by this Agreement, each of Parent,
Merger Sub and the Company and their respective boards of
directors will (a) take all necessary action to ensure that
such transactions may be consummated as promptly as practicable
upon the terms and subject to the conditions set forth in this
Agreement, and (b) otherwise act to eliminate or minimize
the effects of such takeover statute.
Section 5.12 Financing.
(a) Prior to the Effective Time, the Company shall, and
shall cause its Subsidiaries to, provide and cause their
respective Representatives (including legal and accounting
advisors) to provide to Parent and Merger Sub, at Parents
sole expense and upon reasonable prior notice, all reasonable
cooperation as is customary and may be reasonably requested by
Parent in connection with the Financing (provided that such
cooperation does not unreasonably interfere with the ongoing
operations of the Company and its Subsidiaries);
provided, however, that neither of the Company nor
any of its Subsidiaries will be required to pay any commitment
or other similar fee or incur any other liabilities that are not
simultaneously reimbursed by Parent in connection with the
Financing prior to the Effective Time. Parent shall indemnify
and hold harmless the Company, any of its Subsidiaries and their
respective Representatives for and against any and all
liabilities, losses, damages, claims, costs, expenses, interest,
awards, judgments and penalties suffered or incurred by them in
connection with the arrangement of the Financing and any
information utilized in connection therewith (other than
historical information provided by the Company or any of its
Subsidiaries).
(b) Parent and Merger Sub shall use their commercially
reasonable efforts to arrange the Financing as promptly as
practicable on the terms and conditions described in the
Purchase Agreement (provided that Parent and Merger Sub may
replace or amend the Purchase Agreement to include additional
investors (who are reasonably acceptable to the Company) who
execute a counterpart to the Confidentiality Agreement which had
not executed the Purchase Agreement as of the date hereof or
otherwise so long as such replacement or amendment would not
adversely impact in any material respect the ability of Parent
or Merger Sub to timely consummate the transactions contemplated
hereby), including using reasonable best efforts to:
(i) maintain in effect the Purchase Agreement or the New
Purchase Agreement, as applicable; (ii) satisfy on a timely
basis all conditions applicable to Parent
and/or
Merger Sub in such definitive agreement(s) that are within their
control; and (iii) enforce the rights of Parent
and/or
Merger Sub under such definitive agreement(s).
(c) Parent shall not agree to any amendments or
modifications to, or grant any waivers of, any condition or
other provision under the Purchase Agreement without the consent
of the Company if such amendments, modifications or waivers
would impose new or additional conditions or otherwise amend,
modify or waive any of the conditions to the receipt of the
Financing in a manner that would be reasonably be expected to
delay the Financing or delay, hinder or prevent the timely
satisfaction of the conditions set forth in
Article VI and consummation of the Merger.
Notwithstanding anything in this Agreement to the contrary, the
Purchase Agreement may be superseded at the option of Parent and
Merger Sub after the date of this Agreement but prior to the
Effective Time by a purchase agreement (the New
Purchase Agreement) which replaces the existing
Purchase Agreement; provided, however, that:
(x) the investors under the New Purchase Agreement shall be
reasonably acceptable to the Company, and (y) the terms of
the New Purchase Agreement shall not (i) impose new,
additional or modified conditions to the receipt of the
Financing as set forth in the Purchase Agreement or (ii) be
reasonably likely to cause any material delay in the
satisfaction of the conditions set forth in
Article VI or the consummation of the Financing
and/or
Merger.
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(d) Parent and Merger Sub acknowledge and agree that the
obtaining of the Financing, or any alternative financing, is not
a condition to Closing.
Section 5.13 Resignations. The
Company shall use its reasonable best efforts to obtain and
deliver to Parent at the Closing evidence reasonably
satisfactory to Parent of the resignation effective, as of the
Effective Time, of those directors and officers of the Company
or any Subsidiary of the Company designated by Parent to the
Company in writing prior to the Closing.
Section 5.14 Conduct
of Business of Parent and Merger Sub Pending the
Merger. Each of Parent and Merger Sub agrees
that, between the date of this Agreement and the Effective Time,
it shall not, directly or indirectly, knowingly take or permit
any action (a) to cause its representations and warranties
set forth in Article IV to be untrue in any material
respect; or (b) that would, or would reasonably be expected
to, individually or in the aggregate, prevent, materially delay
or materially impede the ability of Parent and Merger Sub to
consummate the Merger or the other transactions contemplated by
this Agreement, the Purchase Agreement or any other financing
commitments.
Section 5.15 Control
of Operations. Without in any way limiting
any partys rights or obligations otherwise set forth under
this Agreement, the parties understand and agree that
(i) nothing contained in this Agreement shall give Parent,
directly or indirectly, the right to control or direct the
Companys operations prior to the Effective Time and
(ii) prior to the Effective Time, the Company shall
exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its operations.
Section 5.16 Voting
Agreement. Contemporaneously with the
execution of this Agreement, the Company shall cause the Voting
Agreement to be delivered to Parent from each of the
Companys executive officers and directors, and their
Affiliates, identified on Exhibit C.
Section 5.17 Transfer
Taxes. The Company and Parent shall cooperate
in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any
sales, transfer, stamp, stock transfer, value added, use, real
property transfer or gains and any similar Taxes which become
payable in connection with the transactions contemplated by this
Agreement. Notwithstanding anything to the contrary herein, each
of Parent and the Surviving Corporation agrees to assume
liability for and pay any sales, transfer, stamp, stock
transfer, value added, use, real property transfer or gains and
any similar Taxes, as well as any transfer, recording,
registration and other fees that may be imposed upon, payable or
incurred in connection with this Agreement and the transactions
contemplated hereby.
ARTICLE VI
CONDITIONS
TO THE MERGER
Section 6.1 Conditions
to the Obligations of Each Party. The
respective obligation of each party to this Agreement to effect
the Merger is subject to the satisfaction or waiver on or prior
to the Closing Date of each of the following conditions:
(a) Stockholder Approval. The
Requisite Stockholder Vote shall have been obtained.
(b) Regulatory
Approvals. (a) If applicable, the
waiting period applicable to the consummation of the Merger
under the HSR Act (or any extension thereof) shall have expired
or early termination thereof shall have been granted and
(b) if any Foreign Merger Control Law is applicable to the
transactions contemplated hereby, then the applicable
Governmental Entity shall have given all necessary approvals or
consents, except for those approvals or consents the failure of
which to obtain would not be material to the Company and its
Subsidiaries, taken as a whole.
(c) No Injunctions or
Restraints. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any Law or
Order (whether temporary, preliminary or permanent) which is
then in effect that have the effect of making the Merger illegal
or otherwise preventing or prohibiting the consummation of the
Merger. No Governmental Entity shall have commenced and not
withdrawn any proceeding seeking to enjoin or otherwise prohibit
consummation of the Merger.
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Section 6.2 Conditions
to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are
also subject to the satisfaction or waiver by Parent on or prior
to the Closing Date of the following conditions:
(a) Representations and
Warranties. The representations and
warranties of the Company set forth herein (i) subject to
any qualification as to materiality, Company
Material Adverse Effect or words of similar meaning set
forth therein shall be true and correct, and (ii) not
subject to any such qualification shall be true and correct in
all material respects, in each case as of the Closing Date, as
if made at and as of the Closing Date (except to the extent
expressly made as of an earlier date, in which case as of such
date). Parent shall have received at the Closing a certificate
dated the Closing Date and signed on behalf of the Company by a
senior executive officer of the Company to the effect that such
officer has read this Section 6.2(a) and the
conditions set forth in this Section 6.2(a) have
been satisfied.
(b) Performance of Covenants. The
Company shall have performed in all material respects all
obligations, and complied in all material respects with the
agreements and covenants, required to be performed by or
complied with by it hereunder on or prior to the Effective Time,
and Parent shall have received a certificate dated the Closing
Date and signed on behalf of the Company by a senior executive
officer of the Company to such effect.
(c) No Material Adverse
Effect. There shall not have occurred any
Company Material Adverse Effect since the date hereof.
(d) Third Party Consents. All
waivers or consents have been obtained with respect to the
Contracts set forth on Section 6.2(d) of the Company
Disclosure Letter.
Section 6.3 Conditions
to Obligation of the Company. The obligation
of the Company to effect the Merger is also subject to the
satisfaction or waiver by the Company on or prior to the Closing
Date of the following conditions:
(a) Representations and
Warranties. The representations and
warranties of Parent and Merger Sub set forth herein
(i) subject to any qualification as to
materiality, Merger Sub Material Adverse
Effect or words of similar meaning set forth therein shall
be true and correct, and (ii) not subject to any such
qualification shall be true and correct in all material
respects, in each case as of the Closing Date, as if made at and
as of the Closing Date (except to the extent expressly made as
of an earlier date, in which case as of such date). The Company
shall have received at the Closing a certificate dated the
Closing Date and signed on behalf of Parent by a senior
executive officer of Parent to the effect that such officer has
read this Section 6.3(a) and the conditions set
forth in this Section 6.3(a) have been satisfied.
(b) Performance of
Covenants. Parent and Merger Sub shall have
performed in all material respects all obligations, and complied
in all material respects with the agreements and covenants,
required to be performed by or complied with by them hereunder,
and the Company shall have received a certificate dated the
Closing Date and signed on behalf of Parent by a senior
executive officer of Parent to such effect.
Section 6.4 Frustration
of Closing Conditions. None of the Company,
Parent or Merger Sub may rely on the failure of any condition
set forth in this Article VI to be satisfied if such
failure was caused by such partys breach of any
representation, warranty, covenant or agreement set forth in
this Agreement.
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ARTICLE VII
TERMINATION,
AMENDMENT AND WAIVER
Section 7.1 Termination
by Mutual Consent. This Agreement may be
terminated at any time prior to the Effective Time, by mutual
written consent of Parent and the Company.
Section 7.2 Termination
by Either Parent or the Company. This
Agreement may be terminated by either Parent or the Company by
written notice at any time prior to the Effective Time:
(a) whether prior to or after the satisfaction of the
condition set forth in Section 6.1(a), if the
Effective Time is not on or before March 31, 2009 (the
Outside Date);
(b) if this Agreement has been submitted to the
stockholders of the Company for adoption at a duly convened
Company Stockholders Meeting and the Requisite Stockholder Vote
shall not have been obtained at such meeting (including any
adjournment or postponement thereof); or
(c) if any Law or Governmental Entity prohibits
consummation of the Merger or if any Order restrains, enjoins or
otherwise prohibits consummation of the Merger, and such Order
has become final and nonappealable; provided,
however that the party seeking to terminate this
Agreement pursuant to this Section 7.2(c) shall have
used all reasonable best efforts to prevent the entry of and to
remove or avoid such prohibition or Order to the extent within
its control or influence;
provided, however, that in each case the right to
terminate this Agreement under this Section 7.2 will
not be available to any party to this Agreement whose failure to
fulfill any of its obligations under this Agreement has been a
principal cause of, or resulted in, the failure of a condition
to the Merger.
Section 7.3 Termination
by Parent. This Agreement may be terminated
by Parent by written notice at any time prior to the Effective
Time:
(a) if, (i) the Company Board shall have made a
Recommendation Change, (ii) the Company Board approves,
endorses or recommends any Takeover Proposal other than the
Merger or has entered into any letter of intent or similar
document or any contract accepting any Takeover Proposal,
(iii) the Company shall have failed to include the Company
Board Recommendation in the Proxy Statement to the extent
required pursuant to Section 5.5, or (iv) the
Company has intentionally and knowingly materially breached any
of its obligations under Section 5.3; or
(b) if a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this
Agreement shall have occurred which would cause the conditions
set forth in Section 6.2(a) or
Section 6.2(b) not to be satisfied, and such breach
is incapable of being cured by the Outside Date; provided,
however, that neither Parent nor Merger Sub is then in material
breach of this Agreement such that the conditions set forth in
Section 6.3(a) or Section 6.3(b) would
not be satisfied.
Section 7.4 Termination
by the Company. This Agreement may be
terminated by the Company by written notice:
(a) if, at any time prior to the Effective Time, a breach
of any representation, warranty, covenant or agreement on the
part of Parent or Merger Sub set forth in this Agreement shall
have occurred which would prevent Parent or Merger Sub from
consummating the transactions contemplated by this Agreement,
and such breach is incapable of being cured by the Outside Date;
provided, however, that the Company is not then in
material breach of this Agreement such that the conditions set
forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied;
(b) pursuant to and in accordance with
Section 5.3(d); or
(c) if (i) all of the conditions set forth in
Section 6.1 and Section 6.2 have been
satisfied (other than those conditions that by their terms are
to be satisfied at the Closing) or waived and (ii) on or
prior to the designated day for Closing under
Section 2.1(b) hereof, neither Parent nor Merger Sub
shall have received the proceeds of the Financing in an amount
sufficient to consummate the transactions contemplated by this
Agreement.
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Section 7.5 Effect
of Termination. If this Agreement is
terminated pursuant to this Article VII, it will
become void and of no further force and effect, with no
liability on the part of any party to this Agreement (or any of
their respective former, current, or future general or limited
partners, stockholders, managers, members, directors, officers,
Affiliates or agents), except that the provisions of
Section 5.2(c), Section 5.10, the
indemnity and reimbursement provisions of
Section 5.12(a), this Section 7.5,
Section 7.6 and Article VIII will
survive any termination of this Agreement; provided,
however, that (i) except as otherwise provided in
Section 7.6, nothing herein shall relieve any Party
from liabilities as a result of any intentional breach of any of
its representations, warranties, covenants or other agreements
set forth in this Agreement prior to such termination and
(ii) the Deposit Escrow Agreement shall remain in full
force and effect.
Section 7.6 Payment
of Fees Following Termination.
(a) The Company will pay, or cause to be paid, to an
account or accounts designated by Parent, by wire transfer of
immediately available funds, an amount equal to the Company
Termination Fee:
(i) if this Agreement is terminated by Parent pursuant to
Section 7.3(a), in which event payment will be made
within two (2) Business Days after such termination;
(ii) if this Agreement is terminated by the Company
pursuant to Section 7.4(b), in which event payment
must be made in advance of or concurrent with such
termination; or
(iii) if (A) a bona fide Takeover Proposal shall have
been made known publicly and not withdrawn prior to the
termination of this Agreement and (B) this Agreement is
terminated by Parent or the Company pursuant to
Section 7.2(a) or Section 7.2(b), or by
Parent pursuant to Section 7.3(b), and within twelve
(12) months following the date of such termination, the
Company or any of its Subsidiaries enters into a definitive
agreement providing for the implementation of such Takeover
Proposal or the Company thereafter consummates such Takeover
Proposal, in which event payment will be made on or prior to the
date on which the Company enters into such definitive agreement.
For purposes of this Section 7.6 only, references in
the definition of the term Takeover Proposal to the
figure 20% will be deemed to be replaced by
more than 50%.
(b) In no event shall the Company be required to pay the
Company Termination Fee on more than one occasion.
(c) The Company acknowledges that the agreements contained
in this Section 7.6 are an integral part of the
transactions contemplated by this Agreement, that without these
agreements Parent and Merger Sub would not have entered into
this Agreement, and that the damages resulting from termination
of this Agreement under circumstances where a Company
Termination Fee is payable are uncertain and incapable of
accurate calculation and that the amounts payable pursuant to
this Section 7.6 are reasonable forecasts of the
actual damages which may be incurred and constitute liquidated
damages and not a penalty.
(d) If the Company fails to pay as directed in writing by
Parent any amounts due to accounts designated by Parent pursuant
to this Section 7.6 within the time periods
specified in this Section 7.6, the Company shall pay
the costs and expenses (including reasonable legal fees and
expenses) incurred by Parent
and/or
Merger Sub in connection with any action, including the filing
of any lawsuit, taken to collect payment of such amounts,
together with interest on such unpaid amounts at the prime
lending rate prevailing during such period as published in The
Wall Street Journal, calculated on a daily basis from the date
such amounts were required to be paid until the date of actual
payment.
(e) Each of Parent and Merger Sub hereby agrees, that upon
any termination of this Agreement under circumstances where it
is entitled to a termination fee pursuant to this
Section 7.6 and provided such termination fee is
paid in full, Parent, Merger Sub and their Affiliates shall be
precluded from any other remedy against the Company or its
Affiliates or Representatives, at Law or in equity or otherwise,
and neither Parent, Merger Sub nor any of their Affiliates may
seek (and Parent shall cause such Persons not to seek) to obtain
any recovery, judgment, or damages of any kind, including
consequential, indirect, or punitive damages, against the
Company or its Representatives, Affiliates, directors, officers,
employees, partners, managers, members, or stockholders in
connection with this Agreement or the transactions contemplated
hereby.
A-41
Section 7.7 Amendment. This
Agreement may be amended by the parties to this Agreement at any
time prior to the Effective Time, whether before or after
stockholder approval hereof; provided, however,
that (a) no amendment that requires further stockholder
approval under applicable Laws after stockholder approval hereof
will be made without such required further approval and
(b) such amendment has been duly authorized or approved by
each of Parent and the Company. This Agreement may not be
amended except by an instrument in writing signed by each of the
parties to this Agreement.
Section 7.8 Extension;
Waiver. At any time prior to the Effective
Time, Parent (for itself and Merger Sub), on the one hand, and
the Company, on the other hand, may (a) extend the time for
the performance of any of the obligations of the other party,
(b) waive any inaccuracies in the representations and
warranties of the other party contained in this Agreement or in
any document delivered under this Agreement, or (c) unless
prohibited by applicable Laws, waive compliance with any of the
covenants or conditions contained in this Agreement. Any
agreement on the part of a party to any extension or waiver will
be valid only if set forth in an instrument in writing signed by
such party. The failure of any party to assert any of its rights
under this Agreement or otherwise will not constitute a waiver
of such rights.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Survival. None
of the representations, warranties and covenants to be performed
prior to the Effective Time contained in this Agreement or in
any instrument delivered under this Agreement will survive the
Effective Time; provided, however, that this
Section 8.1 does not limit any covenant of the
parties to this Agreement, which, by its terms, contemplates
performance after the Effective Time. Without limiting the
preceding sentence, the covenants and agreements of the parties
contained in Section 7.5 (and the Sections referred
to therein) and Section 7.6 and
Article VIII of this Agreement shall survive
termination of this Agreement in accordance with their terms.
The Confidentiality Agreement, the Purchase Agreement and the
Deposit Escrow Agreement will (a) survive termination of
this Agreement in accordance with their respective terms and
(b) the Confidentiality Agreement shall terminate as of the
Effective Time.
Section 8.2 Governing
Law. This Agreement will be governed by, and
construed in accordance with, the Laws of the State of Delaware,
without giving effect to any applicable principles of conflict
of laws that would cause the Laws of another State to otherwise
govern this Agreement.
Section 8.3 Submission
to Jurisdiction. Each of the parties hereto
irrevocably agrees that any legal action or proceeding with
respect to this Agreement and the rights and obligations arising
hereunder, or for recognition and enforcement of any judgment in
respect of this Agreement and the rights and obligations arising
hereunder brought by the other party hereto or its successors or
assigns shall be brought and determined exclusively in any state
or federal court in the State of Delaware. Each of the parties
hereto hereby irrevocably submits with regard to any such action
or proceeding for itself and in respect of its property,
generally and unconditionally, to the personal jurisdiction of
the aforesaid courts and agrees that it will not bring any
action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court or tribunal other
than the aforesaid courts. Each of the parties hereto hereby
irrevocably waives, and agrees not to assert, by way of motion,
as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement and the rights and
obligations arising hereunder, or for recognition and
enforcement of any judgment in respect of this Agreement and the
rights and obligations arising hereunder (a) any claim that
it is not personally subject to the jurisdiction of the above
named courts for any reason other than the failure to serve
process in accordance with this Section 8.3,
(b) any claim that it or its property is exempt or immune
from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise) and (c) to
the fullest extent permitted by the applicable Law, any claim
that (A) the suit, action or proceeding in such court is
brought in an inconvenient forum, (B) the venue of such
suit, action or proceeding is improper, or (C) this
Agreement, or the subject matter hereof, may not be enforced in
or by such courts.
A-42
Section 8.4 Waiver
of Jury Trial. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT
IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND,
THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO
THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE
FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH
PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND
(D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.4.
Section 8.5 Notices. Any
notice, request, instruction or other communication under this
Agreement will be in writing and delivered by hand or overnight
courier service or by facsimile:
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If to Parent or Merger Sub, to:
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If to the Company, to:
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Health Systems Solutions Group, LLC
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Emageon Inc.
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489 Fifth Avenue,
3rd Floor
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1200 Corporate Drive
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New York, N.Y. 10017
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Suite 200
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Facsimile No.:
(212) 214-0348
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Birmingham, Alabama 35242
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Attn: Chief Financial Officer
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Facsimile No.: (205) 980-9815
Attn: Chief Financial Officer
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and
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With a copy to (which will not constitute notice to the Company):
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Health Systems Solutions Group, LLC
489 Fifth Avenue,
3rd
Floor
New York, N.Y. 10017
Facsimile No.:
(212) 214-0348
Attn: General Counsel
Except after November 1, 2008, to those persons at:
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Bass, Berry & Sims PLC
315 Deaderick Street, Suite 2700
Nashville, TN 37238
Facsimile No.: (615) 742-2709
Attn: Howard H. Lamar III
Andrew L. McQueen
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and
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Health Systems Solutions Group, LLC
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Sirote & Permutt, PC
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42 W. 39th Street,
6th Floor
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2311 Highland Avenue South
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New York, N.Y. 10018
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Birmingham, AL 35205
Facsimile No.: (205) 212-3887
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With a copy to (which will not constitute notice to Parent or
Merger Sub):
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Attn: W. Todd Carlisle
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Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
(212) 451-2222
65 East
55th Street
New York, NY
10022-1106
Facsimile No.:
(212) 451-2222
Attn: Steve Wolosky
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or to such other Persons, addresses or facsimile numbers as may
be designated in writing by the Person entitled to receive such
communication as provided above. Each such communication will be
effective (a) if delivered by hand or overnight courier,
when such delivery is made at the address specified in this
Section 8.5,
A-43
or (b) if delivered by facsimile, when such facsimile is
transmitted to the facsimile number specified in this
Section 8.5 and appropriate confirmation is received.
Section 8.6 Entire
Agreement. This Agreement (including the
Exhibits to this Agreement), the Company Disclosure Letter, the
Acquiror Disclosure Letter, the Voting Agreements, the Purchase
Agreement, the Deposit Escrow Agreement and the Confidentiality
Agreement constitute the entire agreement and supersede all
other prior agreements, understandings, representations and
warranties, both written and oral, among the parties to this
Agreement with respect to the subject matter of this Agreement.
No representation, warranty, inducement, promise, understanding
or condition not set forth in this Agreement has been made or
relied upon by any of the parties to this Agreement.
Section 8.7 No
Third Party Beneficiaries. This Agreement is
not intended to confer upon any person, other than the parties
hereto and their successors and permitted assigns, any rights or
remedies hereunder, except that the parties hereto agree and
acknowledge that the agreements and covenants contained in
Section 5.7 are intended for the direct and
irrevocable benefit of the Indemnified Parties described therein
and their respective heirs and legal representatives (each such
Indemnified Party, a Third Party
Beneficiary), and that each such Third Party
Beneficiary, although not a party to this Agreement, shall be
and is a direct and irrevocable third party beneficiary of such
agreements and covenants and shall have the right to enforce
such agreements and covenants against the Surviving Corporation
in all respects fully and to the same extent as if such Third
Party Beneficiary were a party hereto. Notwithstanding the
foregoing or anything to the contrary in this Agreement, Parent
acknowledges and agrees that in the event of any breach, or
wrongful repudiation or termination, of this Agreement by Parent
and/or
Merger Sub, the actual or potential damages incurred by the
Company for purposes of determining any remedy at Law or equity
under this Agreement would include the actual
and/or
potential damages incurred by the Companys stockholders in
the event such Persons do not receive the benefit of the bargain
negotiated by the Company on their behalf, subject to the
Requisite Stockholder Approval, as set forth in this Agreement;
provided, however, that it is agreed that neither this provision
nor any other provision in this Agreement is intended to provide
the Companys stockholders (or any party acting on their
behalf) the ability to directly seek (prior to the Closing Date)
the enforcement of, or directly seek any remedies pursuant to,
this Agreement, or otherwise create any rights in the
Companys stockholders under this Agreement or otherwise,
including against the Company or its directors, under any theory
of Law or equity, including under the applicable Laws of agency
or the Laws relating to the rights and obligations of third
party beneficiaries. For avoidance of doubt as to the
parties intent, the determination of whether and how to
terminate, amend, make any waiver or consent under or enforce
this Agreement, and whether and how (if applicable) to
distribute any damages award to its stockholders, shall
exclusively belong to the Company in its sole discretion.
Section 8.8 Severability. The
provisions of this Agreement are severable and the invalidity or
unenforceability of any provision will not affect the validity
or enforceability of the other provisions of this Agreement. If
any provision of this Agreement, or the application of that
provision to any Person or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision will
be substituted for that provision in order to carry out, so far
as may be valid and enforceable, the intent and purpose of the
invalid or unenforceable provision and (b) the remainder of
this Agreement and the application of that provision to other
Persons or circumstances will not be affected by such invalidity
or unenforceability, nor will such invalidity or
unenforceability affect the validity or enforceability of that
provision, or the application of that provision, in any other
jurisdiction.
Section 8.9 Assignment. This
Agreement may not be assigned by any party without the prior
written consent of the other party whether by operation of Law
or otherwise. Any purported assignment not permitted under this
Section 8.9 will be null and void ab initio.
This Agreement will be binding upon, inure to the benefit of,
and be enforceable by, the parties and their successors and
assigns.
Section 8.10 Specific
Performance. The parties agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement, including each partys
failure to take all actions pursuant hereto as are necessary on
its part to consummate the Merger and including Parents
obligations with regard to arranging, enforcing and consummating
the Financing or any alternative financing pursuant to
Section 5.12, were not performed in accordance with
their specific terms or were otherwise breached. It is
accordingly agreed that, regardless of the availability of an
adequate and available damages remedy (including, without
limitations, any remedies under the Deposit Escrow Agreement,
which shall not be deemed liquidated
A-44
damages), the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement,
including the requirements that each party take all actions
pursuant hereto as are necessary on its part to consummate the
Merger and including Parents obligations with respect to
arranging, enforcing and consummating the Financing or any
alternative financing pursuant to Section 5.12, in
the Delaware Court of Chancery, this being in addition to any
other remedy to which they may be entitled at law or in equity.
Section 8.11 Time
of Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of
the essence.
Section 8.12 Counterparts;
Effectiveness. This Agreement may be executed
in two or more identical counterparts, all of which shall be
considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered
to each other party. In the event that any signature to this
Agreement or any amendment hereto is delivered by facsimile
transmission or by
e-mail
delivery of a pdf format data file, such
signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
pdf signature page were an original thereof.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
A-45
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officers of the parties
hereto as of the date first written above.
PARENT:
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HEALTH SYSTEMS SOLUTIONS, INC.
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By:
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/s/ Michael
G. Levine
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Name: Michael G. Levine
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Title:
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Chief Financial Officer
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MERGER SUB:
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By:
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/s/ Michael
G. Levine
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Name: Michael G. Levine
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Title:
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Chief Executive Officer
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COMPANY:
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By:
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/s/ Charles
A. Jett, Jr.
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Name: Charles A. Jett, Jr.
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Title:
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Chief Executive Officer and President
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[Signature Page to Agreement and Plan of Merger]
A-46
ANNEX B
October 13, 2008
Strategic Alternatives Committee of the Board of Directors
Emageon Inc.
1200 Corporate Drive
Suite 200
Birmingham, AL 35242
Ladies and Gentlemen:
We understand that Emageon Inc. (the Company),
Health Systems Solutions, Inc. (HSS) and HSS
Acquisition Corp., a wholly owned subsidiary of HSS (the
Sub), propose to enter into an Agreement and Plan of
Merger dated October 13, 2008 (the Agreement),
pursuant to which the Company will be merged with and into Sub
(the Proposed Transaction), and among other things,
each outstanding share of the Companys common stock, par
value $0.001 per share (the Common Stock), will be
converted into $2.85 cash (the Merger
Consideration). You have requested our opinion as to the
fairness, from a financial point of view, of the Merger
Consideration to the holders of the Companys Common Stock.
In arriving at our opinion, we reviewed and analyzed:
(1) the Agreement; (2) proxy statements, annual and
quarterly reports, and such other publicly available information
concerning the Company which we believe to be relevant to our
inquiry; (3) financial and operating information with
respect to the business, operations and prospects of the Company
furnished to us by the Company; (4) a trading history of
the Companys common stock from February 9, 2005 to
the present and a comparison of that trading history with those
of other publicly traded companies which we deemed relevant;
(5) a comparison of the historical financial results and
present financial condition of the Company with those of
publicly traded companies which we deemed relevant; and
(6) historical data relating to percentage premiums paid in
acquisitions of publicly traded healthcare companies from
January 2005 to the present. In addition, we have had
discussions with the management of the Company concerning its
business, operations, assets, present condition and future
prospects and undertook such other studies, analyses and
investigations as we deemed appropriate.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of the financial and
other information discussed with or reviewed by us in arriving
at our opinion. With respect to the financial forecasts of the
Company provided to or discussed with us, we have assumed, at
the direction of the management of the Company and without
independent verification or investigation, that such forecasts
have been reasonably prepared on bases reflecting the best
currently available information, estimates and judgments of the
management of the Company as to the future financial performance
of the Company. In arriving at our opinion, we have not
conducted a physical inspection of the properties and facilities
of the Company and have not made nor obtained any evaluations or
appraisals of the assets or liabilities (including, without
limitation, any potential environmental liabilities), contingent
or otherwise, of the Company. We have also assumed that the
Proposed Transaction will be consummated in accordance with the
terms of the Agreement. We have also assumed that all material
governmental, regulatory or other consents and approvals
necessary for the consummation of the Proposed Transaction will
be obtained without any adverse effect on the Company or on the
expected benefits of the Proposed Transaction. Our opinion is
necessarily based upon market, economic and other conditions as
they exist on, and can be evaluated as of, the date of this
letter. We express no opinion as to the underlying valuation,
future performance or long-term viability of the Company. It
should be understood that, although subsequent developments may
affect this opinion, we do not have any obligation to update or
revise the opinion.
We are acting as financial advisor to the Strategic Alternatives
Committee of the Board of Directors (the Committee)
of the Company in connection with the Proposed Transaction and
will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Proposed
Transaction. The Company has also agreed to indemnify us for
certain liabilities arising out of our engagement. In addition,
we
B-1
and our affiliates (including SunTrust Banks, Inc.) may have
other financing and business relationships with the Company, HSS
and their respective affiliates in the ordinary course of
business.
In the ordinary course of our business, we and our affiliates
may actively trade in debt and equity securities of the Company,
as well as securities for HSS, for our own account and for the
accounts of our customers and, accordingly, may at any time hold
a long or short position in such securities. In addition, STRH
is acting as a co-advisor in the Proposed Transaction.
This opinion is being rendered at the behest of the Committee
and is for the benefit of the Committee in its evaluation of the
Proposed Transaction, and does not constitute a recommendation
as to how any stockholder should act or vote with respect to any
matters relating to the Proposed Transaction. This opinion has
been approved by the Fairness Opinion Committee of SunTrust
Robinson Humphrey, Inc. We do not express any opinion as to the
fairness of the amount or nature of the compensation to be
received in the Proposed Transaction by the Companys
officers, directors, or employees, or class of such persons,
relative to the compensation to be received in the Proposed
Transaction by any other shareholders of the Company. This
opinion may be reproduced in full or referred to in any proxy or
information statement mailed to shareholders of the Company in
connection with the Proposed Transaction if required by
applicable law but may not otherwise be disclosed publicly in
any manner without our prior approval.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Merger Consideration is fair to the
holders of the Companys Common Stock from a financial
point of view.
SUNTRUST ROBINSON HUMPHREY, INC.
James H. Cotter
Managing Director
B-2
VOTING
AGREEMENT
BY AND AMONG
HEALTH SYSTEMS SOLUTIONS, INC.,
HSS ACQUISITION CORP.
AND
[STOCKHOLDER]
DATED AS OF OCTOBER [ ], 2008
INDEX OF
DEFINED TERMS
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Page
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Agreement
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C-1
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Beneficial Ownership
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C-1
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Beneficially Own
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C-1
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Beneficially Owned
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C-1
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Common Stock
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C-1
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Company
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C-1
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Covered Shares
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C-2
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Encumbrance
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C-1
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Existing Shares
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C-3
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Grantees
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C-1
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Merger
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C-1
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Merger Agreement
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C-1
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Merger Sub
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C-1
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Parent
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C-1
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Section 2.1 Matters
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C-2
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Stockholder
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C-1
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Transfer
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C-2
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VOTING AGREEMENT, dated as of
,
2008 (this Agreement), by and among
Health Systems Solutions, Inc., a Nevada corporation
(Parent), HSS Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Parent
(Merger Sub), and
[ ]
(the Stockholder).
W I T N E
S S E T H:
WHEREAS, concurrently with the execution of this Agreement,
Parent, Merger Sub and Emageon, Inc., a Delaware corporation
(the Company) are entering into an Agreement
and Plan of Merger, dated as of the date hereof (as amended,
supplemented, restated or otherwise modified from time to time,
the Merger Agreement) pursuant to
which, among other things, Merger Sub will merge with and into
the Company (the Merger) and each outstanding
share of Common Stock will be converted into the right to
receive the merger consideration specified therein.
WHEREAS, as of the date hereof, the Stockholder owns
beneficially and of record the number of shares of Common Stock
set forth opposite Stockholders name on Schedule I
hereto (the Existing Shares).
WHEREAS, as a material inducement to Parent entering into the
Merger Agreement, Parent has required that the Stockholder
agree, and the Stockholder has agreed, to enter into this
Agreement and abide by the covenants and obligations with
respect to the Covered Shares (as hereinafter defined) set forth
herein and in executing and delivering the Merger Agreement,
Parent and Merger Sub are relying on the agreements contained
herein.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein
contained and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
GENERAL
1.1. Defined Terms. The
following capitalized terms, as used in this Agreement, shall
have the meanings set forth below. Capitalized terms used but
not otherwise defined herein shall have the meanings ascribed
thereto in the Merger Agreement.
Beneficial Ownership by a Person of any
securities includes ownership by any Person who, directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares (i) voting power
which includes the power to vote, or to direct the voting of,
such security;
and/or
(ii) investment power which includes the power to dispose,
or to direct the disposition, of such security; and shall
otherwise be interpreted in accordance with the term
beneficial ownership as defined in
Rule 13d-3
adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended; provided that for
purposes of determining Beneficial Ownership, a Person shall be
deemed to be the Beneficial Owner of any securities which such
Person has, at any time during the term of this Agreement, the
right to acquire pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise (irrespective
of whether the right to acquire such securities is exercisable
immediately or only after the passage of time, including the
passage of time in excess of 60 days, the satisfaction of
any conditions, the occurrence of any event or any combination
of the foregoing). The terms Beneficially
Own and Beneficially Owned shall
have a correlative meaning.
Common Stock means the common stock, par
value $0.001 per share, of the Company.
Covered Shares means, with respect to the
Stockholder, the Stockholders Existing Shares, together
with any shares of Common Stock or other voting capital stock of
the Company and any securities convertible into or exercisable
or exchangeable for shares of Common Stock or other voting
capital stock of the Company, in each case, that the Stockholder
acquires Beneficial Ownership of on or after the date hereof.
C-1
Encumbrance means any security interest,
pledge, mortgage, lien (statutory or other), charge, option to
purchase, lease or other right to acquire any interest or any
claim, restriction, covenant, title defect, hypothecation,
assignment, deposit arrangement or other encumbrance of any kind
or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention
agreement.
Transfer means, directly or indirectly, to
sell, transfer, assign, pledge, encumber, hypothecate or
similarly dispose of (by merger (including by conversion into
securities or other consideration), by tendering into any tender
or exchange offer, by operation of law or otherwise), either
voluntarily or involuntarily, or to enter into any contract,
option or other arrangement or understanding with respect to the
voting of or sale, transfer, assignment, pledge, encumbrance,
hypothecation or similar disposition of (by merger, by tendering
into any tender or exchange offer, by operation of law or
otherwise).
ARTICLE II
VOTING
2.1. Agreement to Vote. The
Stockholder hereby irrevocably and unconditionally agrees that
during the time this Agreement is in effect, at the Company
Stockholders Meeting and at any other meeting of the
stockholders of the Company, however called, including any
adjournment or postponement thereof, or in any other
circumstance in which the vote, consent or approval of
stockholders of the Company, in their capacity as stockholders,
is sought with respect to the Merger Agreement or any Takeover
Proposal, the Stockholder shall, in each case, to the fullest
extent that such matters are submitted for the vote, written
consent or approval of the Stockholder and the Stockholder is
entitled to vote thereon or consent thereto: (a) appear at
each such meeting or otherwise cause the Covered Shares to be
counted as present thereat for purposes of calculating a quorum;
and (b) vote in favor of (or cause to be voted in favor
of), in person or by proxy, deliver (or cause to be delivered) a
written consent or otherwise approve on behalf of all of the
Covered Shares (i) the adoption of the Merger Agreement and
any related proposal in furtherance thereof, as reasonably
requested by Parent, submitted for the vote, written consent or
approval of the Companys stockholders; (ii) against
any action, proposal or agreement submitted for the vote,
written consent or approval of the Companys stockholders
that is in opposition to, or to the Stockholders knowledge
(based upon the advice of counsel) is competitive or materially
inconsistent with, the Merger or to the Stockholders
knowledge (based upon the advice of counsel) would result in a
breach of any covenant, representation or warranty or any other
obligation or agreement of the Company contained in the Merger
Agreement, or of the Stockholder contained in this Agreement;
and (iii) against any Takeover Proposal and against any
other action, agreement or transaction submitted for the vote,
written consent or approval of stockholders that the Stockholder
knows would impede, interfere with, delay, postpone, discourage,
frustrate the purposes of or adversely affect the Merger or the
other transactions contemplated by the Merger Agreement or this
Agreement or the performance by the Company of its obligations
under the Merger Agreement or by the Stockholder of its
obligations under this Agreement.
2.2. No Inconsistent
Agreements. The Stockholder hereby covenants
and agrees that, except for this Agreement, and except as may be
permitted by Section 4.3(b) hereof, it (a) has not
entered into, and shall not enter into at any time while this
Agreement remains in effect, any voting agreement or voting
trust with respect to the Covered Shares with respect to any of
the matters described in Section 2.1 (the
Section 2.1 Matters) or, except with
Parent or Merger Sub, any contract, option or other agreement or
binding understanding with respect to any Transfer of any or all
of the Covered Shares, (b) has not granted, and shall not
grant at any time while this Agreement remains in effect (except
pursuant to Section 2.3), a proxy, consent or power of
attorney with respect to the Covered Shares with respect to any
of the Section 2.1 Matters and (c) has not knowingly
taken and shall not knowingly take any action that would make
any representation or warranty of the Stockholder contained
herein untrue or incorrect or have the effect of preventing or
disabling the Stockholder from performing any of its obligations
under this Agreement.
2.3. Proxy. Without in any
way limiting the Stockholders right to vote the Covered
Shares in its sole discretion on any matters other than the
Section 2.1 Matters that may be submitted to a stockholder
vote, consent or other approval, the Stockholder hereby
irrevocably appoints as its proxy and attorney-in-fact, Stan
C-2
Vashovsky and Michael Levine, pursuant to a proxy to be
delivered to Parent substantially in the form attached hereto as
Annex A, in their respective capacities as officers of
Parent, and any individual who shall hereafter succeed to any
such officer of Parent, and any other Person designated in
writing by Parent (collectively, the Grantees), each
of them individually, with full power of substitution, to vote
or execute written consents with respect to the Covered Shares
and, in the discretion of the Grantees, with respect to any
proposed postponements or adjournments of any annual or special
meeting of the stockholders of the Company at which any of the
Section 2.1 Matters is or was to be considered. This proxy
is coupled with an interest and shall be irrevocable until the
termination of this Agreement in accordance with its terms, in
which event this proxy shall automatically be revoked without
any further action by any party. The Stockholder will take such
further action or execute such other instruments as may be
necessary to effectuate the intent of this proxy and hereby
revokes any proxy previously granted by it with respect to the
Covered Shares with respect to any of the Section 2.1
Matters. So long as the proxy granted under this
Section 2.3 is a valid uncontested proxy that is effective
to deliver the votes of the Covered Shares, the Stockholder
shall be deemed to be fulfilling its obligations under
Section 2.1. If Parent believes that such proxy is not a
valid proxy or if Parent otherwise does not wish to utilize the
proxy, Parent will immediately so notify the Stockholder in
writing so that the Stockholder will be able to perform its
obligations under Section 2.1.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES
3.1. Representations and Warranties of the
Stockholder. The Stockholder hereby
represents and warrants to Parent and Merger Sub as follows:
(a) Organization; Authorization; Validity of Agreement;
Necessary Action. The Stockholder has full power and authority
to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Stockholder and, assuming this Agreement
constitutes a valid and binding obligation of the other parties
hereto, constitutes a legal, valid and binding obligation of the
Stockholder, enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization or similar laws affecting the rights
of creditors generally and the availability of equitable
remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) Ownership. As of the date hereof, the
Stockholders Existing Shares are, and all of the Covered
Shares will be, Beneficially Owned including owned of record by
the Stockholder. The Stockholder has good and marketable title
to the Stockholders Existing Shares, free and clear of any
Encumbrances. As of the date hereof, the Stockholders
Existing Shares constitute all of the shares of Common Stock
Beneficially Owned or owned of record by the Stockholder. Except
for the rights granted to Parent hereby, the Stockholder has and
will have at all times through the Closing Date sole voting
power (including the right to control such vote as contemplated
herein) with respect to the Section 2.1 Matters, sole power
of disposition, sole power to issue instructions with respect to
the Section 2.1 Matters, and sole power to agree to all of
the matters set forth in this Agreement, in each case, with
respect to all of the Stockholders Existing Shares and
Covered Shares.
(c) No Violation. The execution, delivery and performance
of this Agreement by the Stockholder does not and will not
(whether with or without notice or lapse of time, or both)
(i) violate, conflict with or result in the breach of any
of the terms or conditions of, result in any (or the right to
make any) modification of or the cancellation or loss of a
benefit under, require any notice, consent or action under, or
otherwise give any Person the right to terminate, accelerate
obligations under or receive payment or additional rights under,
or constitute a default under, any Contract to which the
Stockholder is a party or by which it is bound or
(ii) violate any Law applicable to the Stockholder or by
which any of the Stockholders assets or properties is
bound, except for any of the foregoing as would not, either
individually or in the aggregate, impair the ability of the
Stockholder to perform its obligations hereunder or to
consummate the transactions contemplated hereby on a timely
basis.
C-3
ARTICLE IV
OTHER
COVENANTS
4.1. Prohibition on Transfers, Other
Actions. Except as permitted by
Section 4.3(b), the Stockholder hereby agrees not to
(i) Transfer any of the Covered Shares, Beneficial
Ownership thereof or any other interest specifically therein,
except to participate in the Merger; (ii) enter into any
agreement, arrangement or understanding with any Person (other
than Parent or Merger Sub), or knowingly (based upon advice of
counsel) take any other action, that violates or conflicts with
the Stockholders representations, warranties, covenants
and obligations under this Agreement; or (iii) take any
action that could restrict or otherwise affect the
Stockholders legal power, authority and right to comply
with and perform its covenants and obligations under this
Agreement. Any Transfer in violation of this provision shall be
void.
4.2. Stock Dividends,
etc. In the event of a stock split, stock
dividend or distribution, or any change in the Common Stock by
reason of any
split-up,
reverse stock split, recapitalization, combination,
reclassification, exchange of shares or the like, the terms
Existing Shares and Covered Shares shall
be deemed to refer to and include such shares as well as all
such stock dividends and distributions and any securities into
which or for which any or all of such shares may be changed or
exchanged or which are received in such transaction.
4.3. No Solicitation.
(a) The Stockholder hereby agrees that during the term of
this Agreement, except as permitted by Section 4.3(b), it
shall not, and shall use its reasonable best efforts to ensure
that any of its Affiliates or Representatives do not, directly
or indirectly, (i) initiate, solicit, publicly propose or
encourage the submission of a Takeover Proposal,
(ii) participate or engage in negotiations with respect to
any Takeover Proposal or (iii) furnish any non-public
information regarding the Company or the Merger to any other
Person; provided, however, that nothing in this
Section 4.3(a) shall prevent the Stockholder, in the
Stockholders capacity as a director or executive officer
of the Company, from engaging in any activity permitted pursuant
to Section 5.3 of the Merger Agreement, and no action by
the Company or any of its Affiliates in compliance with
Section 5.3 of the Merger Agreement shall be a violation by
Stockholder of this Section 4.3.
(b) Notwithstanding anything in this Agreement to the
contrary, in the event the Company Board (or the Strategic
Alternatives Committee) exercises its rights under
Section 5.3 of the Merger Agreement to (i) furnish
information with respect to the Company and its Subsidiaries to
any Person, and (ii) participate, engage or assist in any
manner in discussions or negotiations with any Person, in each
case, in compliance with Section 5.3 of the Merger
Agreement, then (x) the Stockholder may likewise furnish
any such information to such Person and participate, engage or
assist in any manner in such discussions or negotiations with
such Person, provided, that any action taken by the
Stockholder shall be taken only in coordination with the Company
Board (or the Strategic Alternatives Committee), and (y) in
connection with the Companys termination of the Merger
Agreement pursuant to Section 5.3(d) of the Merger
Agreement in order to enter into a transaction which constitutes
a Superior Proposal, Stockholder shall be entitled to enter into
a voting or other support agreement with the Person making the
Superior Proposal, provided, that the effectiveness of
such agreement shall be conditioned upon the termination of the
Merger Agreement in compliance with the Article VII thereof.
4.4. Waiver of Appraisal
Rights. The Stockholder agrees not to
exercise any rights of appraisal or any dissenters rights
that the Stockholder may have (whether under applicable Law or
otherwise) or could potentially have or acquire in connection
with the Merger.
4.5. Further
Assurances. From time to time, at
Parents request and without further consideration, the
Stockholder shall execute and deliver such additional documents
and take all such further action as may be reasonably necessary
to effect the actions and consummate the transactions
contemplated by this Agreement.
C-4
ARTICLE V
MISCELLANEOUS
5.1. Termination. This
Agreement shall remain in effect until the earliest to occur of
(i) the Closing Date, (ii) the termination of the
Merger Agreement in accordance with its terms; provided,
however, that the provisions of the Article V shall
survive any termination of this Agreement; (iii) six months
after the date hereof; or (iv) at the Stockholders
option, upon written notice by the Stockholder to the Parent
from and after any material amendment, waiver or modification to
the terms of the Merger Agreement or any amendment, waiver or
modification to the terms of the Merger Agreement that changes
the form of or decreases the amount of payment from what is set
forth in the Merger Agreement of, the Merger Consideration.
Nothing in this Section 5.1 and no termination of this
Agreement shall relieve or otherwise limit any party of
liability for willful breach of this Agreement.
5.2. No Ownership
Interest. Nothing contained in this Agreement
shall be deemed to vest in Parent or Merger Sub any direct or
indirect ownership or incidence of ownership of or with respect
to any Covered Shares, except as otherwise provided herein. All
rights, ownership and economic benefits of and relating to the
Covered Shares shall remain vested in and belong to the
Stockholder, and neither Parent nor Merger Sub shall have any
authority to direct the Stockholder in the voting or disposition
of any of the Covered Shares, except as otherwise provided
herein.
5.3. Notices.
(a) All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally,
by facsimile (upon telephonic confirmation of receipt), on the
first business day following the date of dispatch if delivered
by a recognized next day courier service or on the third
business day following the date of mailing if delivered by
registered or certified mail, return receipt requested, post
prepaid. All notices hereunder shall be delivered as set forth
below, or pursuant to such other instructions as may be
designated in writing in accordance with this Section 5.3
by the party to receive such notice.
(i) If to Parent or Merger Sub, to:
Health Systems Solutions Group, LLC
489 Fifth Avenue, 3rd Floor
New York, N.Y. 10017
Facsimile No.:
(212) 214-0348
Attn: Chief Financial Officer
and
Health Systems Solutions Group, LLC
489 Fifth Avenue, 3rd Floor
New York, N.Y. 10017
Facsimile No.:
(212) 214-0348
Attn: General Counsel
Except after November 1, 2008, to those persons at:
Health Systems Solutions Group, LLC
42 W. 39th Street, 6th Floor
New York, N.Y. 10018
Facsimile No.:
(212) 214-0348
C-5
With a copy to (which will not constitute notice to Parent or
Merger Sub):
Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, NY
10022-1106
Facsimile No.:
(212) 451-2222
Attn: Steve Wolosky
(ii) if to the Stockholder, to the address set forth on
Schedule I hereto.
5.4. Interpretation. The
words hereof, herein and
hereunder and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement, and Section
references are to this Agreement unless otherwise specified.
Whenever the words include, includes or
including are used in this Agreement, they shall be
deemed to be followed by the words without
limitation. The meanings given to terms defined herein
shall be equally applicable to both the singular and plural
forms of such terms. The table of contents and headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of
this Agreement. This Agreement is the product of negotiation by
the parties having the assistance of counsel and other advisers.
It is the intention of the parties that this Agreement not be
construed more strictly with regard to one party than with
regard to the others.
5.5. Counterparts. This
Agreement may be executed by facsimile and in counterparts, all
of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by
each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
5.6. Entire Agreement. This
Agreement, together with the agreements and other documents and
instruments referred to herein or annexed hereto, embody the
complete agreement and understanding among the parties hereto
with respect to the subject matter hereof and supersede and
preempt any prior understandings, agreements or representations
by or among the parties, written and oral, that may have related
to the subject matter hereof in any way.
5.7. Governing Law; Waiver of Jury
Trial.
(a) This Agreement, and all claims or causes of action
(whether at law, in contract or in tort) that may be based upon,
arise out of or relate to this Agreement or the negotiation,
execution or performance hereof, shall be governed by and
construed in accordance with the Laws of the State of Delaware,
without giving effect to any choice or conflict of Law provision
or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the Laws of
any jurisdiction other than the State of Delaware.
(b) Each party hereto hereby waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by
jury in respect of any Action arising out of or relating to this
Agreement. Each party hereto (i) certifies that no
representative, agent or attorney of any other party has
represented, expressly or otherwise, that such party would not,
in the event of any action, seek to enforce the foregoing waiver
and (ii) acknowledges that it and the other parties hereto
have been induced to enter into this Agreement, by, among other
things, the mutual waiver and certifications in this
Section 5.7.
5.8. Amendment; Waiver. This
Agreement may not be amended except by an instrument in writing
signed by each of the parties hereto. Each party may waive any
right of such party hereunder by an instrument in writing signed
by such party and delivered to Parent and the Stockholder.
5.9. Remedies. All rights,
powers and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of
the exercise of any thereof by any party shall not preclude the
simultaneous or later exercise of any other such right, power or
remedy by such party.
C-6
5.10. Severability. Any term
or provision of this Agreement which is determined by a court of
competent jurisdiction to be invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to
the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and
provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction, and if any provision of
this Agreement is determined to be so broad as to be
unenforceable, the provision shall be interpreted to be only so
broad as is enforceable, in all cases so long as neither the
economic nor legal substance of the transactions contemplated
hereby is affected in any manner adverse to any party or its
stockholders or partners, as applicable. Upon any such
determination, the parties shall negotiate in good faith in an
effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties as
closely as possible and to the end that the transactions
contemplated hereby shall be fulfilled to the maximum extent
possible.
5.11. Successors and Assigns; Third Party
Beneficiaries. Neither this Agreement nor any
of the rights or obligations of any party under this Agreement
shall be assigned, in whole or in part (by operation of law or
otherwise), by any party without the prior written consent of
the other parties hereto. Subject to the foregoing, this
Agreement shall bind and inure to the benefit of and be
enforceable by the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to confer on any Person other
than the parties hereto or their respective successors and
permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
5.12. Stockholder
Capacity. The restrictions and covenants of
the Stockholder hereunder shall not be binding, and shall have
no effect, in any way with respect to any director or officer of
the Company or any of its Subsidiaries in such Persons
capacity as such a director or officer, nor shall any action
taken by any such director or officer in his or her capacity as
such be deemed a breach by the Stockholder of this Agreement.
[Remainder
of this page intentionally left blank]
C-7
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed (where applicable, by their respective
officers or other authorized Person thereunto duly authorized)
as of the date first written above.
PARENT:
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HEALTH SYST EMS SOLUTIONS, INC.
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Name: Stan Vashovsky
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Title:
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Chief Executive Officer
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MERGER SUB:
Name: Michael Levine
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Title:
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Chief Executive Officer
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[STOCKHOLDER]
Name:
C-8
SCHEDULE I
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Name and Address of Stockholder
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Number of Shares
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if to the Stockholder, to:
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With a copy to (which will not constitute notice to the
Stockholder):
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C-9
ANNEX A
IRREVOCABLE
PROXY
Dated as of
,
2008
The undersigned Stockholder (the Stockholder)
of Emageon, Inc., a Delaware corporation (the
Company), hereby irrevocably (to the fullest
extent permitted by law) appoints each of Stan Vashovsky and
Michael Levine, as the sole and exclusive attorneys and proxies
of the undersigned, with full power of substitution and
resubstitution, for and in the name, place and stead of the
Stockholder, to vote and exercise all voting and related rights
(to the full extent that the undersigned is entitled to do so)
with respect to all of the shares of capital stock of the
Company that now are or hereafter may be beneficially owned by
the undersigned, and any and all other shares or securities of
the Company issued or issuable in respect thereof on or after
the date hereof (collectively, the Covered
Shares), in accordance with the terms of this Proxy.
The Covered Shares beneficially owned by the Stockholder as of
the date of this Proxy are listed on Schedule I to this
Proxy. Upon the Stockholders execution of this Proxy, any
and all prior proxies given by the undersigned with respect to
any Covered Shares are hereby revoked and terminated, and the
Stockholder agrees not to grant any subsequent proxies with
respect to the Covered Shares, with respect to any of the
matters referred to in any of clauses (a) through
(c) below until after the Expiration Time (as defined
below).
This Proxy is irrevocable (to the fullest extent permitted by
law), is coupled with an interest and is granted pursuant to
that certain Voting Agreement of even date herewith (the
Voting Agreement) by and among Health Systems
Solutions, Inc., a Nevada corporation (Parent), HSS
Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Parent (Merger Sub), and the
undersigned Stockholder, and is granted in consideration of
Parent entering into that certain Agreement and Plan of Merger
of even date herewith (as it may hereafter be amended from time
to time in accordance with the provisions thereof, the
Merger Agreement) by and among Parent, Merger
Sub and the Company. The Merger Agreement provides that Merger
Sub will merge with and into the Company (the
Merger) and the Stockholder will be entitled
to receive the merger consideration specified therein. The term
Expiration Time, as used in this Proxy, shall
mean the earliest to occur of the events specified in
Section 5.1 of the Voting Agreement.
The attorneys and proxies named above, and each of them, are
hereby authorized and empowered by the Stockholder, at any time
prior to the Expiration Time, to act as the Stockholders
attorney and proxy to vote all of the Covered Shares, and to
exercise all voting, consent and similar rights of the
undersigned with respect to all of the Covered Shares
(including, without limitation, the power to execute and deliver
written consents) at every annual or special meeting of
stockholders of the Company (and at every adjournment or
postponement thereof), and in every written consent in lieu of
such meeting:
(a) in favor of the adoption of the Merger Agreement and
any related proposal in furtherance thereof, as reasonably
requested by Parent, submitted for the vote, written consent or
approval of the Companys stockholders;
(b) against any action, proposal or agreement submitted for
the vote, written consent or approval of the Companys
stockholders that is in opposition to, or to the
Stockholders knowledge (based upon the advice of counsel)
is competitive or materially inconsistent with, the Merger or to
the Stockholders knowledge (based upon the advice of
counsel) would result in a breach of any covenant,
representation or warranty or any other obligation or agreement
of the Company contained in the Merger Agreement, or of the
Stockholder contained in the Voting Agreement; and
(c) against any Takeover Proposal and against any other
action, agreement or transaction submitted for the vote, written
consent or approval of stockholders that the Stockholder knows
would impede, interfere with, delay, postpone, discourage,
frustrate the purposes of or adversely affect the Merger or the
other transactions contemplated by the Merger Agreement or the
Voting Agreement or the performance by the Company of its
obligations under the Merger Agreement or by the Stockholder of
its obligations under the Voting Agreement.
C-10
Any term or provision of this Proxy that is invalid or
unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any
other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision
hereof is invalid or unenforceable, the Stockholder agrees that
the court making such determination shall have the power to
limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Proxy shall
be enforceable as so modified. In the event such court does not
exercise the power granted to it in the prior sentence, the
Stockholder agrees to replace such invalid or unenforceable term
or provision with a valid and enforceable term or provision that
will achieve, to the extent possible, the economic, business and
other purposes of such invalid or unenforceable term.
The restrictions and covenants of the Stockholder hereunder
shall not be binding, and shall have no effect, in any way with
respect to any director or officer of the Company or any of its
Subsidiaries in such Persons capacity as such a director
or officer, nor shall any action taken by any such director or
officer in his or her capacity as such be deemed a breach by the
Stockholder of this Proxy.
Any obligation of the Stockholder hereunder shall be binding
upon the successors and assigns of the Stockholder.
This Proxy shall terminate, and be of no further force and
effect, automatically upon the Expiration Time.
[signature page follows]
C-11
COUNTERPART
SIGNATURE PAGE
IN WITNESS WHEREOF, the Stockholder has caused this Irrevocable
Proxy to be duly executed as of the day and year first above
written.
[STOCKHOLDER]
Name:
with a copy to:
Health Systems Solutions Group, LLC
489 Fifth Avenue, 3rd Floor
New York, N.Y. 10017
Facsimile No.:
(212) 214-0348
Attn: Chief Financial Officer
and
Health Systems Solutions Group, LLC
489 Fifth Avenue, 3rd Floor
New York, N.Y. 10017
Facsimile No.:
(212) 214-0348
Attn: General Counsel
Except after November 1, 2008, to those persons at:
Health Systems Solutions Group, LLC
42 W. 39th Street, 6th Floor
New York, N.Y. 10018
Facsimile No.:
(212) 214-0348
With a copy to (which will not constitute notice to Parent or
Merger Sub):
Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, NY
10022-1106
Facsimile No.:
(212) 451-2222
Attn: Steve Wolosky
C-12
SCHEDULE I
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Name and Address of Stockholder
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Number of Shares
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if to the Stockholder, to:
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With a copy to (which will not constitute notice to the
Stockholder):
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C-13
ANNEX D
DEPOSIT ESCROW AGREEMENT
Between
HEALTH SYSTEMS SOLUTIONS, INC.
EMAGEON INC.
And
THE BANK OF NEW YORK MELLON
Dated as of October 21, 2008
ACCOUNT NUMBER(S)
SHORT TITLE OF ACCOUNT:
Escrow for HSS/Emageon
DEPOSIT ESCROW AGREEMENT (this Escrow
Agreement) made this 21st day of October, 2008 by and
between THE BANK OF NEW YORK MELLON, a New York Banking
Corporation, as escrow agent (Escrow Agent), Health
Systems Solutions, Inc., a Nevada corporation (HSS),
and Emageon Inc., a Delaware corporation (Emageon,
and together with HSS the Depositors, and each
individually a Depositor).
Depositors and Escrow Agent hereby agree that, in consideration
of the mutual promises and covenants contained herein, Escrow
Agent shall hold in escrow and shall distribute the Escrow
Property (as defined herein) in accordance with and subject to
the following Instructions and Terms and Conditions:
I. INSTRUCTIONS:
The property
and/or funds
deposited or to be deposited with Escrow Agent by HSS shall be
as follows:
$5,000,000 USD
The foregoing property
and/or
funds, plus all interest, dividends and other distributions and
payments thereon (collectively the Distributions)
received by Escrow Agent, less any property
and/or funds
distributed or paid in accordance with this Escrow Agreement,
are collectively referred to herein as Escrow
Property.
The Escrow Property shall be safeguarded and held as a trust
fund and shall not be subject to any lien, attachment, trustee
process or any other judicial process of any creditor or party
hereto.
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2.
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Investment
of Escrow Property Depositors are to select one of the following
options:
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(a)
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Escrow Agent shall have no obligation to pay interest on or to
invest or reinvest any Escrow Property deposited or received
hereunder.
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(b)
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Upon the receipt of joint instructions delivered by both
Depositors, the Escrow Agent shall invest or reinvest Escrow
Property without distinction between principal and income, in
the following:
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One or more short-term market instruments including but not
limited to marketable obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, bank
instruments, corporate debt securities issued by U.S. or foreign
companies, commercial paper, demand instruments, adjustable rate
obligations, asset-backed securities, restricted securities,
fully collateralized repurchase agreements or money market funds
subject to the requirements of the Investment Company Act of
1940, as amended, invested in any one or more of the
aforementioned types of instruments.
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Depositors agree that, for tax reporting purposes, all interest
and other income earned from the investment of Escrow Property
shall be taxable to HSS.
Escrow Agent shall have no liability for any loss arising from
or related to any such investment other than in accordance with
paragraph 4 of the Terms and Conditions.
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3.
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Distribution
of Escrow Property
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Escrow Agent is directed to hold and distribute the Escrow
Property in the following manner:
Escrow Agent shall disburse the Escrow Property only in
accordance with (i) a written instrument delivered to the
Escrow Agent that is executed by both Depositors and that
instructs the Escrow Agent as to the disbursement of the Escrow
Property, or (ii) an order of a court of competent
jurisdiction, a copy of which is delivered to the Escrow Agent
by either of the Depositors, that instructs the Escrow Agent as
to the disbursement of the Escrow Property.
For the avoidance of doubt, HSS and Emageon hereby agree that
Emageon shall be entitled to the Escrow Property, including any
interest or investment proceeds thereof, only in the event that
either (i) that certain agreement and plan of merger by and
among HSS, HSS Acquisition Corp. and Emageon, dated as of
D-1
October 13, 2008, a copy of which is attached hereto as
Exhibit A (the Merger Agreement) is
terminated by Emageon pursuant to Section 7.4(c) of the
Merger Agreement, or (ii) the Merger Agreement is
terminated by Emageon pursuant to Section 7.4(a) of the Merger
Agreement and HSS is finally determined by a final
non-appealable order of a court of competent jurisdiction to
have intentionally breached any of its representations,
warranties, covenants or other agreements set forth in the
Merger Agreement.
Notices, instructions and other communications shall be sent to
Escrow Agent, Corporate Trust Administration, 101 Barclay
Street-Floor 8W, New York, New York 10286, Attn.: Gina Jones,
Escrow Group, Facsimile No.
(212) 815-5875
and to Depositors as follows:
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If to HSS, to:
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If to Emageon, to:
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Health Systems Solutions Group, LLC
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Emageon Inc.
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489 Fifth Avenue,
3rd Floor
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1200 Corporate Drive
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New York, N.Y. 10017
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Suite 200
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Facsimile No.:
(212) 214-0348
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Birmingham, Alabama 35242
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Attn: Chief Financial Officer
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Facsimile No.: (205) 980-9815
Attn: Chief Financial Officer
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and
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With a copy to (which will not constitute notice
to Emageon):
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Health Systems Solutions Group, LLC
489 Fifth Avenue,
3rd
Floor
New York, N.Y. 10017
Facsimile No.:
(212) 214-0348
Attn: General Counsel
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Bass, Berry & Sims PLC
315 Deaderick Street, Suite 2700
Nashville, TN 37238
Facsimile No.:
(615) 742-2709
Attn: Howard H. Lamar III
Andrew L. McQueen
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Except after November 1, 2008, to
those persons at:
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Health Systems Solutions Group, LLC
42 W. 39th Street,
6th Floor
New York, N.Y. 10018
With a copy to (which will not constitute notice to HSS):
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and
Sirote & Permutt, PC
2311 Highland Avenue South
Birmingham, AL 35205
Facsimile No.: (205) 212-3887
Attn: W. Todd Carlisle
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Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East
55th Street
New York, NY
10022-1106
Facsimile No.:
(212) 451-2222
Attn: Steve Wolosky
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5.
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Distribution
of Escrow Property Upon Termination
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Upon termination of this Escrow Agreement, the Escrow Property
then held (if any) hereunder shall be distributed in accordance
with a joint written instruction provided by the Depositors.
For the avoidance of doubt, this Escrow Agreement shall continue
in full force and effect until terminated by a written
instrument executed by both Depositors (or as provided in
Part II, paragraph 10 of this Escrow Agreement),
subject to any surviving indemnification rights of the Escrow
Agent. Additionally, upon disbursement of the full balance of
the Escrow Property by the Escrow Agent in accordance these
provisions, this Escrow Agreement shall terminate, subject to
any surviving indemnification rights of the Escrow Agent.
D-2
(a) Depositors shall pay Escrow Agent an annual fee of
$5,000.00, payable upon execution of this Escrow Agreement and
thereafter on each anniversary date of this Escrow Agreement.
The annual fee shall not be pro-rated for any portion of a year.
(b) Depositors shall pay upon written demand all activity
charges as per Escrow Agents current fee schedule.
(c) Depositors shall be responsible for and shall reimburse
Escrow Agent upon written demand for all reasonable expenses,
disbursements and advances reasonably incurred or made by Escrow
Agent in connection with this Escrow Agreement.
(d) Each Depositor shall pay one-half of Escrow
Agents fees and any other amounts owing to Escrow Agent
hereunder.
II. TERMS
AND CONDITIONS:
1. The duties, responsibilities and obligations of Escrow
Agent shall be limited to those expressly set forth herein and
no duties, responsibilities or obligations shall be inferred or
implied. Escrow Agent shall not be subject to, nor required to
comply with, any other agreement between or among any or all of
the Depositors or to which any Depositor is a party, even though
reference thereto may be made herein, or to comply with any
direction or instruction (other than those contained herein or
delivered in accordance with this Escrow Agreement) from any
Depositor or any entity acting on its behalf. Escrow Agent shall
not be required to, and shall not, expend or risk any of its own
funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
2. This Escrow Agreement is for the exclusive benefit of
the parties hereto and their respective successors hereunder,
and shall not be deemed to give, either express or implied, any
legal or equitable right, remedy, or claim to any other entity
or person whatsoever.
3. If at any time Escrow Agent is served with any judicial
or administrative order, judgment, decree, writ or other form of
judicial or administrative process which in any way affects
Escrow Property (including but not limited to orders of
attachment or garnishment or other forms of levies or
injunctions or stays relating to the transfer of Escrow
Property), Escrow Agent is authorized to comply therewith in any
manner as it or its legal counsel of its own choosing deems
appropriate; and if Escrow Agent complies with any such judicial
or administrative order, judgment, decree, writ or other form of
judicial or administrative process, Escrow Agent shall not be
liable to any of the parties hereto or to any other person or
entity even though such order, judgment, decree, writ or process
may be subsequently modified or vacated or otherwise determined
to have been without legal force or effect. Notwithstanding the
foregoing, Escrow Agent and the Depositors agree that the Escrow
Property shall not be subject to any lien, attachment, trustee
process or any other judicial process of any creditor or party
hereto.
4. (a) Escrow Agent shall not be liable for any action
taken or omitted in good faith or for any loss or injury
resulting from its good faith actions or its performance or lack
of performance of its duties hereunder in good faith in the
absence of gross negligence or willful misconduct on its part.
In no event shall Escrow Agent be liable (i) for acting in
accordance with or relying upon any joint written instruction,
notice, demand, certificate or document from the Depositors or
any entity acting on behalf of both Depositors, (ii) for
any consequential, punitive or special damages, (iii) for
the acts or omissions of its nominees, correspondents,
designees, subagents or subcustodians selected in good faith and
with due care in the absence of gross negligence or willful
misconduct on the part of such persons, or (iv) for an
amount in excess of the value of the Escrow Property, valued as
of the date of deposit.
(b) If any fees, expenses or costs properly incurred by
Escrow Agent in accordance with the terms of this Escrow
Agreement are not promptly paid when due (and after reasonable
opportunity to cure upon notice of non-payment), Escrow Agent
may reimburse itself therefor from the Escrow Property and may
sell, convey or otherwise dispose of any Escrow Property for
such purpose; provided that the party failing to pay such
D-3
amounts shall promptly redeposit with the Escrow Agent such
amounts which shall constitute Escrow Property hereunder.
(c) Escrow Agent may consult with legal counsel at the
expense of the Depositors as to any matter relating to this
Escrow Agreement, and Escrow Agent shall not incur any liability
in acting in good faith in accordance with any advice from such
counsel.
(d) Escrow Agent shall not incur any liability for not
performing any act or fulfilling any duty, obligation or
responsibility hereunder by reason of any occurrence beyond the
control of Escrow Agent (including but not limited to any act or
provision of any present or future law or regulation or
governmental authority, any act of God or war, or the
unavailability of the Federal Reserve Bank wire or telex or
other wire or communication facility).
5. Unless otherwise specifically set forth herein, Escrow
Agent shall proceed as soon as practicable to collect any checks
or other collection items at any time deposited hereunder. All
such collections shall be subject to Escrow Agents usual
collection practices or terms regarding items received by Escrow
Agent for deposit or collection. Escrow Agent shall not be
required, or have any duty, to notify anyone of any payment or
maturity under the terms of any instrument deposited hereunder,
nor to take any legal action to enforce payment of any check,
note or security deposited hereunder or to exercise any right or
privilege which may be afforded to the holder of any such
security.
6. Escrow Agent shall provide to Depositors monthly
statements identifying transactions, transfers or holdings of
Escrow Property.
7. Escrow Agent shall not be responsible in any respect for
the form, execution, validity, value or genuineness of documents
or securities deposited hereunder, or for any description
therein, or for the identity, authority or rights of persons
executing or delivering or purporting to execute or deliver any
such document, security or endorsement.
8. Notices, instructions or other communications shall be
in writing and shall be given to the address set forth in the
Addresses provision herein (or to such other address
as may be substituted therefor by written notification to Escrow
Agent and the Depositors). Notices to Escrow Agent shall be
deemed to be given when actually received by Escrow Agents
Insurance Trust and Escrow Unit of the Corporate
Trust Division. Escrow Agent is authorized to comply with
and rely upon any joint written notices, instructions or other
communications believed by it to have been sent or given by
Depositors or by a person or persons authorized by both
Depositors. Whenever under the terms hereof the time for giving
a notice or performing an act falls upon a Saturday, Sunday, or
banking holiday, such time shall be extended to the next day on
which Escrow Agent is open for business.
9. (a) Depositors, jointly and severally, shall be
liable for and shall reimburse and indemnify Escrow Agent and
hold Escrow Agent harmless from and against any and all claims,
losses, liabilities, costs, damages or expenses (including
reasonable attorneys fees and expenses) (collectively,
Losses) arising from or in connection with or
related to this Escrow Agreement or being Escrow Agent hereunder
(including but not limited to Losses incurred by Escrow Agent in
connection with its successful defense, in whole or in part, of
any claim of gross negligence or willful misconduct on its
part), provided, however, that nothing contained herein shall
require Escrow Agent to be indemnified for Losses caused by its
gross negligence or willful misconduct.
(b) Depositors agree to indemnify and hold harmless the
Escrow Agent against any and all Losses incurred or sustained by
the Escrow Agent as a result of or in connection with the Escrow
Agents reliance upon and compliance with instructions or
directions given by Electronic Methods (defined
below) that are in conformance with the requirements under this
Escrow Agreement, provided, however, that such Losses have not
arisen from the negligence or willful misconduct of the Escrow
Agent, it being understood that the failure of the Escrow Agent
to verify or confirm that the person giving the instructions or
directions, is, in fact, an authorized person does not
constitute negligence or willful misconduct.
Electronic Methods include facsimile,
electronic mail/Portable Document Format (PDF).
D-4
10. (a) Depositors may remove Escrow Agent at any time
by giving to Escrow Agent thirty (30) calendar days
prior notice in writing signed by all Depositors. Escrow Agent
may resign at any time by giving thirty (30) calendar
days prior written notice thereof to the Depositors.
(b) Within ten (10) calendar days after giving the
foregoing notice of removal to Escrow Agent or receiving the
foregoing notice of resignation from Escrow Agent, all
Depositors shall jointly agree on and appoint a successor Escrow
Agent. If a successor Escrow Agent has not accepted such
appointment by the end of such ten (10) day period, Escrow
Agent may, in its sole discretion, deliver the Escrow Property
to any of the Depositors at the address provided herein or may
apply to a court of competent jurisdiction for the appointment
of a successor Escrow Agent or for other appropriate relief. The
costs and expenses (including reasonable attorneys fees
and expenses) incurred by Escrow Agent in connection with such
proceeding shall be paid by, and be deemed a joint and several
obligation of, the Depositors.
(c) Upon receipt of the identity of the successor Escrow
Agent, Escrow Agent shall either deliver the Escrow Property
then held hereunder to the successor Escrow Agent, less any
Escrow Agents fees, costs and expenses that are unpaid and
past-due in accordance with the terms hereof; provided that the
party failing to pay such amounts shall promptly redeposit with
the successor Escrow Agent such amounts which shall constitute
Escrow Property.
(d) Upon delivery of the Escrow Property to successor
Escrow Agent, Escrow Agent shall have no further duties,
responsibilities or obligations hereunder.
11. (a) In the event of any ambiguity or uncertainty
hereunder or in any notice, instruction or other communication
received by Escrow Agent hereunder, Escrow Agent may, in its
sole discretion, refrain from taking any action other than
retain possession of the Escrow Property, unless Escrow Agent
receives written instructions, signed by all Depositors, which
eliminates such ambiguity or uncertainty.
(b) In the event of any dispute between or conflicting
claims by or among the Depositors
and/or any
other person or entity with respect to any Escrow Property,
Escrow Agent shall be entitled, in its sole discretion, to
refuse to comply with any and all claims, demands or
instructions with respect to such Escrow Property so long as
such dispute or conflict shall continue, and Escrow Agent shall
not be or become liable in any way to the Depositors for failure
or refusal to comply with such conflicting claims, demands or
instructions. Escrow Agent shall be entitled to refuse to act
until, in its sole discretion, either (i) such conflicting
or adverse claims or demands shall have been determined by a
final order, judgment or decree of a court of competent
jurisdiction, which order, judgment or decree is not subject to
appeal, or settled by agreement between the conflicting parties
as evidenced in a writing satisfactory to Escrow Agent or
(ii) Escrow Agent shall have received security or an
indemnity satisfactory to it sufficient to hold it harmless from
and against any and all Losses which it may incur by reason of
so acting. Escrow Agent may, in addition, elect, in its sole
discretion, to commence an interpleader action or seek other
judicial relief or orders as it may deem, in its sole
discretion, necessary. The costs and expenses (including
reasonable attorneys fees and expenses) incurred in
connection with such proceeding shall be paid by, and shall be
deemed a joint and several obligation of, the Depositors.
12. This Escrow Agreement shall be interpreted, construed,
enforced and administered in accordance with the internal
substantive laws (and not the choice of law rules) of the State
of New York. Each of the Depositors hereby submits to the
personal jurisdiction of and each agrees that all proceedings
relating hereto shall be brought in courts located within the
City and State of New York or elsewhere as Escrow Agent may
select. Each of the Depositors hereby waives the right to trial
by jury and to assert counterclaims in any such proceedings. To
the extent that in any jurisdiction any Depositor may be
entitled to claim, for itself or its assets, immunity from suit,
execution, attachment (whether before or after judgment) or
other legal process, each hereby irrevocably agrees not to
claim, and hereby waives, such immunity. Each Depositor waives
personal service of process and consents to service of process
by certified or registered mail, return receipt requested,
directed to it at the address last specified for notices
hereunder, and such service shall be deemed completed ten
(10) calendar days after the same is so mailed.
D-5
13. This Escrow Agreement may be modified only by a written
amendment signed by all the parties hereto, and no waiver of any
provision hereof shall be effective unless expressed in a
writing signed by the party to be charged.
14. The rights and remedies conferred upon the parties
hereto shall be cumulative, and the exercise or waiver of any
such right or remedy shall not preclude or inhibit the exercise
of any additional rights or remedies. The waiver of any right or
remedy hereunder shall not preclude the subsequent exercise of
such right or remedy.
15. Each Depositor hereby represents and warrants
(a) that this Escrow Agreement has been duly authorized,
executed and delivered on its behalf and constitutes its legal,
valid and binding obligation and (b) that the execution,
delivery and performance of this Escrow Agreement by Depositor
do not and will not violate any applicable law or regulation.
16. The invalidity, illegality or unenforceability of any
provision of this Escrow Agreement shall in no way affect the
validity, legality or enforceability of any other provision; and
if any provision is held to be enforceable as a matter of law,
the other provisions shall not be affected thereby and shall
remain in full force and effect.
17. This Escrow Agreement shall constitute the entire
agreement of the parties with respect to the subject matter and
supersedes all prior oral or written agreements in regard
thereto.
18. This Escrow Agreement shall terminate upon the
distribution of all Escrow Property from the Account. The
provisions of these Terms and Conditions shall survive
termination of this Escrow Agreement
and/or the
resignation or removal of the Escrow Agent.
19. No printed or other material in any language, including
prospectuses, notices, reports, and promotional material which
mentions The Bank of New York by name or the rights,
powers, or duties of the Escrow Agent under this Escrow
Agreement shall be issued by any other parties hereto, or on
such partys behalf, without the prior written consent of
Escrow Agent.
20. The headings contained in this Escrow Agreement are for
convenience of reference only and shall have no effect on the
interpretation or operation hereof.
21. This Escrow Agreement may be executed by each of the
parties hereto in any number of counterparts, each of which
counterpart, when so executed and delivered, shall be deemed to
be an original and all such counterparts shall together
constitute one and the same agreement.
22. The Escrow Agent does not have any interest in the
Escrowed Property deposited hereunder but is serving as escrow
holder only and having only possession thereof. Except as
otherwise specifically agreed to herein, HSS and Emageon jointly
shall pay or reimburse the Escrow Agent upon request for any
transfer taxes and HSS shall pay any other taxes relating to the
Escrowed Property incurred in connection herewith and HSS and
Emageon, or HSS, as applicable, shall indemnify and hold
harmless the Escrow Agent any amounts that it is obligated to
pay in the way of such taxes. Any payments of income from this
Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes. The parties hereto
will provide the Escrow Agent with appropriate
W-9 forms
for tax I.D., number certifications, or
W-8 forms
for non-resident alien certifications. It is understood that the
Escrow Agent shall be responsible for income reporting only with
respect to income earned on investment of funds which are a part
of the Escrowed Property and is not responsible for any other
reporting. This paragraph and paragraph 9 shall survive
notwithstanding any termination of this Escrow Agreement or the
resignation of the Escrow Agent.
D-6
IN WITNESS WHEREOF, each of the parties has caused this Escrow
Agreement to be executed by a duly authorized officer as of the
day and year first written above.
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HEALTH SYSTEMS SOLUTIONS, INC.
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EMAGEON INC.
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By:
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/s/ Robert
S. Herbst
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/s/ Charles
A. Jett, Jr.
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Name: Robert S. Herbst
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Name: Charles A. Jett, Jr.
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Title: Corporate Secretary
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Title: Chief Executive Officer
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THE BANK OF NEW YORK MELLON,
as Escrow Agent
Name: Regina Jones
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Title: Assistant Treasurer
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D-7
ANNEX E
SECTION 262
OF THE
DELAWARE GENERAL CORPORATION LAW
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
E-1
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
E-2
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) of
this section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting
E-3
corporation pursuant to subsection (f) of this section and
who has submitted such stockholders certificates of stock
to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation. (8 Del. C. 1953,
§ 262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186,
§ 24; 57 Del. Laws, c. 148,
§§ 27-29;
59 Del. Laws, c. 106, § 12; 60 Del. Laws, c. 371,
§§ 3-12; 63 Del. Laws, c. 25, § 14; 63
Del. Laws, c. 152, §§ 1, 2; 64 Del. Laws, c. 112,
§§ 46-54;
66 Del. Laws, c. 136,
§§ 30-32;
66 Del. Laws, c. 352, § 9; 67 Del. Laws, c. 376,
§§ 19, 20; 68 Del. Laws, c. 337,
§§ 3, 4; 69 Del. Laws, c. 61, § 10; 69
Del. Laws, c. 262, §§ 1-9; 70 Del. Laws, c. 79,
§ 16; 70 Del. Laws, c. 186, § 1; 70
Del. Laws, c. 299, §§ 2, 3; 70 Del. Laws, c. 349,
§ 22; 71 Del. Laws, c. 120, § 15; 71 Del.
Laws, c. 339,
§§ 49-52;
73 Del. Laws, c. 82, § 21; 76 Del. Laws, c. 145,
§§ 11-16.)
E-4
PROXY
EMAGEON INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE DECEMBER 17, 2008
SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Emageon Inc. (Emageon) hereby appoints Charles A. Jett, Jr. and W.
Todd Carlisle and each of them individually, with full power of substitution, as proxies of the
undersigned, and hereby authorizes them to represent and to vote and act for the undersigned, at
the Special Meeting of Stockholders of Emageon to be held on December
17, 2008 at 9:00 a.m. Central Daylight
Time at the offices of Emageon, 1200 Corporate Drive, Suite 200, Birmingham, Alabama, and at any
adjournment or postponement thereof, according to the number of votes which the undersigned is now,
or may then be, entitled to cast. This proxy revokes all prior proxies given by the undersigned
with respect to the matters covered hereby. The undersigned acknowledges receipt of the Proxy
Statement dated November 14, 2008 and the related Notice of Special Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS SET FORTH IN THE PROXY AND
ACCOMPANYING PROXY STATEMENT.
(Continued and to be signed on the reverse side.)
SPECIAL MEETING OF STOCKHOLDERS OF
EMAGEON INC.
December
17, 2008
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
¯Please detach along perforated line and mail in the envelope provided.¯
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING PROPOSALS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN
BLUE OR BLACK INK AS SHOWN HERE x
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1. |
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Proposal to adopt the Agreement and Plan of Merger, dated as of October 13, 2008, by and among Emageon Inc., Health Systems Solutions, Inc. and HSS Acquisition Corp. |
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AGAINST o |
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ABSTAIN o |
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2. |
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Proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies if there are insufficient votes in favor of Proposal 1. |
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FOR o |
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3. |
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In the discretion of the Proxies on any other matter that may properly come before the Meeting or any adjournment(s) or postponement(s) thereof. |
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This proxy, when properly
executed, will be voted in the manner
directed herein by the undersigned stockholder. If no
direction is made, this proxy
will be voted FOR Proposal One
and, FOR Proposal Two and at the discretion
of the proxy holders as to any other business that may properly come before the Special Meeting or any adjournment(s) or postponement(s) thereof. |
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To change the address on your account, please
check the box at right and indicate your new address in
the address space above. Please note that changes to
the registered name(s) on
the account may not be submitted via this method. |
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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Note: |
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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