-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JCnKp2tiYo/yVUyxsmLSJlO5Pq7dZYPWrxDxAmvCyD7pV6zC8xV+Ww8Tv/hgIovF KD98cr10CMypDl/V8F45OA== 0000950172-97-000098.txt : 19970225 0000950172-97-000098.hdr.sgml : 19970225 ACCESSION NUMBER: 0000950172-97-000098 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970128 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970205 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCKESSON CORP CENTRAL INDEX KEY: 0000927653 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 943207296 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-86536 FILM NUMBER: 97518275 BUSINESS ADDRESS: STREET 1: ONE POST ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159838300 FORMER COMPANY: FORMER CONFORMED NAME: SP VENTURES INC DATE OF NAME CHANGE: 19940728 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 January 28, 1997 (Date of Earliest Event Reported) MCKESSON CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-13252 94-3207296 (State or other (Commission File Number) (IRS Employer jurisdiction Identification of incorporation) Number) McKesson Plaza, One Post Street, San Francisco, CA 94104 (Address of principal executive offices, including Zip Code) (415) 983-8300 (Registrant's telephone number, including area code) Item 5 - Other Events. McKesson Corporation ("McKesson"), General Medical Inc. ("General Medical") and certain stockholders of General Medical (the "Continuing Stockholders") entered into an Agreement and Plan of Merger, dated as of January 28, 1997 (the "Merger Agreement"), pursuant to which McKesson will acquire all of the outstanding capital stock (including options) of General Medical for approximately $347 million. McKesson will also assume approximately $428 million in debt of General Medical. The Merger Agreement, which has been approved by the Boards of Directors of each company and by the stockholders of General Medical, provides for the merger (the "Merger") of Spider Acquisition Corporation, a wholly owned subsidiary of McKesson ("Merger Sub"), with and into General Medical, with General Medical being the surviving corporation in the Merger. The Merger Agreement provides that each share of General Medical common stock held by the Continuing Stockholders will be converted into the right to receive a combination of cash and shares of McKesson common stock, par value $.01 per share (the "McKesson Common Stock"), pursuant to formulas specified in the Merger Agreement. The issued and outstanding shares of capital stock held by stockholders of General Medical other than the Continuing Stockholders (and other than dissenting shares, treasury shares and shares held by McKesson or Merger Sub) will be converted in the Merger into the right to receive cash. Approximately one-half of the aggregate Merger consideration will be paid in cash and one-half in shares of McKesson Common Stock. The Merger Agreement provides that the number of shares of McKesson Common Stock to be issued in the Merger will be determined on the basis of the average closing price of McKesson Common Stock for the five trading days ending two trading days prior to the closing; provided, however, that the average closing price of McKesson Common Stock will not be deemed to be greater than $63.11 or less than $46.64. Accordingly, in the aggregate, no more than approximately 3,720,000 or less than approximately 2,750,000 shares of McKesson Common Stock will be issued in the Merger. The Merger Agreement provides that $30 million of the cash consideration to be paid in the Merger will be held back from the General Medical stockholders (and optionholders) and such amount will be applied against any costs incurred by General Medical and certain other defendants in connection with a pending lawsuit involving General Medical and certain other persons. The lawsuit was brought by the former controlling shareholder of the predecessor of General Medical against General Medical, GM Holdings, Inc., a wholly owned subsidiary of General Medical, Kelso & Company, L.P., a stockholder of General Medical, and one of its officers, and certain present and former officers and a director of General Medical, alleging fraud, breach of fiduciary duty and participation in and inducing breach of fiduciary duty in connection with the acquisition of General Medical from its predecessor company in 1993. The Merger is subject to certain customary conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Copies of the Merger Agreement and the press release announcing the transaction are attached hereto as Exhibits 2.1 and 99.1, respectively, which exhibits are incorporated herein by reference. McKesson and the Continuing Stockholders have also entered into a Registration Rights Agreement (the "Registration Rights Agreement") providing certain demand and incidental registration rights with respect to the shares of McKesson Common Stock which such stockholders will receive in exchange for their shares of General Medical common stock. The Registration Rights Agreement also provides for certain "standstill" provisions and other limitations on disposition of the shares of McKesson Common Stock. A copy of the Registration Rights Agreement is attached hereto as Exhibit 99.2, which exhibit is incorporated herein by reference. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about companies, so long as those statements are identified as forward looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. The press release filed herewith contains certain forward- looking statements. McKesson desires to take advantage of the "safe harbor" provisions with respect to statements it may make concerning the Merger. The following important factors, among others, could affect the successful integration of the companies and the recognition of cost savings or other synergies from the transaction, as well as McKesson's continuing operations: Factors specific to the transaction include: - Absence of legislation which prevents the Merger from being consummated or makes the benefits expected to be realized upon consummation of the Merger more difficult to achieve. - Possible adverse publicity or litigation from third parties interested in preventing the Merger from occurring. - Loss or retirement of key executives of General Medical. Other factors affecting McKesson's operations include: - Level of competition for McKesson's products, including a possible willingness on the part of certain competitors to cut prices for their products in order to preserve or gain market share. - Increase in spending by competitors. - Risks inherent in new product introductions, including uncertainty of customer acceptance of the product's value proposition relative to competitors' products, and competitors' response to the introduction. - General economic and business conditions. - Uncertainty in the economic environment in foreign countries. - Other risks detailed from time to time in McKesson's filings with the Securities and Exchange Commission. The foregoing review of factors pursuant to the Private Litigation Securities Reform Act of 1995 should not be construed as exhaustive. Item 7(c) - Exhibits. 2.1 Agreement and Plan of Merger, dated as of January 28, 1997, by and among General Medical Inc., McKesson Corporation, Spider Acquisition Corporation and certain stockholders named therein. 99.1 Press Release of McKesson Corporation, dated January 28, 1997. 99.2 Registration Rights Agreement, dated as of January 28, 1997, by and among McKesson Corporation and certain stockholders named therein. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MCKESSON CORPORATION (Registrant) Date: February 5, 1997 By: /s/ Nancy A. Miller -------------------------- Name: Nancy A. Miller Title: Vice President and Corporate Secretary EXHIBIT INDEX Exhibit Page 2.1 Agreement and Plan of Merger, dated as of January 28, 1997, by and among General Medical Inc., McKesson Corporation, Spider Acquisition Corporation and certain stockholders named therein. 99.1 Press Release of McKesson Corporation, dated January 28, 1997. 99.2 Registration Rights Agreement, dated as of January 28, 1997, by and among McKesson Corporation and certain stockholders named therein. EX-2 2 EXHIBIT 2.1 - AGREEMENT AND PLAN OF MERGER EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER by and among GENERAL MEDICAL INC., MCKESSON CORPORATION, SPIDER ACQUISITION CORPORATION and THE CONTINUING STOCKHOLDERS NAMED HEREIN Dated as of January 28, 1997 TABLE OF CONTENTS PAGE ARTICLE I THE MERGER 1.1 The Merger.......................................................3 1.2 Effect on Shares.................................................4 1.3 Holdback of Cash Consideration...................................6 1.4 Surrender of Certificates.......................................19 1.5 Sales Taxes; Transfer Taxes and Fees; Withholding...............21 1.6 No Further Ownership Rights in Shares...........................23 1.7 Closing of Company Transfer Books...............................23 1.8 Stock Options...................................................23 1.9 Lost Certificates...............................................24 1.10 Dissenters' Rights..............................................24 1.11 Closing.........................................................25 ARTICLE II THE SURVIVING CORPORATION 2.1 Certificate of Incorporation....................................26 2.2 Bylaws..........................................................26 2.3 Directors and Officers..........................................26 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3.1 Corporate Organization and Authority............................27 3.2 Capitalization..................................................29 3.3 Subsidiaries....................................................31 3.4 Consents and Approvals; No Violations...........................31 3.5 SEC Documents...................................................34 3.6 Financial Statements............................................34 3.7 Absence of Material Adverse Changes, etc........................35 3.8 Absence of Undisclosed Liabilities..............................37 3.9 Information Statement...........................................38 3.10 Taxes...........................................................38 3.11 Employment Matters..............................................44 3.12 Environmental Matters...........................................50 3.13 Legal Proceedings, etc..........................................52 3.14 Compliance with Applicable Law..................................53 3.15 Certain Contracts and Arrangements..............................54 3.16 Real Property...................................................55 3.17 Certain Fees....................................................57 3.18 Intellectual Property...........................................57 3.19 Board Recommendations; Takeover Provisions......................59 3.20 Labor Matters...................................................59 3.21 Transactions with Affiliates....................................60 3.22 Existing Stock Agreements.......................................60 3.23 Product Liability...............................................61 3.24 Legal Opinion...................................................61 3.25 Opinion of Financial Advisor....................................61 3.26 Full Disclosure.................................................62 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY 4.1 Corporate Organization and Authority............................62 4.2 Capitalization..................................................64 4.3 Consents and Approvals; No Violations...........................65 4.4 SEC Documents...................................................67 4.5 Financial Statements............................................68 4.6 Absence of Material Adverse Changes, etc........................68 4.7 Absence of Undisclosed Liabilities..............................69 4.8 Taxes...........................................................69 4.9 Employment Matters..............................................70 4.10 Legal Proceedings, etc..........................................70 4.11 Compliance with Applicable Law..................................71 4.12 Certain Fees....................................................71 4.13 Financing.......................................................71 4.14 Information Statement...........................................72 ARTICLE V CONTINUING STOCKHOLDERS 5.1 Authority, Binding Effect.......................................72 5.2 Title...........................................................73 5.3 Consents and Approvals; No Violations...........................75 5.4 Investment Intention............................................76 5.5 Federal Securities Laws Matters.................................77 5.6 Investor Status.................................................77 ARTICLE VI COVENANTS 6.1 Conduct of the Business.........................................78 6.2 Information Statement...........................................82 6.3 Access to Information; Confidentiality..........................83 6.4 No Solicitation.................................................84 6.5 Obligations of Merger Subsidiary................................85 6.6 Director and Officer Liability; Indemnification.................85 6.7 Reasonable Best Efforts.........................................88 6.8 Regulatory Compliance...........................................89 6.9 Public Announcements............................................91 6.10 Further Assurances..............................................91 6.11 Employee Matters................................................91 6.12 Treatment of Public Debt........................................93 ARTICLE VII CONDITIONS TO THE MERGER 7.1 Conditions to Each Party's Obligations..........................93 7.2 Conditions to the Obligations of the Company....................95 7.3 Conditions to the Obligations of Buyer and Merger Subsidiary......................................................96 ARTICLE VIII TERMINATION 8.1 Termination.....................................................97 8.2 Effect of Termination...........................................98 ARTICLE IX MISCELLANEOUS 9.1 Notices.........................................................98 9.2 No Survival of Representations and Warranties...................99 9.3 Amendments, Modification and Waiver............................100 9.4 Expenses.......................................................101 9.5 Successors and Assigns; Binding Effect.........................102 9.6 Governing Law..................................................102 9.7 Severability...................................................102 9.8 Third Party Beneficiaries......................................103 9.9 Schedules......................................................103 9.10 Entire Agreement...............................................104 9.11 Counterparts; Effectiveness....................................104 TABLE OF DEFINED TERMS TERM SECTION NO. accredited investor........................................................5.6 accumulated funding deficiency.................................3.11(f), 4.9(f) Acorn Partnership.....................................................Recitals Acquisition Proposal.......................................................6.4 Active Subsidiary.......................................................3.1(a) Affiliate.................................................................3.21 Agreement.............................................................Recitals Assumed Options........................................................6.11(a) Average Price...........................................................1.2(a) Bernstein Claims...........................................................1.3 Buyer.................................................................Recitals Buyer Common Stock......................................................1.2(a) Buyer Disclosure Schedule...............................................4.3(a) Buyer ERISA Plans.......................................................4.1(a) Buyer Material Adverse Effect...........................................4.1(a) Buyer Plans.............................................................4.9(a) Buyer Preferred Stock......................................................4.2 Buyer Rights............................................................1.2(a) Buyer SEC Documents........................................................4.4 Buyer Securities...........................................................4.2 CEA...................................................................Recitals Certificate of Merger...................................................1.1(b) Class A Common Stock..................................................Recitals Closing...................................................................1.11 Closing Date..............................................................1.11 Code....................................................................1.4(c) Common Stock..........................................................Recitals Company...............................................................Recitals Company Board...........................................................3.1(b) Company Disclosure Schedule................................................3.3 Company SEC Documents......................................................3.5 Company Securities.........................................................3.2 Consideration Shares....................................................1.2(a) Continuing Cash Portion...................................................2(a) Continuing Share Portion................................................1.2(a) Continuing Stockholders...............................................Recitals Costs...................................................................6.6(a) DGCL..................................................................Recitals Dissenting Shares.........................................................1.10 Distribution Amount........................................................1.3 Effective Time..........................................................1.1(b) employee pension benefit plan..................................3.11(a), 4.9(a) employee welfare benefit plan..................................3.11(a), 4.9(a) Employment Agreements..................................................6.11(a) Environmental Claim.................................................3.12(a)(i) Environmental Laws.................................................3.12(a)(ii) Equity Value............................................................1.2(a) ERISA..................................................................3.11(a) ERISA Affiliate........................................................3.11(a) ERISA Plans............................................................3.11(a) Excess Expense Amount......................................................9.4 Exchange Act.......................................................3.4(b)(iii) Exchange Share Fractional Amount........................................1.2(a) Excluded Shares.........................................................1.2(a) GAAP.......................................................................3.6 General Medical.........................................................3.1(c) Governmental Entity.....................................................3.4(b) Hazardous Materials...............................................3.12(a)(iii) Holdback Amount............................................................1.3 Holdings...................................................................3.5 HSR Act.................................................................3.4(b) Indemnifiable Claim.....................................................6.6(a) Indemnified Lawsuit.....................................................6.6(a) Indemnified Party.......................................................6.6(a) Information Statement...................................................6.2(b) Intellectual Property.....................................................3.18 IPO Prospectus.............................................................3.5 Kelso Parties.........................................................Recitals KEP II................................................................Recitals KIA IV................................................................Recitals Leased Real Property...................................................3.16(a) Leases.................................................................3.16(a) Lien.......................................................................3.3 Material Adverse Effect.................................................3.1(a) Merger..................................................................1.1(a) Merger Consideration....................................................1.2(a) Merger Subsidiary.....................................................Recitals multiemployer pension plan.....................................3.11(f), 4.9(f) Net Equity Value........................................................1.2(a) Non-Continuing Cash Amount..............................................1.2(a) Non-Continuing Stockholders...........................................Recitals Opel..................................................................Recitals Option..................................................................1.8(a) Option Plans............................................................1.8(a) Outstanding Shares......................................................1.2(a) Owned Real Property....................................................3.16(a) Paying Agent............................................................1.4(a) Permits...................................................................3.14 Permitted Liens........................................................3.16(a) Person.....................................................................6.4 PGI...................................................................Recitals PGI Sweden............................................................Recitals Plans..................................................................3.11(a) Princes Gate..........................................................Recitals Real Property..........................................................3.16(a) Release............................................................3.12(a)(iv) Registration Rights Agreement...........................................7.2(d) Representatives.........................................................6.3(a) Rutledge Partners.....................................................Recitals SEC................................................................1.8(a), 4.4 SPD................................................................3.11(b)(iv) Secretary of State......................................................1.1(b) Securities Act.............................................................3.5 Securities Purchase Agreement..............................................3.2 Securityholders Agreement..................................................5.2 Share Certificates......................................................1.4(b) Shares................................................................Recitals single employer................................................3.11(a), 4.9(a) State Takeover Laws.......................................................3.19 Stock Agreements...........................................................3.2 Stock Subscription Agreement...............................................5.2 Stockholders Agreement.....................................................5.2 Subsidiary.................................................................3.3 Surviving Corporation...................................................1.1(a) Tax Return..........................................................3.10(b)(i) Taxes...............................................................3.10(b)(i) 1993 Plan..................................................................3.2 1994 Directors Plan........................................................3.2 1994 Plan..................................................................4.2 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of January 28, 1997 (this "Agreement"), by and among GENERAL MEDICAL INC, a Delaware corporation (the "Company"), MCKESSON CORPORATION, a Delaware corporation ("Buyer"), SPIDER ACQUISITION CORPORATION, a Delaware corporation and a wholly-owned subsidiary of Buyer ("Merger Subsidiary"), KELSO INVESTMENT ASSOCIATES IV, L.P., a Delaware limited partnership ("KIA IV"), KELSO EQUITY PARTNERS II, L.P., a Delaware limited partnership ("KEP II" and together with KIA IV, the "Kelso Parties"), CHASE EQUITY ASSOCIATES, a California limited partnership ("CEA"), JOHN RUTLEDGE PARTNERS, L.P., a Delaware limited partnership ("Rutledge Partners"), PRINCES GATE INVESTORS L.P., a Delaware limited partnership ("Princes Gate"), ACORN PARTNERSHIP I, L.P., a Delaware limited partnership ("Acorn Partnership"), PGI INVESTMENTS LIMITED, a British Virgin Islands corporation ("PGI"), PGI SWEDEN AB, a Swedish corporation ("PGI Sweden") and GREGOR VON OPEL ("Opel"), THE LEWIS and PATRICIA KELSO TRUST, WILLIAM A. MARQUARD, THE FRANK T. NICKELL IRA, DAVID M. RODERICK, GEORGE L. SHINN, STEVEN B. NIELSEN, F. De WIGHT TITUS and DONALD B. GARBER. All of the parties hereto excluding the Company, Buyer and Merger Subsidiary are referred to collectively herein as the "Continuing Stockholders." All stockholders of the Company, excluding the Continuing Stockholders are referred to collectively herein as the "Non-Continuing Stockholders." W I T N E S S E T H WHEREAS, the respective Boards of Directors of Buyer, Merger Subsidiary and the Company have each approved, and deem it advisable and in the best interests of the stockholders of Merger Subsidiary and the Company to consummate, the acquisition of the Company by Buyer upon the terms and subject to the conditions of this Agreement; and WHEREAS, in furtherance of such acquisition, the respective Boards of Directors of Buyer, Merger Subsidiary and the Company have each approved this Agreement and the merger of the Merger Subsidiary with and into the Company, upon the terms and subject to the conditions set forth herein, and in accordance with the General Corporation law of the State of Delaware (the "DGCL"), whereby each issued and outstanding share of Common Stock, par value $.01 per share (the "Common Stock") and each issued and outstanding share of Class A Common Stock, par value $.01 per share (the "Class A Common Stock" and, together with the Common Stock, the "Shares"), of the Company, not owned directly or indirectly by Buyer, Merger Subsidiary or the Company, will be converted into the right to receive the applicable Merger Consideration payable to the holder thereof, without interest; NOW, THEREFORE, in consideration of the representations, warranties, covenants, agreements and conditions hereafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I THE MERGER 1.1 The Merger. (a) Upon the terms and subject to the conditions of this Agreement, and in accordance with the DGCL, at the Effective Time (as defined in Section 1.1(b) hereof), the Merger Subsidiary shall be merged (the "Merger") with and into the Company, whereupon the separate existence of the Merger Subsidiary shall cease. After the Merger, the Company shall continue as the surviving corporation (sometimes referred to herein as the "Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware. (b) Concurrently with the Closing (as defined in Section 1.11 hereof) the Company, Buyer and Merger Subsidiary shall cause a certificate of merger (the "Certificate of Merger") with respect to the Merger to be executed and filed with the Secretary of State of the State of Delaware (the "Secretary of State") as provided in the DGCL. The Merger shall become effective on the date and time (the "Effective Time") at which the Certificate of Merger has been duly filed with the Secretary of State. (c) Upon the Merger, all the rights, privileges, immunities, powers and franchises of the Company and Merger Subsidiary shall vest in the Surviving Corporation and all obligations, restrictions, disabilities, duties, debts and liabilities of the Company and Merger Subsidiary shall be the obligations, restrictions, disabilities, duties, debts and liabilities of the Surviving Corporation. 1.2 Effect on Shares. At the Effective Time: (a) Conversion of Shares; Merger Consideration. Each Share issued and outstanding immediately prior to the Effective Time (other than (i) Shares held by the Company as treasury stock or by any wholly-owned Subsidiary (as defined in Section 3.3 hereof) of the Company or owned by Buyer, Merger Subsidiary or any other Subsidiary of Buyer ("Excluded Shares") and (ii) Dissenting Shares (as defined in Section 1.10)) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive the Merger Consideration (as defined below), upon surrender of the certificate formerly representing such Shares in the manner provided in Section 1.3 hereof. All Shares to be converted into the Merger Consideration pursuant to this Section 1.2 shall, by virtue of the Merger and without any action on the part of the holders thereof, cease to be outstanding, be canceled and retired, and each holder of a certificate representing any such Shares shall thereafter cease to have any rights with respect thereto, except the right to receive the applicable Merger Consideration therefor, without interest thereon, upon the surrender of such certificate in accordance with Section 1.4 hereof. As used herein, "Outstanding Shares" shall mean the Shares other than Excluded Shares. "Merger Consideration" shall mean: (i) in the case of the Shares held by Non-Continuing Stockholders: (I) an amount in cash (the "Non-Continuing Cash Amount") equal to the Equity Value Per Share (as defined below) and (II) the Distribution Amount (as defined in Section 1.3 below); and (ii) in the case of Shares held by Continuing Stockholders: (I) the Continuing Cash Portion (as defined below), (II) the Continuing Stock Portion (as defined below), and (III) the Distribution Amount. As used herein, "Equity Value Per Share" shall be the amount equal to (A) $331,071,912.58 minus the product of the Excess Expense Amount (as defined in Section 9.4) and .605, divided by (B) 11,014,357.13. The "Continuing Cash Portion" shall be an amount in cash equal to (A) .50 times the Equity Value Per Share minus (B) the quotient of (I) (x) .50 times the aggregate Non-Continuing Cash Amounts, plus (y) $15,000,000, plus (z) .50 times the aggregate Option Spreads (as defined in Section 1.8), divided by (II) the total number of Shares held by the Continuing Stockholders. The "Continuing Share Portion" shall be the number of shares of Buyer common stock, par value $.01 per share (the "Buyer Common Stock") and the associated Preferred Stock Purchase Rights of Buyer to be issued pursuant to the Rights Agreement, dated as of September 14, 1994, by and between Buyer and First Chicago Trust Company of New York (the "Buyer Rights") (unless the context otherwise requires, all references in this Agreement to Buyer Common Stock shall include the corresponding Buyer Rights) equal to (A) the Equity Value Per Share minus the Continuing Cash Portion divided by (B) subject to the provisions of the last sentence of this Section 1.2(a), the average closing price of Buyer Common Stock for the five trading day period ending two trading days before the Closing Date (the "Average Price") (such resulting number, the "Consideration Shares") and (ii) an amount in cash in lieu of fractional shares, if any, calculated at the Average Price (the "Exchange Share Fractional Amount"). The provisions of clause (B) of the foregoing sentence notwithstanding, if (A) the Average Price is greater than $63.11, then the Average Price, for all purposes of this Agreement (including Section 1.7 hereof) shall be deemed to be $63.11 and (B) the Average Price is less than $46.64, then the Average Price, for all purposes of this Agreement other than Section 8.1(d) (but including Section 1.7) shall be deemed to be $46.64. (b) Cancellation of Shares. All Excluded Shares shall be canceled and no Merger Consideration or other consideration or payment shall be delivered therefor or in respect thereof. (c) Capital Stock of Merger Subsidiary. Each share of common stock of Merger Subsidiary issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation with the same rights, powers and privileges as the Shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. 1.3 Holdback of Cash Consideration. (a) The parties agree that at the Closing, Buyer shall withhold, from the Merger Consideration an amount equal to $30 million (the "Initial Holdback Amount"). The Initial Holdback Amount shall be reduced as and to the extent provided in Section 1.3(c) and 1.3(e) below and, after giving effect to the provisions of such Sections, shall be referred to herein as the "Holdback Amount." (b) The Holdback Amount shall accrue interest at the applicable Interest Rate (as defined below) commencing on the Closing Date and ending on the Final Holdback Distribution Date (as defined below). The Holdback Amount, together with all such accrued interest, divided by 11,014,357.13, shall be referred to herein as the "Distribution Amount." For purposes of this Agreement, the "Interest Rate" shall be (i) 6.75% per annum for the period commencing on the Closing Date and ending on the date that is six months following the Closing Date (the "Six Month Anniversary Date"), (ii) 8.75% per annum for the period commencing on the day following the Six Month Anniversary Date and ending on the date that is twelve months following the Closing Date (the "Twelve Month Anniversary Date"), (iii) 10.75% per annum for the period commencing on the day following the Twelve Month Anniversary Date and ending on the date that is the earlier of (A) the Bar Date (as defined below) and (B) eighteen months following the Closing Date and for any other periods thereafter; provided, however, that in the event that (i) the order of the New York State Supreme Court with respect to the Bernstein Lawsuit (as defined below) is not affirmed on the appeal or (ii) a Subsequent Lawsuit (as defined below) is brought or filed, the Interest Rate shall be 6.75% per annum from and after the date of such disposition (in the case of clause (i)) or the filing or bringing of such Subsequent Lawsuit (in the case of clause (ii)) for all subsequent periods hereunder. (c) As soon as practicable following the Initial Holdback Distribution Date (as defined below) Buyer shall distribute the Initial Distribution Amount (as defined below), and as soon as practicable following the Final Holdback Distribution Date, the Buyer shall distribute the Final Distribution Amount, in each case, in accordance with Section 1.2(a). The right of a holder of Outstanding Shares or Options to receive any amounts under this Section 1.3(c) may not be transferred, sold, assigned or otherwise disposed of, except by will, intestate succession or operation of law. Not later than 10 days following the Effective Time, Buyer shall cause the Surviving Corporation to provide to the Stockholder Representative (as defined below) a schedule setting forth the names and addresses of the holders of all Outstanding Shares and Options immediately prior to the Effective Time as such information appears on the records of the Company, together with the number of Shares or Options held by each such Person at such time. Any Distribution Amount that Buyer is unable to distribute to a former holder of Outstanding Shares or Options pursuant to this Section 1.3(c) may be retained by Buyer (subject to Section 1.3(h)) and such holder shall be entitled to look to Buyer only as a general creditor with respect to the pro rata share of the Distribution Amount payable to such holder pursuant to this Section 1.3(c), subject to applicable abandoned property, escheat or other similar laws. (d) For purposes hereof, the following terms shall have the meanings set forth below: "Costs" shall mean any and all losses, reasonable costs, reasonable expenses (including, without limitation, reasonable attorneys' fees and disbursements, the reasonable costs of any investigation or preparation incurred in connection therewith and the reasonable fees of experts and consultants), claims, damages, liabilities, judgments (including interest on any judgments), amounts paid in settlement and premiums paid for insurance with respect to the Bernstein Lawsuit (pursuant to clause (iv) of the definition of "Final Holdback Distribution Date" contained in Section 1.3(d)). "Holdback Costs" shall mean any and all Costs (including, without limitation, any Costs incurred in connection with any indemnification obligations of the Company or the Company's Subsidiaries) incurred after the Effective Time by Buyer, the Company, the Surviving Corporation or the Company's Subsidiaries and all other Defendants (as defined below) in connection with, arising out of or related to (y) that certain lawsuit, including any appeal related thereto, styled Richard A. Bernstein v. Kelso & Company, Inc., Steven B. Nielsen, James C. Robison, Donald B. Garber, G. Keith Nedrow, Michael B. Goldberg, General Medical Corp. Inc. and GM Holdings, Inc., Index No. 117957/95 (the "Bernstein Lawsuit"), filed in the Supreme Court of the State of New York or (z) any claim asserted in any other proceeding or forum against any entity or person based on, arising out of or related to facts and/or circumstances alleged or asserted in the Bernstein Lawsuit (subclauses (y) and (z) being collectively referred to as the "Bernstein Claims"). "Initial Distribution Amount" shall be 50% of the Distribution Amount as of the Initial Holdback Distribution Date. "Initial Holdback Distribution Date" shall be the date which is thirty days following the first to occur of: (i) the date of the settlement of the Bernstein Lawsuit, including the delivery to all persons named as defendants in the Bernstein Lawsuit (the "Defendants") of an unconditional written release (or if the delivery of such a release is not feasible, the entry of an order of a court of competent jurisdiction which is no longer subject to appeal and which provides that all claims asserted therein are released or dismissed with prejudice) (x) from the named plaintiff in the Bernstein Lawsuit (on behalf of such named plaintiff and any other person or persons whom such named plaintiff purports to represent) and (y) on behalf of all other members of any class actually certified or approved in the Bernstein Lawsuit, from all obligations and liabilities in respect of all Bernstein Claims and potential Bernstein Claims other than as expressly provided for in the settlement agreement); or (ii) the date on which a final order or judgment of a court of competent jurisdiction , with respect to the Bernstein Lawsuit, has become final and no longer subject to appellate review. "Final Holdback Distribution Date" shall be the date which is thirty days following the first to occur of: (i) the date on which a final order or judgment of a court of competent jurisdiction, with respect to the Bernstein Lawsuit, has become final and no longer subject to appellate review (such final adjudication to have res judicata or similar effect with respect to all potential Bernstein Claims, and such settlement to include the delivery to all Defendants of an unconditional written release (or if the delivery of such a release is not feasible, the entry of an order of a court of competent jurisdiction which is no longer subject to appeal and which provides that all claims asserted therein are released or dismissed with prejudice) (x) from the named plaintiff in the Bernstein Lawsuit (y) on behalf of all other members of the purported class asserted in the Bernstein Lawsuit, from all obligations and liabilities in respect of all Bernstein Claims and potential Bernstein Claims other than as expressly provided for in the settlement agreement); or (ii) July 20, 1998 (the "Bar Date"), but only in the event that by such date (A) a final order or judgment of a court of competent jurisdiction with respect to the Bernstein Lawsuit has become final and no longer subject to appellate review and (B) no other Bernstein Claims have been brought or filed against the Company, any of its Subsidiaries or any Person with respect to which the Company or any of its Subsidiaries may have indemnification, reimbursement or other monetary obligations (a "Subsequent Lawsuit"); or (iii) in the event that one or more Subsequent Lawsuits is brought or filed, the date on which there has been, with respect to the Bernstein Lawsuit and all such Subsequent Lawsuits, the entry of a final order or judgment of a court of competent jurisdiction (whether in connection with a settlement or otherwise) and such order or judgment has become final and no longer subject to appellate review; or (iv) on such date as the Stockholder Representative (as defined below) obtains insurance with respect to the Bernstein Claims on such terms as are mutually acceptable to the Stockholder Representative and Buyer. "Final Distribution Amount" shall be the remaining Distribution Amount, as of the Final Holdback Distribution Date, following the distribution of the Initial Distribution Amount, if any. (e) Buyer agrees to pay or reimburse, or cause the Company or one of its Subsidiaries to pay or reimburse, Holdback Costs (including Holdback Costs incurred by any of the Defendants which Buyer, the Company or the Company's Subsidiaries would not have been obligated to pay or reimburse but for the provisions of this Section 1.3(e)) on the following basis: (A) Prior to the Initial Distribution Date: (x) up to the first $1 million of Hold back Costs, if any, shall not be applied against or reduce the Initial Holdback Amount; (y) Holdback Costs, if any, which exceed $1 million, up to such excess Holdback Costs which aggregate $30 million shall be fully applied against and reduce the Initial Holdback Amount; and (z) Holdback Costs, if any, in excess of $31 million, up to an additional $9 million, shall be paid or reimbursed notwithstanding that the Initial Holdback Amount shall have been reduced to zero; and (B) On or following the Initial Distribution Date, after giving effect to the distribution of the Initial Distribution Amount: (x) up to the first $1 million of Holdback Costs following the Effective Time, if any, shall not be applied against or reduce the Holdback Amount; (y) Holdback Costs, if any, which exceed $1 million, up to such excess Holdback Costs following the Effective Time which aggregate not more than $30 million, minus the aggregate Initial Distribution Amount (less the interest component thereof) shall be fully applied against and reduce the Holdback Amount; and (z) Holdback Costs, if any, in excess of $31 million, minus the aggregate Initial Distribution Amount (less the interest component thereof), up to an additional $4.5 million, shall be paid or reimbursed notwithstanding that the Holdback Amount shall have been reduced to zero. Subject to the foregoing, Holdback Costs will be paid or reimbursed in the order in which they are presented to Buyer. Notwithstanding anything in this Section 1.3(e) to the contrary, no obligation to pay or reimburse Holdback Costs which constitute costs paid in settlement shall be imposed under this Section 1.3(e) if the settlement is by a Defendant who is not a party to this Agreement and it does not satisfy the conditions set forth in the fourth sentence in Section 1.3(f) below. (f) The Defendants other than the Company and its Subsidiaries will continue undertaking the defense of the Bernstein Lawsuit with counsel of their own choosing. The Stockholder Representative (as defined below) shall undertake and have sole discretion and authority with respect to, the defense (and, subject to this Section 1.3(f), the settlement) of any Bernstein Claims on behalf of the Company and its Subsidiaries with counsel selected by the Stockholder Representative; provided, however, that Buyer may select counsel of its choosing to act as co-counsel (but not lead counsel) on behalf of the Company and any of its Subsidiaries (the "Company Defendants"), for purposes of participating in the defense of any Bernstein Claims. Following the Closing, Buyer will cause the Company Defendants vigorously and diligently to defend any Bernstein Claims, it being understood that Buyer may, at any time, cause the Company Defendants to seek the dismissal of any and all Bernstein Claims against the Company Defendants on their own motion (and not jointly with the other Defendants). The Defendants which are parties hereto agree that they will not enter into any settlement or similar agreement with respect to any Bernstein Claims unless (i) any such settlement shall include as a term thereof the delivery to the Defendants by all plaintiffs in the proceeding (on behalf of such named plaintiff and any other person or persons who such named plaintiff purports to represent) relating to such Bernstein Claims of an unconditional written release from all liability in respect of all Bernstein Claims and potential Bernstein Claims (or if the delivery of such a release is not feasible, the entry of an order of a court of competent jurisdiction which is no longer subject to appeal and which provides that all claims asserted therein are released or dismissed with prejudice), (ii) such settlement shall not provide for any action by the Company Defendants other than the payment of money and the execution of customary settlement documents, and (iii) the aggregate amount of such money payment shall not exceed the excess, if any, of $40 million over the aggregate Holdback Costs calculated by the Buyer as of the execution of the agreement relating to the settlement (but without giving effect to such money payment), provided that the condition set forth in this clause (iii) shall be deemed satisfied if any excess over $40 million is not required to be paid, directly or indirectly (by way of reimbursement, indemnification or otherwise) by Buyer, the Company or its Subsidiaries, provided, further, that the $40 million amount set forth in this clause (iii) shall be reduced to $35.5 million minus the aggregate Initial Distribution Amount as of Initial Holdback Distribution Date after giving effect to the disbursement of the Initial Distribution Amount. In the event of a settlement of any Bernstein Claims as provided in the immediately preceding sentence, Buyer will cause the Company Defendants to enter into the settlement or similar agreement with respect to such Bernstein Claims. In connection with any calculation required by the second preceding sentence, at Buyer's request each of the Defendants who are parties hereto shall submit promptly to Buyer such party's claims for payment or reimbursement of Holdback Costs (including pursuant to Section 1.3(e) above), including by obtaining up-to-date invoices with respect to attorneys' fees and disbursements and other third party-related Holdback Costs. Buyer will cause the Company and its Subsidiaries to reasonably cooperate with the Stockholder Representative and the other Defendants in order to defend any Bernstein Claims, including, without limitation, providing reasonable access to all requested documentation and records and making officers and employees and representatives of the Company and its Subsidiaries reasonably available to the Stockholder Representative and the other Defendants and their counsel for such purpose. For purposes hereof Kelso & Company shall serve as the initial Stockholder Representative and if Kelso & Company ceases to act as the Stockholder Representative for any reason, the holders of a majority of the Outstanding Shares and Options outstanding immediately prior to the Effective Time shall appoint a replacement Stockholder Representative. The Stockholder Representative may be removed at any time by vote of the holders of a majority of the Outstanding Shares and Options outstanding immediately prior to the Effective Time. (g) If any Defendant has claims for payment or reimbursement of Holdback Costs against any third party (other than any other Defendant), the Defendant shall pursue such claim if reasonably available to it and, to the extent such Holdback Costs were paid or reimbursed by Buyer, the Company, the Surviving Corporation or any of their Subsidiaries, the Defendant shall pay the net proceeds of such claim (after deducting all out-of-pocket costs of collection, including attorneys fees and disbursements) to Buyer. To the extent the amount so paid to Buyer is in respect of a Holdback Cost which would reduce or in fact reduced the Distribution Amount, an appropriate adjustment and/or payment (even if after the Distribution Date) shall be made for the benefit of the Stockholders on the same pro rata basis as provided above in this Section 1.3. Without limiting the foregoing, to the extent that any Defendant has claims for payment or reimbursement of Holdback Costs against any third party (other than any other Defendant), including, without limitation, any claim under any insurance policy, this provision shall in no way reduce or mitigate such claims, and the obligation under this Section 1.3 to make any payment or reimbursement shall be reduced or eliminated accordingly; provided, that until any claim is collected, this Section 1.3 shall continue to operate as it would in the absence of this sentence, including with respect to the obligation to pay or reimburse Holdback Costs under Section 1.3(e) above. (h) Upon the occurrence of a Trigger Event (as defined below), Buyer will deposit with an escrow agent selected by Buyer and reasonably acceptable to the Stockholder Representative (the "Escrow Agent"), the Holdback Amount (in the amount of the Holdback Amount at the time of such deposit), which deposit shall be held by the Escrow Agent pursuant to the terms of this Agreement and an escrow agreement in form and substance consistent with the terms of this Agreement to be mutually agreed to by Buyer, the Stockholder Representative and the Escrow Agent. For purposes hereof, "Trigger Event" shall mean either (i) a "Change in Control" (as defined below) or (ii) the senior debt of Buyer shall cease to be rated at an investment grade level by either Moody's or Standard & Poors. For purposes hereof, a "Change in Control" shall occur in the event of (i) the acquisition by any Person of 50% or more of the capital stock of the Company which is entitled to vote generally in the election of directors or (ii) a merger or similar business combination involving Buyer, after which the holders of Buyer Common Stock immediately prior to such merger or business combination own in the aggregate less than 50% of the common equity value of the surviving corporation or entity. (i) This Section 1.3 is not intended to affect the rights or obligations of the parties with respect to Holdback Costs except as expressly set forth herein. 1.4 Surrender of Certificates. (a) Deposit With Paying Agent. Prior to the Effective Time, Buyer shall designate a bank, trust company, or such Person or Persons as shall be reasonably acceptable to the Company to act as paying agent hereunder (the "Paying Agent"). Immediately prior to the Effective Time, Buyer shall deposit with the Paying Agent, for the benefit of holders of Shares, (i) the funds necessary to complete the payments contemplated by Section 1.2(a) hereof on a timely basis and (ii) certificates representing shares of Buyer Common Stock to be issued pursuant to Section 1.2(a) hereof. (b) Surrender Procedure. Promptly following the Effective Time, Buyer shall cause the Paying Agent to mail (and to make available for collection by hand) to each holder of record of a certificate or certificates, which represented outstanding Shares (the "Share Certificates"), whose Shares are to be converted pursuant to Section 1.2(a) hereof into the right to receive the Merger Consideration, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Share Certificates shall pass, only upon proper delivery of the Share Certificates to the Paying Agent and which shall be in the form and have such other provisions as Buyer and the Company may reasonably specify) and (ii) instructions for use in effecting the surrender of the Share Certificates for payment therefor (which instructions shall provide that at the election of the surrendering holder, Share Certificates may be surrendered, and payment therefor collected immediately after the Effective Time, by hand delivery). Upon proper surrender of a Share Certificate for cancellation to the Paying Agent, together with a letter of transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Share Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each such Share formerly represented by such Share Certificate, to be mailed (or immediately made available for collection by hand) within one business day of receipt thereof, and the Share Certificate so surrendered shall be forthwith canceled. The Paying Agent shall accept such Share Certificates upon compliance with such reasonable terms and conditions as the Paying Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. No interest shall be paid or accrued for the benefit of holders of the Share Certificates on the Merger Consideration payable upon the surrender of the Share Certificates. No dividends or distributions that have been declared and having a record date after the Effective Time shall be paid to Persons entitled to receive certificates for shares of Buyer Common Stock until such Persons surrender their Share Certificates, at which time all such dividends shall be paid. Notwithstanding anything to the contrary contained herein, neither the Paying Agent nor any party hereto shall be liable to a holder of Shares or any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law. (c) Delivery of Merger Consideration. Any portion of the Merger Consideration that remains unclaimed by the stockholders of the Company twelve months after the Effective Time shall be delivered to the Surviving Corporation. Any former stockholders of the Company who have not theretofore complied with the surrender procedures described in this Section 1.4 shall look only to the Surviving Corporation for payment and/or issuance of the Merger Consideration to which such stockholder is entitled, subject to applicable abandoned property, escheat or similar laws. 1.5 Sales Taxes; Transfer Taxes and Fees; Withholding. (a) Except as provided in Section 1.5(b) below, all sales, use, transfer, stamp, recording and registration taxes and fees incurred in connection with the consummation of the transactions contemplated hereby whether imposed on the Company, Buyer or Merger Subsidiary, including, without limitation, all real property transfer taxes or fees, shall be paid by Buyer, and each of Buyer and the Company shall file all necessary tax returns and other documentation with respect to all such taxes and fees. The Company and Buyer agree to cooperate with each other in connection with the preparation and timely filing of all necessary forms and clearances required by any taxing authority. (b) If payment or issuance of the Merger Consideration is to be made to a Person other than the Person in whose name the Share Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that the Share Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and that the Person requesting such exchange shall pay to the Paying Agent any transfer or other taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Share Certificate so surrendered, or shall establish to the satisfaction of the Paying Agent that such tax either has been paid or is not applicable. (c) Buyer or Paying Agent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as Buyer or the Paying Agent are required to deduct and withhold under the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of state, local or foreign tax law, with respect to the making of such payment. To the extent that amounts are so withheld by Buyer or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of whom such deduction and withholding was made by Buyer or the Paying Agent. 1.6 No Further Ownership Rights in Shares. The Merger Consideration delivered upon the surrender for exchange of any Share Certificate in accordance with the terms hereof shall be deemed to have been delivered (and paid) in full satisfaction of all rights pertaining to the Shares previously represented by such Share Certificate. 1.7 Closing of Company Transfer Books. After the Effective Time, the stock transfer books of the Company shall be closed, and no transfer of Shares shall thereafter be made. If, after the Effective Time, Share Certificates are presented to the Surviving Corporation, the Paying Agent or Buyer, they shall be canceled and exchanged for the Merger Consideration as provided in this Article I. 1.8 Stock Options. (a) Each outstanding option ("Option") to purchase Shares pursuant to the Company's 1993 Stock Incentive Plan as amended, and the 1994 Non-Employee Directors' Stock Incentive Plan (collectively, the "Option Plans") outstanding immediately prior to the Effective Time shall be canceled and converted into the right to receive from the Company, for each Share subject to such Option, an amount in cash equal to (I) the amount by which (A) the Equity Value Per Share exceeds (B) the exercise price that would have been payable under such Option to acquire such Share (such calculation, the "Option Spread") and (II) the Distribution Amount. All applicable withholding taxes shall be deducted from the amounts payable hereunder. The Company, rather than the Paying Agent will make payments in respect of the Options. (b) Notwithstanding any other provision of this Agreement to the contrary, the Company may, by appropriate action of the Compensation Committee of its Board of Directors, elect to accelerate the vesting of all or any portion of the Options to a date prior to the date on which the Effective Time occurs. 1.9 Lost Certificates. If any Share Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Share Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct (but consistent with past practice of the Company), as indemnity against any claim that may be made against it with respect to such Share Certificate, the Paying Agent will pay in exchange for such lost, stolen or destroyed Share Certificate the Merger Consideration to which the holder thereof is entitled pursuant to this Article I. 1.10 Dissenters' Rights. Notwithstanding anything in this Agreement to the contrary, Outstanding Shares held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has delivered a written demand for appraisal of such Shares in accordance with Section 262 of the DGCL ("Dissenting Shares") shall not be converted into the right to receive the Merger Consideration, as provided in Section 1.2(a) hereof, unless and until such holder fails to perfect or effectively withdraws or otherwise loses his right to appraisal and payment under Section 262 of the DGCL. If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses his right to appraisal, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration to which such holder is entitled, without interest thereof. The Company shall give Buyer (i) prompt notice of any notice or demands for appraisal or payment for Shares received by the Company and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to any such demands or notices. The Company shall not, without the prior written consent of Buyer, make any payment with respect to, or settle, offer to settle or otherwise negotiate, any such demands. 1.11 Closing. Subject to the provisions of Article VIII hereof, the closing of the transaction contemplated by this Agreement (the "Closing") and all actions specified in this Agreement to occur at the Closing shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York at 10:00 a.m., New York time, on a date to be specified by the parties, which shall be the second business day following the day on which the last of the conditions set forth in Section 7.1 hereof shall have been fulfilled or waived or on such other date prior to April 1, 1997 (or such later date as provided in Section 8.1(b)) as Buyer and the Company shall agree (such date, the "Closing Date"). ARTICLE II THE SURVIVING CORPORATION 2.1 Certificate of Incorporation. The certificate of incorporation of the Company, as in effect at the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with applicable law. 2.2 Bylaws. The bylaws of the Company, as in effect at the Effective Time, shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with applicable law, the certificate of incorporation of the Surviving Corporation and such bylaws. 2.3 Directors and Officers. From and after the Effective Time, the directors of Merger Subsidiary at the Effective Time shall be the initial directors of the Surviving Corporation, and the officers of the Company at the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified in accordance with applicable law. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY In order to induce Buyer and Merger Subsidiary to enter into this Agreement, the Company represents and warrants to Buyer and Merger Subsidiary as follows: 3.1 Corporate Organization and Authority. (a) Each of the Company and its Subsidiaries that is actively engaged in any business or owns material assets (an "Active Subsidiary") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite corporate power and authority to own, lease and operate the properties owned, leased and operated by it and to carry on the operations of its business as now being conducted by it. Each of the Company and its Active Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it with respect to its business or the nature of the business conducted by it makes such licensing or qualification necessary, except in such jurisdictions where the failure to be so duly qualified or licensed or in good standing would not have a material adverse effect on the assets, liabilities, business, results of operations, cash flow or financial condition of the Company and its Subsidiaries taken as a whole (a "Material Adverse Effect"). The Company has heretofore made available to Buyer true, complete and correct copies of the certificate of incorporation and bylaws (or other organization documents of like import) as currently in effect, of the Company and each of its Subsidiaries. (b) The Company has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly and validly authorized by the Board of Directors of the Company (the "Company Board") and by the requisite vote of the Company's stockholders and no other corporate proceedings on the part of the Company are necessary to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered by the Company and constitutes, assuming due authorization, execution and delivery of this Agreement by Buyer, Merger Subsidiary and the Continuing Stockholders, a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (1) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally or (2) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (c) General Medical Corporation, a Virginia corporation ("General Medical"), has the corporate power and authority to execute and deliver the Employment Agreements with the persons listed on Section 3.1(c) of the Company Disclosure Schedule (as defined in Section 3.3) and to perform its obligations thereunder. The execution and delivery of the Employment Agreements and the performance of its obligations thereunder have been duly and validly authorized by the Board of Directors of General Medical and no other corporate proceedings on the part of General Medical are necessary to authorize the execution, delivery and performance of the Employment Agreements. The Employment Agreements have been duly executed and delivered by General Medical and constitute, assuming execution and delivery of the Employment Agreements by the counter parties thereto, valid and binding obligations of General Medical, enforceable against General Medical in accordance with their terms, except as such enforceability may be limited by (1) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally or (2) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). 3.2 Capitalization. The authorized capital stock of the Company consists of 20,000,000 Shares of Common Stock and 5,000,000 Shares of Class A Common Stock. As of the date hereof, there were (i) 8,723,621 shares of Common Stock issued and outstanding and (ii) 1,214,231 shares of Class A Common Stock issued and outstanding. All Shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and are not subject to any preemptive rights. As of the date hereof, there were (i) outstanding Options in respect of 958,615.63 shares of Common Stock, which Options were granted pursuant to the 1993 Stock Incentive Plan, as amended (the "1993 Plan") and up to 154,759.37 Options in respect of 154,759.37 shares of Common Stock authorized for possible future issuance pursuant to the 1993 Plan; (ii) outstanding options in respect of 10,000 shares of Common Stock, which options were granted pursuant to the 1994 Non-Employee Directors Stock Incentive Plan (the "1994 Directors Plan") and up to 40,000 Options in respect of 40,000 shares of Common Stock authorized for possible future issuance pursuant to the 1994 Directors Plan. The Company has an obligation pursuant to Section 2.3(d) of the Securities Purchase Agreement, dated as of July 28, 1994, among Holdings and the Purchasers (as defined therein) (the "Securities Purchase Agreement") to issue to the Purchasers 107,889.50 shares of Common Stock in accordance with the terms of the Securities Purchase Agreement. Except as set forth in this Section 3.2, and except for changes occurring subsequent to the date hereof resulting from the exercise of Options outstanding on such date, there are outstanding (i) no shares of capital stock or other voting securities of the Company, (ii) no securities of the Company or any Subsidiary convertible into or exchangeable for shares of capital stock or voting securities of the Company and (iii) no options or other rights to acquire from the Company, and no obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company (the items in clauses (i), (ii) and (iii) being referred to collectively as the "Company Securities"). Except for the purchase by the Company of Shares pursuant to the terms of the Stockholders Agreement, the Securityholders Agreement and the Stock Subscription Agreement (collectively, the "Stock Agreements"), there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities. 3.3 Subsidiaries. Except as set forth in Section 3.3 of the disclosure schedule delivered by the Company to Buyer concurrently with the execution and delivery by the Company of this Agreement (the "Company Disclosure Schedule"), all of the outstanding shares of capital stock of each Subsidiary of the Company are duly authorized, validly issued, fully paid and nonassessable, and such shares are owned by the Company or by a Subsidiary of the Company free and clear of any Lien (as defined hereafter). For purposes of this Agreement, "Subsidiary" means with respect to any Person, any corporation or other legal entity of which such Person owns, directly or indirectly, more than 50% of the outstanding stock or other equity interests, the holders of which are entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. All Subsidiaries and their respective jurisdictions of incorporation are identified in Section 3.3 of the Company Disclosure Schedule. For purposes of this Agreement, "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. 3.4 Consents and Approvals; No Violations. (a) Except as set forth in Section 3.4 of the Company Disclosure Schedule, neither the execution and delivery of this Agreement nor the performance by the Company of its obligations hereunder will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws of the Company or of any Subsidiary; (ii) result in a violation or breach of, or default (or give rise to any right of termination, cancellation or acceleration) or result in the creation of any Lien under any of the terms, conditions or provisions of any note, mortgage, letter of credit, other evidence of indebtedness, guarantee, license, lease or agreement or similar instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their assets may be bound (provided that the Company makes no representation as to any contract with any federal, state or local government or agency thereof) or (iii) assuming that the filings, registrations, notifications, authorizations, consents and approvals referred to in subsection (b) below have been obtained or made, as the case may be, violate any order, injunction, decree, statute, rule or regulation of any governmental agency or authority or court to which the Company or any of its Subsidiaries is subject, excluding from the foregoing clauses (ii) and (iii) such requirements, defaults, breaches, rights or violations (A) that would not singularly, or in the aggregate, have a Material Adverse Effect and would not have a material adverse effect on the ability of the Company to perform its obligations hereunder or (B) that become applicable as a result of (1) the business or activities in which Buyer or Merger Subsidiary or any of their affiliates is or proposes to be engaged, or (2) any acts or omissions by, or facts pertaining to, Buyer or Merger Subsidiary. (b) Except as set forth in Section 3.4 of the Company Disclosure Schedule, no filing or registration with, notification to, or authorization, consent or approval of, any court, legislative, executive, governmental or regulatory authority or agency in the United States (each, a "Governmental Entity") is required in connection with the execution and delivery of this Agreement by the Company or the performance by the Company of its obligations hereunder, except (i) the filing of the Certificate of Merger in accordance with the DGCL and filings to maintain the good standing of the Surviving Corporation; (ii) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (iii) compliance with any applicable requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (iv) compliance with any applicable requirements of state blue sky or takeover laws; (v) filings in connection with the financing of the Merger and (vi) such other consents, approvals orders, authorizations, notifications, registrations, declarations and filings that (A) may be required to novate, assign or transfer any contract or agreement with any Governmental Entity, (B) the failure of which to be obtained or made would not have a Material Adverse Effect and would not have a material adverse effect on the ability of the Company to perform its obligations hereunder or (C) that become applicable as a result of (1) the business or activities in which Buyer or Merger Subsidiary is or proposes to be engaged, or (2) any acts or omissions by Buyer or Merger Subsidiary. 3.5 SEC Documents. The Company, GM Holdings Inc., a Delaware corporation ("Holdings"), and General Medical have filed all required reports, proxy statements, forms and other documents with the SEC since December 31, 1993. The Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements filed by the Company, Holdings and General Medical since December 31, 1993, together with the Company's Registration Statement on Form S-1, Registration No. 333-16317 (as amended, the "IPO Prospectus") and Holdings' Registration Statement on Form S-1, Registration No. 33-73180, in each case, as amended, are hereinafter referred to as the "Company SEC Documents." As of their respective dates, and giving effect to any amendments thereto, (a) the Company SEC Documents complied in all material respects with the requirements of the Securities Act of 1933 (the "Securities Act") or the Exchange Act, as the case may be, and the applicable rules and regulations of the SEC promulgated thereunder and (b) none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. 3.6 Financial Statements. The financial statements of the Company and its Subsidiaries (including, in each case, any notes and schedules thereto) included in the Company SEC Documents (a) comply as to form in all material respects with all applicable accounting requirements and the rules and regulations of the SEC with respect thereto, (b) are in conformity with generally accepted accounting principles ("GAAP"), applied on a consistent basis (except in the case of unaudited statements, as permitted by Form 10-Q as filed with the SEC under the Exchange Act) during the periods involved (except as may be indicated in the related notes and schedules thereto) and (c) fairly present, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments) which are not material in amount. 3.7 Absence of Material Adverse Changes, etc. Except as set forth in Section 3.7 of the Company Disclosure Schedule or as otherwise contemplated by this Agreement, since September 30, 1996, the Company and its Subsidiaries have conducted their business in the ordinary course consistent with past practice and there has not been: (a) any event, circumstances or occurrence of facts which has had or is reasonably expected to have a Material Adverse Effect; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company, or any repurchase, redemption or other acquisition by the Company or any Subsidiary of any amount of outstanding shares of capital stock or other securities of, or other ownership interest in, the Company; (c) any sale or disposition of material properties or assets of the Company or its Subsidiaries, except in the ordinary course of business consistent with past practice; (d) any amendment of any term of any outstanding security of the Company or any Subsidiary of the Company; (e) any incurrence, assumption or guarantee by the Company or any Subsidiary of the Company of any indebtedness from any third party for borrowed money, other than borrowings pursuant to the Company's existing Credit Agreement dated as of July 28, 1994, in amounts and on terms consistent with past practice; (f) any making of any loan, advance or capital contribution to or investment in any Person other than (i) loans, advances or capital contributions to or investments in Subsidiaries of the Company, or (ii) other loans, advances, capital contributions or investments in an aggregate amount not exceeding $250,000; (g) any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or assets of the Company or any Subsidiary of the Company which, individually or in the aggregate, is or may reasonably be expected to have a Material Adverse Effect; (h) any transaction or commitment made, or any contract or agreement entered into, by the Company or any Subsidiary of the Company relating to its assets or business (including, without limitation, the acquisition or disposition of any material amount of assets) or any relinquishment by the Company of any Subsidiary of the Company of any contract, license or other right which, in any such case, individually or in the aggregate, would have or be reasonably expected to have a Material Adverse Effect, other than transactions, commitments, contracts or agreements contemplated by this Agreement; (i) any change in any method of accounting or accounting principle or practice by the Company or any Subsidiary of the Company, or revaluation of any assets of the Company or any of its Subsidiaries (including, without limitation, any write-downs of inventory or write-offs of accounts receivables other than in the ordinary course of business consistent with past practice); and (j) any capital expenditures or commitments in excess of $6,000,000 in the aggregate for the additions or property, plant or equipment of the Company's business; (k) any loss of major customer contracts or major customers which either by themselves or in the aggregate represented over $5,000,000 in revenue; and (l) any agreement, commitment or understanding entered into in connection with any of the foregoing. 3.8 Absence of Undisclosed Liabilities. Except as set forth in Section 3.8 of the Company Disclosure Schedule or in the Company SEC Documents filed prior to the date hereof, and except for liabilities and obligations incurred in the ordinary course of business since the date of the most recent consolidated balance sheet included in the Company SEC Documents filed prior to the date hereof, neither the Company nor any of its Subsidiaries has any liabilities of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of the Company and its consolidated Subsidiaries or in the notes thereto except for those that would not in the aggregate have or be reasonably expected to have a Material Adverse Effect. 3.9 Information Statement. The Information Statement (as defined in Section 6.2(b) hereof) (and any amendments thereof or supplements thereto) will not, other than with respect to information supplied by Buyer, at the time of the mailing of the Information Statement to the stockholders of the Company contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.10 Taxes. (a) Except as set forth in Section 3.10 of the Company Disclosure Schedule, (i) all Tax Returns required to be filed by or with respect to Taxes (as defined hereafter) of the Company and its Subsidiaries are accurate in all material respects and have been filed in a timely manner (taking into account all lawful extensions of due dates); (ii) all Taxes shown to be due on such filed Tax Returns have been timely paid or adequate provision in accordance with GAAP with respect to the matters covered by such Tax Returns has been made for the payment therefore; (iii) the Company and its Subsidiaries have not received any formal written notice of deficiency or assessment from any taxing authority with respect to liabilities for Taxes of the Company or its Subsidiaries that have not been fully paid or finally settled; (iv) there are no Liens with respect to Taxes upon any of the properties or assets of the Company or its Subsidiaries other than Liens for Taxes not yet due and payable or that are being contested in good faith; (v) each of the Company and its Subsidiaries has complied in all respects with all applicable laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or similar provisions under any foreign law) and has, within the time and within the manner prescribed by law, withheld and paid over to the proper governmental authorities all amounts required to be withheld and paid over under all applicable laws; (vi) no outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns of the Company or any of its Subsidiaries has been given by or on behalf of the Company or any of its Subsidiaries; (vii) neither the Company nor any of its Subsidiaries has requested an extension of time within which to file any Tax Return in respect of any fiscal year which has not since been filed; (viii) neither the Company nor any of its Subsidiaries has made a change in accounting methods, received a ruling from any taxing authority or signed an agreement with any taxing authority which would have a Material Adverse Effect; (ix) neither the Company nor any of its Subsidiaries is required to include in income any adjustment pursuant to Section 481(a) of the Code, by reason of the voluntary change in accounting method (nor has any taxing authority proposed in writing any such adjustment or change of accounting method); (x) neither the Company nor any of its Subsidiaries is a party to, is bound by, nor has any obligation under, any Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement. Neither the Company nor any of its Subsidiaries is aware of any potential liability or obligation to any person as a result of, or pursuant to, any such agreement, contract or arrangement; (xi) no power of attorney has been granted by or with respect to the Company or any of its Subsidiaries with respect to any matter relating to Taxes; (xii) neither the Company nor any of its Subsidiaries is a party to any agreement (including this Agreement), plan, contract or arrangement that would result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code; (xiii) all Tax deficiencies which have been claimed, proposed or asserted against the Company or any of its Subsidiaries have been fully paid or finally settled, and to the knowledge of the Company no issue has been raised in any examination by any Taxing authority, which by application of similar principles, could be expected to result in the proposal or assertion of a Tax deficiency against the Company or any of its Subsidiaries for another year not so examined; (xiv) no closing agreement pursuant to Section 7121 of the Code (or any predecessor provision) or any similar provision of any state, local or foreign law has been entered into by or with respect to the Company or any of its Subsidiaries; (xv) neither the Company nor any of its Subsidiaries has filed a consent pursuant to Section 341(f) of the Code (or any predecessor provision) or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by the Company or any of its Subsidiaries; (xvi) neither the Company nor any of its Subsidiaries has any or could have liability for Taxes of another person (other than the Company or its Subsidiaries) under Section 1.1502-6 of the Treasury Regulations (or any similar provision under state, local or foreign law), by contract or otherwise; (xvii) neither the Company nor any of its Subsidiaries has any deferred intercompany gain or loss arising as a result of a deferred intercompany transaction within the meaning of Treasury Regulation Section 1.1502-13 (or similar provision under state, local or foreign law); (xviii) the reserves for Taxes (determined in accordance with generally accepted accounting principles consistently applied) reflected in the financial statements are adequate for the payment of all Taxes incurred or which may be incurred by the Company and any of its Subsidiaries through the date thereof. Since the date of the financial statements, neither the Company nor any Subsidiary has incurred any liability for Taxes other than in the ordinary course of business; (xix) the Company is the common parent of an affiliated group of corporations (as defined in Section 1504 of the Code) consisting solely of the Company and its Subsidiaries. Since December 31, 1987, neither the Company nor any of its Subsidiaries has been a member of an affiliated group (or similar state or local filing group) other than the group in which the Company is the Common Parent; (xx) neither the Company nor any of its Subsidiaries has taken any position on any Tax Return that could give rise to an understatement of federal income Tax liability within the meaning of Section 6662(d) of the Code; and (xxi) neither the Company nor any of its Subsidiaries has or would have any liability for Taxes under or as a result of Section 482 of the Code or any similar provision of state, local or foreign law. (b) The Company has previously delivered or made available to Buyer complete and accurate copies of each of: (i) all audit reports, letter rulings, technical advice memoranda issued to the Company and each of its Subsidiaries, (ii) United States federal Tax Returns, and those state, local or foreign Tax Returns filed by the Company and each of its Subsidiaries and (iii) any closing agreements entered into by the Company or any of its Subsidiaries with any taxing authority, in each case existing on the date hereof. The Company will make available to Buyer all materials with respect to the foregoing for all matters arising after the date hereof. (c) For purposes of this Agreement, (i) "Taxes" means all taxes, levies or other like assessments, charges or fees (including estimated taxes, charges and fees), including, without limitation, income, corporation, gross receipts, transfer, excise, property, sales, use, value-added, license, payroll, pay as you earn, withholding, social security and franchise or other governmental taxes or charges, imposed by the United States or any state, county, local or foreign government or subdivision or agency thereof, and such term shall include any interest, penalties or additions to tax attributable to such taxes, (ii) "Tax Return" means any report, return, statement or other written information required to be supplied to a taxing authority in connection with Taxes, and (iii) "Treasury Regulations" shall mean the United States Income Tax Regulations, including Temporary Regulations promulgated under the Code (including corresponding provisions of succeeding U.S. income tax regulations). 3.11 Employment Matters. (a) Section 3.11(a) of the Company Disclosure Schedule contains a true and complete list of each employment, bonus, deferred compensation, incentive compensation, stock purchase, stock option, stock appreciation right or other stock-based incentive, severance or termination pay, hospitalization or other medical, life, disability or other insurance, supplemental unemployment benefits, profit sharing, pension, or retirement plan, program, agreement or arrangement, and each other employee benefit plan, program, agreement or arrangement, sponsored, maintained or contributed to or required to be contributed to by the Company or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), that together with the Company would be deemed a "single employer" within the meaning of Section 4001(b)(1) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder ("ERISA"), for the benefit of any current or former employees or directors of the Company (the "Plans"). Section 3.11(a) of the Company Disclosure Schedule identifies each of the Plans that is an "employee welfare benefit plan," or "employee pension benefit plan" as such terms are defined in Section 3(1) and 3(2) of ERISA (such plans being hereafter referred to collectively as the "ERISA Plans"). Neither the Company nor any ERISA Affiliate has any formal plan or commitment, whether legally binding or not, to create any additional Plan or modify or change any existing Plan that would affect any current or former employee or director of the Company or any ERISA Affiliate. (b) With respect to each of the Plans, the Company has heretofore delivered or made available to Buyer true and complete copies of each of the following documents: (i) a copy of the Plan (including all amendments thereto) or a written description of any Plan that is otherwise not in writing; (ii) a copy of the annual report, if required under ERISA, with respect to each ERISA Plan for the last three years; (iii) a copy of the actuarial report, if required under ERISA, with respect to each ERISA Plan for the last three years; (iv) a copy of the most recent Summary Plan Description ("SPD"), together with all Summaries of Material Modification issued with respect to such SPD, if required under ERISA, with respect to each ERISA Plan, and all other material employee communications relating to each ERISA Plan; (v) if the Plan is funded through a trust or any other funding vehicle, a copy of the trust or other funding agreement (including all amendments thereto) and the latest financial statements thereof; (vi) all contracts relating to the Plans with respect to which the Company or any ERISA Affiliate may have any liability, including, without limitation, insurance contracts, investment management agreements, subscription and participation agreements and record keeping agreements; and (vii) the most recent determination letter received from the Internal Revenue Service with respect to each Plan that is intended to be qualified under Section 401 of the Code. (c) No liability under Title IV of ERISA has been incurred by the Company or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to the Company or any ERISA Affiliate of incurring any liability under such Title, other than liability for premiums due the Pension Benefit Guaranty Corporation, which payments have been or will be made when due. To the extent this representation applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made not only with respect to the ERISA Plans but also with respect to any employee benefit plan, program, agreement or arrangement subject to Title IV of ERISA to which the Company or any ERISA Affiliate made, or was required to make, contributions during the five (5)-year period ending on the last day of the Company's most recent fiscal year. (d) The Pension Benefit Guaranty Corporation has not instituted proceedings to terminate any of the ERISA Plans and no condition exists that presents a material risk that such proceedings will be instituted. (e) With respect to each of the ERISA Plans that is subject to Title IV of ERISA, the present value of accrued benefits under such Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Plan's actuary with respect to such Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Plan allocable to such accrued benefits. (f) Neither the Company, any ERISA Affiliate, any of the ERISA Plans, any trust created thereunder nor any trustee or administrator thereof has engaged in a transaction or has taken or failed to take any action in connection with which the Company, any ERISA Affiliate, any of the ERISA Plans, any such trust, any trustee or administrator thereof, or any party dealing with the ERISA Plans or any such trust could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975, 4976 or 4980B of the Code. (g) No ERISA Plan or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each ERISA Plan ended prior to the Closing Date, and all contributions required to be made with respect thereto (whether pursuant to the terms of any ERISA Plan or otherwise) on or prior to the Closing Date have been timely made. No ERISA Plan is a "multiemployer pension plan," as defined in Section 3(37) of ERISA, nor is any ERISA Plan a plan described in Section 4063(a) of ERISA. (h) Each of the Plans has been operated and administered in all material respects in accordance with applicable laws, including but not limited to ERISA and the Code. (i) Each of the ERISA Plans that is intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified. The Company has timely applied for and received a currently effective determination letter from the Internal Revenue Service with respect to each such Plan. (j) No "leased employee," as that term is defined in Section 414(n) of the Code, performs services for the Company or any ERISA Affiliate. (k) No Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees after retirement or other termination of service (other than (i) coverage mandated by applicable law, (ii) death benefits or retirement benefits under any "employee pension benefit plan," as that term is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on the books of the Company or the ERISA Affiliates, or (iv) benefits, the full cost of which is borne by the current or former employee (or his beneficiary)). (l) With respect to each Plan that is funded wholly or partially through an insurance policy, there will be no liability of the Company or any ERISA Affiliate, as of the Effective Time under any such insurance policy or ancillary agreement with respect to such insurance policy in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability arising wholly or partially out of events occurring prior to the Effective Time. (m) Except as described in Section 3.11 of the Company Disclosure Schedule, the consummation of the transactions contemplated hereunder will not result in the payment, vesting, acceleration or enhancement of any benefit under any Plan. 3.12 Environmental Matters. (a) (i) "Environmental Claim" means any claim, action, cause of action, investigation or notice (written or oral) by any Person or entity alleging potential liability (including, without limitation, potential liability for investigatory costs, governmental response or remediation costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence or Release of any Hazardous Materials at any location, whether or not owned or operated by the Company or any of its Subsidiaries or Buyer or any of its Subsidiaries, as the case may be, or (b) circumstances forming the basis of any violation of any Environmental Law. (ii) "Environmental Laws" means all federal, state, local and foreign laws and regulations relating to pollution or protection of human health or the environment, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, transport or handling of Hazardous Materials. (iii) "Hazardous Materials" means all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. ss. 300.5, or defined as such by, or regulated as such under, any Environmental Law. (iv) "Release" means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including, without limitation, ambient air, surface water, groundwater and surface or subsurface strata). (b) (i) Except as set forth in Section 3.12(b)(i) of the Company Disclosure Schedule, the Company and its Subsidiaries are in compliance with all applicable Environmental Laws (which compliance includes, but is not limited to, the possession by the Company and its Subsidiaries of all permits and other governmental authorizations required under applicable Environmental Laws, all of which are in full force and effect, and compliance with the terms and conditions thereof), except where failure to be in compliance would not have a Material Adverse Effect. Since January 1, 1994 neither the Company nor any of its Subsidiaries has received any written communication, whether from a governmental authority, citizens' group, employee or otherwise, alleging that the Company or any of its Subsidiaries are not in such compliance. (ii) Except as set forth in Section 3.12(b) (ii) of the Company Disclosure Schedule, (A) there is no Environmental Claim pending or threatened against the Company or any of its Subsidiaries or against any Person or entity whose liability for any Environmental Claim the Company or any of its Subsidiaries has or may have retained or assumed either contractually or by operation of law that would have a Material Adverse Effect and (B) the Company has not received notice nor is it aware of any facts or conditions that may give rise to any Environmental Claim. 3.13 Legal Proceedings, etc. Except as set forth in Section 3.13 of the Company Disclosure Schedule, there are no suits, actions, claims, proceedings or investigations pending, or, to the knowledge of the Company threatened against, relating to or involving the Company or any of its Subsidiaries (or any of their respective officers or directors in connection with the business or affairs of the Company and its Subsidiaries) or any properties or rights of the Company or any of its Subsidiaries, before any court, arbitrator or administrative or governmental body, United States or foreign which, if adversely determined, would have a Material Adverse Effect. There are no such suits, actions, claims, proceedings or investigations pending or, to the knowledge of the Company, threatened challenging the validity or propriety of the transactions contemplated by this Agreement. Neither the Company nor any of its Subsidiaries is subject to any judgment, decree, injunction, rule or order of any court or, to the knowledge of the Company, any governmental restriction applicable to the Company or any of its Subsidiaries, which has or would be reasonably expected to have a Material Adverse Effect. 3.14 Compliance with Applicable Law. Except as set forth in Section 3.14 of the Company Disclosure Schedule the Company and its Subsidiaries are in material compliance with all applicable laws, ordinances, rules and regulations of any federal, state, local or foreign governmental authority applicable to their respective businesses and operations (including, without limitation, (A) laws regarding the provision of insurance, third party administration and primary health care services, including Medicare, Medicaid and "safe harbor" provisions, (B) the Prescription Drug Marketing Act, the Federal Controlled Substances Act of 1970, the Food, Drug and Cosmetic Act and any state Pharmacy Acts, Controlled Substance Acts, Dangerous Drugs Acts and Food, Drug and Cosmetic Acts, (C) laws and regulations relating to billing or sales practices, and (D) the Foreign Corrupt Practices Act of 1977 and any other laws regarding use of funds for political activity or commercial bribery). All governmental approvals, permits and licenses (collectively, "Permits") required to conduct the business of the Company and its Active Subsidiaries have been obtained, are in full force and effect and are being complied with except for such non-compliance and failures to have Permits in full force and effect, if any, which, individually or in the aggregate, would not have or be reasonably expected to have a Material Adverse Effect. 3.15 Certain Contracts and Arrangements. (a) Except as set forth in Section 3.15 of the Company Disclosure Schedule, each material contract or agreement (whether written or oral) to which the Company or any of its Subsidiaries is a party or by which any of them is bound is in full force and effect, and neither the Company nor any of its Subsidiaries, nor, to the knowledge of the Company, any other party thereto, is in breach of, or default under, any such contract or agreement, and no event has occurred that with notice or passage of time or both would constitute such a breach or default thereunder by the Company or any of its Subsidiaries, or, to the knowledge of the Company, any other party thereto except for such failures to be in full force and effect and such breaches and defaults as individually or in the aggregate would not result or would not reasonably be expected to result in a Material Adverse Effect. Since September 30, 1996, neither the Company nor any of its Subsidiaries has entered into any material contract or agreement ( whether written or oral), except for this Agreement, those contracts listed in Section 3.15 of the Company Disclosure Schedule and such contracts entered into in the ordinary course of business consistent with past practice. (b) Except as specifically provided in the Company's Certificate of Incorporation and By-laws or authorized by a resolution of the Board of Directors of General Medical dated September 13, 1995, the Company is not obligated to indemnify or hold harmless (whether by contract, indemnification agreement or otherwise) any officer, director, employee, agent or representative of the Company, or any other Person in connection with Costs arising out of or related to the Bernstein Claims. 3.16 Real Property. (a) For purposes of this Agreement, "Permitted Liens" means (i) mechanics', carriers', workers', repairers', materialmen's, warehousemen's, landlord's and other similar Liens arising or incurred in the ordinary course of business, (ii) Liens arising or resulting from any action taken by Buyer or Merger Subsidiary, (iii) Liens for current Taxes not yet due or that are being contested in good faith by appropriate proceedings, (iv) any other covenants, conditions, restrictions, reservations, rights, easements and other matters affecting title, which do not individually or in the aggregate materially adversely affect the value or occupancy of any of the Real Property, (v) zoning, building, land use, and other similar restrictions imposed by law, statute, rule, regulation, ordinance, order or process promulgated by any Governmental Entity and (vi) matters set forth in Section 3.16(a) of the Company Disclosure Schedule. "Leases" means the real property leases, subleases, licenses and use or occupancy agreements pursuant to which the Company or any of its Active Subsidiaries is the lessee, sublessee, licensee, user or occupant of real property, or interests therein, necessary for the conduct of, or otherwise material to, the business of the Company and its Subsidiaries as it is currently conducted. "Leased Real Property" means all interests in real property leased, subleased, licensed, used or occupied by the Company pursuant to the Leases. "Owned Real Property" means the real property owned by the Company and its Subsidiaries. "Real Property" means the Owned Real Property and the Leased Real Property. (b) Section 3.16(b) of the Company Disclosure Schedule contains a complete and correct list of all Owned Real Property setting forth information sufficient to identify specifically such Owned Real Property and the legal owner thereof. The Company and its Subsidiaries have good and valid title to the Owned Real Property, free and clear of any Liens other than Permitted Liens. There are no outstanding options or rights of first refusal to purchase the Owned Real Property, or any material portion thereof or interest therein. (c) Section 3.16(c) of the Company Disclosure Schedule contains a complete and correct list of all Leased Real Property setting forth information sufficient to identify specifically such Leased Real Property. Each Lease grants the lessee under the Lease the exclusive right to use and occupy the premises and rights demised thereunder in accordance with the terms thereof free and clear of any Lien other than Permitted Liens. Each of the Company and its Subsidiaries has good and valid title to the leasehold estate or other interest created under its respective Leases free and clear of any Liens other than Permitted Liens. (d) The Real Property constitutes all the fee, leasehold and other interests in real property held by the Company and its Subsidiaries, and constitutes all of the fee, leasehold and other interests in real property, necessary for the conduct of, or otherwise material to, the business of the Company and its Subsidiaries as it is currently conducted, except for any fee, leasehold or other interest acquired or disposed of in the ordinary course of business after the date hereof. The use and operation of the Real Property in the conduct of the business of the Company and its Subsidiaries does not violate any instrument of record or agreement affecting the Real Property, except for such violations that individually and in the aggregate would not have a Material Adverse Effect. 3.17 Certain Fees. Except for the fees of those Persons described in Section 3.17 of the Company Disclosure Schedule (whose fees shall be the sole responsibility of the Company), (i) the Company has not employed any financial advisor or finder and (ii) neither the Company nor any of its Subsidiaries has incurred any liability for any financial advisory or finders' fees in connection with this Agreement or the transactions contemplated hereby. 3.18 Intellectual Property. (a) Except as described in Section 3.18 of the Company Disclosure Schedule, the Company and its Subsidiaries own or have rights to use all intellectual property, including without limitation, all patent rights, trademarks, trademark rights, trade names, trade name rights, copyrights, service marks, service mark rights, trade secrets, computer software and data bases, including all embodiments or fixations thereof and related documentation, applications to register, and registrations for, the foregoing trademarks, service marks, know-how, all licenses and rights with respect to the foregoing, and other proprietary rights and information (collectively, "Intellectual Property") used in connection with or necessary for the business of the Company and its Subsidiaries as currently conducted, and all goodwill of the business symbolized thereby. Except as described in Section 3.18 of the Company Disclosure Schedule, to the knowledge of the Company all of the Intellectual Property is in good standing and is owned by the Company free and clear of any and all Liens, except imperfections of title and encumbrances, if any, which are not reasonably likely to materially detract from the value of the Intellectual Property subject thereto or to materially impair the operations of the Company or any of its Subsidiaries. (b) Except as described in Section 3.18 of the Company Disclosure Schedule, the conduct of the business of the Company and its Subsidiaries as currently conducted does not infringe upon or otherwise violate any Intellectual Property of any third party except where such infringement or violation would not reasonably be expected to have, individually or in the aggregate a Material Adverse Effect, and there is no restriction or limitation on the right of the Company or its Subsidiaries to transfer any of their respective Intellectual Property. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in the loss of, or any encumbrance on, the rights of the Company or any Subsidiary with respect to the Intellectual Property owned or used by or licensed to any of them, except where such loss or encumbrance taken individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. 3.19 Board Recommendations; Takeover Provisions. The Board of Directors of the Company, at a meeting duly called and held, has by the unanimous vote of all directors (i) determined that this Agreement and the transactions contemplated hereby are fair to and in the best interests of the stockholders of the Company and has approved the same, and (ii) resolved to recommend that the holders of Shares approve this Agreement and the transactions contemplated herein. No State Takeover Laws (as defined below) including, but not limited to, Section 203 of the DGCL, are applicable to Buyer or Merger Subsidiary as a result of the Merger, this Agreement or the transactions contemplated hereby. "State Takeover Laws" shall mean any "fair price," "business combination" or "control share acquisition" statute or similar statute or regulation. 3.20 Labor Matters. Except as set forth in Section 3.20 of the Company Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or its Subsidiaries, nor does the Company know of any activities or proceedings of any labor union to organize any such employees, (ii) there are no unfair labor practice charges or complaints pending against the Company or any of its Subsidiaries before the National Labor Relations Board or any current union representation questions involving employees of the Company or any of its Subsidiaries and (iii) there is no labor strike, lockout, organized slowdown or organized work stoppage in effect or, to the best knowledge of the Company after due inquiry, threatened against the Company or any of its Subsidiaries other than, in cases of clauses (ii) and (iii), those matters which would not reasonably be expected to have a Material Adverse Effect. 3.21 Transactions with Affiliates. Except to the extent disclosed in the Company SEC Documents filed prior to the date of this Agreement, since December 31, 1993 there have been no material transactions, agreements, arrangements or understandings between the Company or its Subsidiaries, on the one hand, and the Company's Affiliates (other than wholly-owned Subsidiaries of the Company) or other Persons, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act. For purposes hereof, the term "Affiliate" will mean a person who, directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Company. 3.22 Existing Stock Agreements. The Company and the Continuing Stockholders have amended the Stock Agreements to provide that (I) this Agreement, the Merger and other transactions contemplated hereby shall be exempt from and not subject to any terms or provisions of the Stock Agreements, and (ii) such Stock Agreements, including, without limitation, any registration rights granted to the Continuing Stockholders therein, shall terminate and be of no further force or effect immediately prior to the Effective Time. 3.23 Product Liability. Except as described in Section 3.23 of the Company Disclosure Schedule, there are not presently pending, or to the best knowledge of the Company, threatened, any civil, criminal or administrative actions, suits, demands, claims, hearings, notices of violation, investigations, proceedings or demand letters relating to any alleged hazard or alleged defect in design, manufacture, materials or workmanship, including, without limitation, any failure to warn or alleged breach of express or implied warranty or representation, relating to any product manufactured, distributed or sold by or on behalf of the Company and its Subsidiaries, which if adversely determined, would have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has extended to its customers any written non-uniform product warranties, indemnifications or guarantees. 3.24 Legal Opinion. The Company has received a legal opinion of Delaware counsel relating to the form of the consideration to be paid or delivered in the Merger, a copy of which has been delivered to Buyer. 3.25 Opinion of Financial Advisor. The Company has received the opinion of Smith Barney Inc., dated the date of this Agreement, to the effect that, as of such date, the consideration to be received in the Merger by the Non-Continuing Stockholders is fair to such stockholders, from a financial point of view, a copy of which opinion will be delivered to Buyer promptly after the Company's receipt thereof. 3.26 Full Disclosure. The Company has not knowingly failed to disclose to Buyer any facts material to the Company's business, results of operations, assets, liabilities or financial condition. No representation or warranty by the Company in this Agreement and no statement by the Company in any document referred to herein (including the Schedules and Exhibits hereto), contains any untrue statement of a material fact or omits to state any material fact necessary, in order to make the statement made herein or therein, in light of the circumstances under which they were made, not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY Buyer and Merger Subsidiary represent and warrant to the Company and the Continuing Stockholders as follows: 4.1 Corporate Organization and Authority. (a) Each of the Buyer and its Subsidiaries, including Merger Subsidiary, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite corporate power and authority to own, lease and operate the properties owned, leased and operated by it and to carry on the operations of its business as now being conducted by it. Each of the Buyer and its Subsidiaries, including Merger Subsidiary, is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it with respect to its business or the nature of the business conducted by it makes such licensing or qualification necessary, except in such jurisdictions where the failure to be so duly qualified or licensed or in good standing would not have a material adverse effect on the assets, business, results of operations or financial condition of Buyer and its Subsidiaries, including Merger Subsidiary, taken as a whole (a "Buyer Material Adverse Effect"). Buyer has heretofore made available to the Company a complete and correct copy of the certificate of incorporation and bylaws (or other organizational documents of like import), as currently in effect, of Buyer and Merger Subsidiary. (b) Each of Buyer and Merger Subsidiary has the requisite corporate power and corporate authority to execute and deliver this Agreement and the Registration Rights Agreement (as defined in Section 7.2(d)) and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the performance of its obligations hereunder and under the Registration Rights Agreement have been duly and validly authorized by the Board of Directors of each of Buyer and Merger Subsidiary and no other corporate or stockholder proceedings on the part of either Buyer or Merger Subsidiary are necessary to authorize the execution, delivery and performance of this Agreement or the Registration Rights Agreement. This Agreement and the Registration Rights Agreement have been duly executed and delivered by each of Buyer and Merger Subsidiary and constitute, assuming due authorization, execution and delivery of this Agreement by the Company and the Continuing Stockholders, a valid and binding obligation of each of Buyer and Merger Subsidiary, enforceable against each of Buyer and Merger Subsidiary in accordance with its terms, except as such enforceability may be limited by (1) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally or (2) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). 4.2 Capitalization. The authorized capital stock of the Buyer consists of 200,000,000 Shares of Common Stock, par value $.01 per share and 100,000,000 shares of Preferred Stock, par value $.01 per share ("Buyer Preferred Stock"). As of December 31, 1996, there were 42,250,152 shares of Buyer Common Stock issued and outstanding and no shares of Buyer Preferred Stock issued and outstanding. All issued and outstanding shares of capital stock of the Buyer are, and all Consideration Shares will be, duly authorized, validly issued, fully paid and nonassessable. As of December 31, 1996, there were (I) outstanding options in respect of 4,615,875 shares of Common Stock, which options were granted pursuant to Buyer's 1994 Stock Option and Restricted Stock Plan, as amended (the "1994 Plan"); (ii) up to 2,393,830 shares of Common Stock authorized for possible future issuance pursuant to the 1994 Plan. Except as set forth in this Section 4.2 and except for the Buyer Rights, and except for changes since December 31, 1996 resulting from the exercise of Options outstanding on such date, as of the date hereof there are outstanding (I) no shares of capital stock or other voting securities of the Buyer, (ii) no securities of the Buyer or any Subsidiary convertible into or exchangeable for shares of capital stock or voting securities of the Buyer and (iii) no options or other rights to acquire from the Buyer, and no obligation of the Buyer to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Buyer (the items in clauses (I), (ii) and (iii) being referred to collectively as the "Buyer Securities"). As of the date hereof, there are no outstanding obligations of the Buyer or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Buyer Securities. 4.3 Consents and Approvals; No Violations. (a) Except as set forth in Section 4.3 of the disclosure schedule delivered by Buyer and Merger Subsidiary to the Company substantially concurrently with the execution and delivery by the Company of this Agreement (the "Buyer Disclosure Schedule"), neither the execution and delivery of this Agreement nor the performance by either Buyer or Merger Subsidiary of its obligations hereunder will (I) conflict with or result in any breach of any provision of the certificate of incorporation or bylaws (or similar organizational documents) of either Buyer or Merger Subsidiary; (ii) result in a violation or breach of, or constitute a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, mortgage, letter of credit, other evidence of indebtedness, guarantee, license, lease or agreement or similar instrument or obligation relating to the business of Buyer or Merger Subsidiary or to which either Buyer or Merger Subsidiary is a party or by which either Buyer or Merger Subsidiary or any of the assets used or held for use by Buyer or Merger Subsidiary may be bound or (iii) assuming that the filings, registrations, notifications, authorizations, consents and approvals referred to in subsection (b) below have been obtained or made, as the case may be, violate any order, injunction, decree, statute, rule or regulation of any Governmental Entity to which either Buyer or Merger Subsidiary is subject, excluding from the foregoing clauses (ii) and (iii) such requirements, defaults, breaches, rights or violations (A) that would not in the aggregate have a Buyer Material Adverse Effect and would not have a material adverse effect on the ability of either Buyer or Merger Subsidiary to consummate the transactions contemplated hereby or (B) that become applicable as a result of any acts or omissions by the Company or the Continuing Stockholders. (b) Except as set forth in Section 4.3 of the Buyer Disclosure Schedule, no filing or registration with, notification to, or authorization, consent or approval of, any Governmental Entity is required in connection with the execution and delivery of this Agreement by either Buyer or Merger Subsidiary or the performance by either Buyer or Merger Subsidiary of its obligations hereunder, except (I) the filing of the Certificate of Merger in accordance with the DGCL and filings to maintain the good standing of the Surviving Corporation; (ii) compliance with any applicable requirements of the HSR Act; (iii) compliance with any applicable requirements of the Exchange Act; (iv) compliance with any applicable requirements of state blue sky or takeover laws; (v) filings in connection with the financing of the Merger; and (vi) such other consents, approvals, orders, authorizations, notifications, registrations, declarations and filings that (A) may be required to novate, assign or transfer any contract or agreement with any Governmental Entity, (B) the failure of which to be obtained or made would not have a Buyer Material Adverse Effect and would not have a material adverse effect on the ability of Buyer and Merger Subsidiary to perform their obligations hereunder or (C) that become applicable as a result of any acts or omissions by the Company. 4.4 SEC Documents. The Buyer and its Subsidiaries have filed all required reports, proxy statements, forms and other documents with the SEC since September 1, 1994. The Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements filed by the Buyer since September 1, 1994 are hereinafter referred to as the "Buyer SEC Documents." Except as set forth in Section 4.4 of the Buyer Disclosure Schedule, as of their respective dates, and giving effect to any amendments thereto, (a) the Buyer SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the applicable rules and regulations of the SEC promulgated thereunder and (b) none of the Buyer SEC Documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. 4.5 Financial Statements. The financial statements of the Buyer and its Subsidiaries (including, in each case, any notes and schedules thereto) included in the Buyer SEC Documents (a) comply as to form in all material respects with all applicable accounting requirements and the rules and regulations of the SEC with respect thereto, (b) are in conformity with GAAP, applied on a consistent basis (except in the case of unaudited statements, as permitted by Form 10-Q as filed with the SEC under the Exchange Act) during the periods involved (except as may be indicated in the related notes and schedules thereto) and (c) fairly present, in all material respects, the consolidated financial position of the Buyer and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which are not material in amount). 4.6 Absence of Material Adverse Changes, etc. Except as set forth in Section 4.6 of the Buyer Disclosure Schedule or as otherwise contemplated by this Agreement, since September 30, 1996, there has not been any Buyer Material Adverse Effect. 4.7 Absence of Undisclosed Liabilities. Except as set forth in Section 4.7 of the Buyer Disclosure Schedule or in the Buyer SEC Documents filed prior to the date hereof, and except for liabilities and obligations incurred in the ordinary course of business since the date of the most recent consolidated balance sheet included in the Buyer SEC Documents filed prior to the date hereof, neither the Buyer nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of the Buyer and its consolidated Subsidiaries or in the notes thereto except for those that would not in the aggregate have or be reasonably expected to have a Buyer Material Adverse Effect. 4.8 Taxes. (a) Except as set forth in Section 4.8 of the Buyer Disclosure Schedule, (I) all Tax Returns required to be filed by or with respect to Taxes (as defined hereafter) of the Buyer and its Subsidiaries are accurate in all material respects and have been filed in a timely manner (taking into account all lawful extensions of due dates), other than those Tax Returns as to which the failure to file would not have a Buyer Material Adverse Effect, and (ii) all Taxes shown to be due on such filed Tax Returns have been paid or adequate provision in accordance with GAAP with respect to the matters covered by such Tax Returns has been made for the payment therefore. Except as set forth in Section 4.8 of the Buyer Disclosure Schedule, to the knowledge of the Buyer, the Buyer and its Subsidiaries have not received any formal written notice of deficiency or assessment from any taxing authority with respect to liabilities for income and other material Taxes of the Buyer or its Subsidiaries that have not been fully paid or finally settled. To the knowledge of the Buyer, there are no Liens with respect to Taxes upon any of the properties or assets of the Buyer or its Subsidiaries other than Liens for Taxes not yet due and payable or that are being contested in good faith. 4.9 Employment Matters. Each employee benefit plan, program, policy or arrangement maintained by Buyer has been operated and administered in all material respects in accordance with applicable laws, including but not limited to ERISA and the Code. 4.10 Legal Proceedings, etc. Except as set forth in Section 4.11 of the Buyer Disclosure Schedule or in the SEC Documents, there are no suits, actions, claims, proceedings or investigations pending, or, to the knowledge of Buyer threatened against, relating to or involving Buyer or any of its Subsidiaries (or any of their respective officers or directors in connection with the business or affairs of Buyer and its Subsidiaries) or any properties or rights of Buyer or any of its Subsidiaries, before any court, arbitrator or administrative or governmental body, United States or foreign which, if adversely determined, would have a Buyer Material Adverse Effect. There are no such suits, actions, claims, proceedings or investigations pending or, to the knowledge of the officers of Buyer, threatened challenging the validity or propriety of the transactions contemplated by this Agreement. Neither Buyer nor any of its Subsidiaries is subject to any judgment, decree, injunction, rule or order of any court or, to the knowledge of the officers of Buyer, any governmental restriction applicable to the Buyer or any of its Subsidiaries, which has or would be reasonably expected to have a Buyer Material Adverse Effect. 4.11 Compliance with Applicable Law. Except as set forth in Section 4.12 of the Buyer Disclosure Schedule, the Buyer and its Subsidiaries are in material compliance with all applicable laws, ordinances, rules and regulations of any federal, state, local or foreign governmental authority applicable to their respective businesses and operations. All Permits required to conduct the business of the Buyer and its Active Subsidiaries have been obtained, are in full force and effect and are being complied with except for such violations and failures to have Permits in full force and effect, if any, which, individually or in the aggregate, would not have or be reasonably expected to have a Buyer Material Adverse Effect. 4.12 Certain Fees. Except in connection with the retention of Peter J. Solomon Company Limited (whose fees shall be the sole responsibility of Buyer), (I) Buyer and Merger Subsidiary have not employed any financial advisor or finder and (ii) neither Buyer nor Merger Subsidiary has incurred any liability for any financial advisory or finders' fees in connection with this Agreement or the transactions contemplated hereby. 4.13 Financing. Buyer and Merger Subsidiary have on the date of execution of this Agreement and will have at the Closing sufficient available funds (through existing credit arrangements, commitment letters or otherwise) to pay the Merger Consideration, and all fees and expenses required to be paid in connection with the Merger and the transactions contemplated hereby. 4.14 Information Statement. None of the information supplied or to be supplied by the Buyer to the Company for inclusion in the Information Statement (as defined in Section 6.2(b) hereof) (and any amendments thereof or supplements thereto) will, with respect to information relating to the Buyer or Merger Subsidiary, at the time of the mailing of the Information Statement to the stockholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. ARTICLE V CONTINUING STOCKHOLDERS Each Continuing Stockholder severally and not jointly represents and warrants to Buyer and Merger Subsidiary as follows: 5.1 Authority, Binding Effect. (a) Each Continuing Stockholder has the requisite power, authority and right to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of each Continuing Stockholder. This Agreement has been duly and validly executed by each Continuing Stockholder, and, assuming this Agreement has been duly authorized, executed and delivered by the Company, Buyer and Merger Subsidiary, this Agreement constitutes a valid and binding obligation of each Continuing Stockholder enforceable in accordance with its terms, except as such enforceability may be limited by (1) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally or (2) general principles or equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (b) Each Continuing Stockholder, other than Princes Gate, Acorn Partnership, PGI, PGI Sweden and Opel (collectively, the "PGI Holders") represent and warrant that all actions of the Continuing Stockholders other than the PGI Holders, and the Board of Directors of the Company in connection with the approval and authorization of this Agreement and the transactions contemplated hereby and the implementation thereof were effected in compliance with, and not in violation of, applicable Delaware law. Each PGI Holder represents and warrants that all actions of such PGI Holder in connection with the approval and authorization of this Agreement and the transactions contemplated hereby and the implementation thereof were efffected in compliance with, and not in violation of, applicable Delaware law. 5.2 Title. Other than as contemplated by this Agreement, the Continuing Stockholders are not parties to, or bound by, voting trusts, stockholder agreements, proxies or other agreements and understandings in effect with respect to the voting or the transfer of the Shares owned by the Continuing Stockholders, except for (I) the Securityholders Agreement, dated as of July 28, 1994, by and among the Company, Holdings, the Kelso Parties, Princes Gate, Acorn Partnership, PGI, PGI Sweden, Opel and PG Holdings, Inc., as agent (the "Securityholders Agreement"), (ii) the Stockholders Agreement, dated August 27, 1993, by and among Holdings, the Kelso Parties and the Management Shareholders listed on the Schedule of Management Shareholders attached thereto (the "Stockholders Agreement") (the Company assumed the rights and obligations of Holdings pursuant to the Stockholders Agreement in the Assignment and Assumption Agreement, dated as of January 23, 1995, by and among Holdings, the Company and the Kelso Parties), (iii) the Stock Subscription Agreement, dated August 31, 1994, by and among Holdings, the Company and CEA (the "Stock Subscription Agreement"), and (iv) the subscription letters pursuant to which the respective Continuing Stockholders acquired Shares, copies of which have been made available to Buyer (the Company assumed the rights and obligations of Holdings under such letters). There are no existing options, warrants, calls, commitments or other securities or agreements of any kind to which the Continuing Stockholders are parties requiring the issuance, sale or transfer of any shares of capital stock of the Company, except as provided under the Stockholders Agreement, the Securityholders Agreement and the Stock Subscription Agreement. 5.3 Consents and Approvals; No Violations. (a) Neither the execution and delivery of this Agreement nor the performance by the Continuing Stockholders of their obligations hereunder will (I) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws, partnership agreement or other organizational documents of the Continuing Stockholders; (ii) result in a violation or breach of, or default (or give rise to any right of termination, cancellation or acceleration or result in the creation of any Lien) under any of the terms, conditions or provisions of any note, mortgage, letter of credit, other evidence of indebtedness, guarantee, license, lease or agreement or similar instrument or obligation to which the Continuing Stockholders are a party or by which any of them or any of their assets may be bound, including, without limitation, the Stock Agreements; or (iii) assuming that the filings, registrations, notifications, authorizations, consents and approvals referred to in subsection (b) below have been obtained or made, as the case may be, violate any order, injunction, decree, statute, rule or regulation of any governmental agency or authority or court to which the Continuing Stockholder is subject, excluding from the foregoing clause (ii) and (iii) such requirements, defaults, breaches, rights or violations that become applicable as a result of (1) the business or activities in which Buyer or Merger Subsidiary or any of their affiliates is or proposes to be engaged, or (2) any acts or omissions by, or facts pertaining to, Buyer or Merger Subsidiary. (b) No filing or registration with, notification to, or authorization, consent or approval of, any Governmental Entity is required in connection with the execution and delivery of this Agreement by the Continuing Stockholders or the performance by the Continuing Stockholders of their obligations hereunder, except (I) the filing of the Certificate of Merger in accordance with the DGCL and filings to maintain the good standing of the Surviving Corporation; (ii) compliance with any applicable requirements of the HSR Act; (iii) compliance with any applicable requirements of the Exchange Act; (iv) compliance with any applicable requirements of state blue sky or takeover laws; (v) filings in connection with the financing of the Merger; and (vi) such other consents, approvals, orders, authorizations, notifications, registrations, declarations and filings that (A) may be required to novate, assign or transfer any contract or agreement with any Governmental Entity, (B) the failure of which to be obtained or made would not have a Material Adverse Effect and would not have a material adverse effect on the ability of the Continuing Stockholders to perform their obligations hereunder or (c) that become applicable as a result of (1) the business or activities in which Buyer or Merger Subsidiary is or proposes to be engaged, or (2) any acts or omissions by Buyer or Merger Subsidiary. 5.4 Investment Intention. Each Continuing Stockholder is acquiring the Consideration Shares solely for such stockholder's own account for investment and not with a view to, or for sale in connection with, any distribution or other disposition thereof. 5.5 Federal Securities Laws Matters. Each Continuing Stockholder acknowledges receipt of advice from Buyer that (I) the Consideration Shares have not been registered under the Securities Act, (ii) the Consideration Shares must be held indefinitely and each Continuing Stockholder must continue to bear the economic risk of the investment in the Consideration Shares, unless such Consideration Shares are subsequently registered under the Securities Act, or an exemption from such registration is available, (iii) if the exemption afforded by Rule 144 of the Securities Act is not available, sale of the Consideration Shares without registration will require the availability of an exemption under the Securities Act, (iv) an appropriate restrictive legend shall be placed on the certificate(s) representing the Consideration Shares and (v) a notation shall be made in the appropriate records of Buyer indicating that the Consideration Shares are subject to restrictions on transfer and, appropriate stop-transfer restrictions will be issued to the transfer agent with respect to the Consideration Shares. In addition, each Continuing Stockholder has been given access to and the opportunity to examine all documents and ask questions of, and receive answers from, Buyer and its representatives concerning the business, assets, liabilities, results of operations and financial condition of Buyer and its Subsidiaries and the terms and conditions of the Merger. 5.6 Investor Status. Either (I) each Continuing Stockholder is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act or (ii) (A) each Continuing Stockholder's financial situation is such that the Continuing Stockholder can afford to bear the economic risk of holding the Consideration Shares for an indefinite period of time, (B) the Continuing Stockholder can afford to suffer complete loss of his investment in the Consideration Shares, and (c) the Continuing Stockholder's knowledge and experience in financial and business matters are such that each Continuing Stockholder is capable of evaluating the merits and risks of the Continuing Stockholder's investment in the Consideration Shares. ARTICLE VI COVENANTS 6.1 Conduct of the Business. (a) The Company agrees that, during the period from the date hereof until the earlier of the Closing or the termination of this Agreement in accordance with its terms, except as (I) otherwise expressly contemplated hereby, (ii) set forth in Section 6.1 of the Company Disclosure Schedule or (iii) consented to by Buyer, in writing: (i) The Company and its Subsidiaries shall use their reasonable efforts to (x) cause their business operations to be conducted in the ordinary course consistent with past practice, (y) preserve intact their business organization in all material respects and relationships with suppliers, employees and customers and (z) comply in all material respects with all laws; (ii) The Company and its Subsidiaries shall not issue, deliver, sell, pledge, dispose of or encumber, or authorize or commit to the issuance, sale, pledge, disposition or encumbrance of, except for the issuance of shares of Common Stock upon the exercise of currently outstanding Options and the issuance of 107,889.50 shares of Common Stock pursuant to the Securities Purchase Agreement, (x) any shares of capital stock of any class (except upon the exercise of Options outstanding on the date hereof), or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock, any other ownership interest (including, but not limited to, stock appreciation rights or phantom stock), of the Company or any of its Subsidiaries or (y) any assets of the Company or any of its Subsidiaries, except for sales of products in the ordinary course of business in a manner consistent with past practice; (iii) The Company shall not declare, set aside, make or pay any dividend or other distribution, payable in cash, stock property or otherwise, with respect to any of its capital stock or any security or right exchangeable or exercisable for, or convertible into, its capital stock; (iv) The Company shall not reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, or any security or right exchangeable or exercisable for, or convertible into, its capital stock; provided, the Company shall be entitled to purchase Shares in connection with the retirement or termination of certain employees pursuant to the terms of the Stockholders Agreement; (v) The Company and its Subsidiaries shall not (w) make any capital expenditures not authorized in the current capital expenditures budget in excess of an aggregate of $1,000,000, (x) sell or dispose of any of their material properties or assets, except in the ordinary course of business; (y) except as may be required by existing contracts, make any loans, advances (other than advances in the ordinary course of business and consistent with past practice) or capital contributions to, or investments in, any other Person on behalf of the Company or any of its Subsidiaries or (z) make any change in any of the present accounting methods and practices of their business, except as required by changes in GAAP; (vi) Other than in the ordinary course of business and consistent with past practice, neither the Company nor any Subsidiary shall change the employment arrangements with its senior executive officers (including hiring, termination, promotion or relocation), make any change in the compensation payable or to become payable to any of its officers, directors, employees, agents or consultants, enter into or amend any employment, severance, termination or other similar agreement, adopt any new plan, program, agreement or arrangement that would otherwise constitute a Plan, or make any loans to any of its officers, directors, employees, agents or consultants or make any changes in its existing borrowing or lending arrangements for or on behalf of any of such persons, whether contingent on consummation of the Merger or otherwise. (vii) The Company and its Subsidiaries will not take any action prohibited by clauses (b) through (k) of Section 3.7 hereof; and (viii) The Company will not, and will not permit any Subsidiary to, agree, commit, or adopt any plan or proposal to take any of the actions set forth in clauses (ii) through (vii) above. (b) Buyer and Merger Subsidiary each agree that, during the period from the date hereof until the earlier of the Closing or the termination of this Agreement in accordance with its terms, Buyer shall not, and shall not permit any of its Subsidiaries to: (i) A) declare, set aside, make or pay any dividends or other distributions with respect to, any of its capital stock, other than dividends and distributions by any direct or indirect wholly-owned Subsidiary of Buyer to its parent and regular quarterly dividends consistent with past practice of Buyer or (B) combine, split, subdivide, redeem or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock. 6.2 Information Statement. (a) The Company Board will deliver prompt notice of the adoption of this Agreement and the Merger by the Company's stockholders to those stockholders of the Company who have not consented to such action in writing, and who, if such actions had been taken at a meeting, would have been entitled to notice of the meeting of the Company's stockholders if the record date for such meeting had been the date that written consents signed by a sufficient number required to take the actions were delivered to the Company. (b) The Company shall promptly prepare and Buyer and Merger Subsidiary shall cooperate with the Company in such preparation of an information statement (the "Information Statement") relating to this Agreement and the transactions contemplated hereby and the Company shall as soon as practicable cause the Information Statement to be mailed to the Company's stockholders. The Company will furnish Buyer and its counsel drafts of the Information Statement for their review and comment prior to its dissemination and will use all reasonable efforts to incorporate all comments and suggestions made by Buyer and its counsel. The Information Statement shall contain the recommendation of the Company Board that stockholders of the Company approve and adopt this Agreement and notice of the approval and adoption of this Agreement by the stockholders of the Company by written consent in lieu of meeting pursuant to DGCL Section 228. (c) Buyer agrees that it will provide the Company with all information concerning Buyer and Merger Subsidiary necessary or appropriate to be included in the Information Statement. 6.3 Access to Information; Confidentiality. (a) Upon reasonable advance notice, between the date hereof and the earlier of the Effective Time or the termination of this Agreement in accordance with its terms, each of Buyer and the Company shall (I) give the other, its counsel, financial advisors, financing sources, auditors and other authorized representatives (collectively, "Representatives") reasonable access during normal business hours to the offices, properties, books and records of the Company and its Subsidiaries or the Buyer and its Subsidiaries, as the case may be, (ii) furnish to the other and such Representatives such financial and operating data and other information as such Persons may reasonably request, and (iii) instruct its employees, counsel and financial advisors to cooperate with the other in its investigation of the business of the Company and its Subsidiaries or Buyer and its Subsidiaries, as the case may be; provided that all requests for information, to visit plants or facilities or to interview employees or agents should be directed to and coordinated with an executive officer of the Company or Buyer, as the case may be. (b) Each of Buyer and the Company shall not disclose or use, and each shall cause its officers, employees and Representatives not to disclose or use, any confidential information with respect to the other party hereto, furnished or to be furnished, by such other party or their Representatives in connection herewith at any time or in any manner other than in connection with the evaluation of the transactions contemplated by this Agreement. If this Agreement is terminated for any reason, all such confidential information, in whatever form shall be returned to the originator by each party and its Representatives. 6.4 No Solicitation. From the date hereof until the termination of this Agreement pursuant to the Article IX hereof, the Continuing Stockholders, the Company and its Subsidiaries shall not, and the Company shall use its reasonable efforts to ensure that the respective officers, directors, employees or other agents of the Company and its Subsidiaries will not, directly or indirectly, (a) solicit, initiate or encourage any Acquisition Proposal (as defined hereafter) or (b) engage in substantive discussions or negotiations with, or disclose any non-public information relating to the Company or its Subsidiaries or afford access to the properties, books or records of the Company or its Subsidiaries to, any Person that has made an Acquisition Proposal. For purposes of this Agreement, "Acquisition Proposal" means any offer or proposal for a merger or other business combination involving the Company or any of its Subsidiaries or the acquisition of any significant equity interest in, or a substantial portion of the assets of, the Company or any of its Subsidiaries, other than the transactions contemplated by this Agreement. "Person" means any natural Person, firm, individual, partnership, joint venture, business trust, trust, association, corporation, company, unincorporated entity or Governmental Entity. 6.5 Obligations of Merger Subsidiary. Buyer will take all action necessary to cause Merger Subsidiary to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth herein. 6.6 Director and Officer Liability; Indemnification. (a) Buyer, Merger Subsidiary and the Company agree that all rights to indemnification and all limitations on liability existing in favor of any Indemnified Party (as defined below) as provided in the Company's Certificate of Incorporation, Bylaws or an agreement between an Indemnified Party and the Company and any of its Subsidiaries as in effect as of the date hereof shall survive the Merger and continue in full force and effect for six years after the Effective Time and for such period, Buyer shall, and shall cause the Surviving Corporation to the fullest extent permitted by law to, indemnify and hold harmless the individuals who on or prior to the Effective Time were officers or directors of the Company and any of its Subsidiaries (each, an "Indemnified Party") against all losses, expenses (including, without limitation, attorneys' fees and the cost of any investigation or preparation incurred in connection thereof), claims, damages, liabilities, judgments, or amounts paid in settlement (collectively, "Costs") in respect to any threatened, pending or contemplated claim, action, suit or proceeding, whether criminal, civil, administrative or investigative arising out of acts or omissions occurring on or prior to the Effective Time except for any Costs arising out of or related to any Bernstein Claims and except as otherwise provided in subsection (e) below (each, an "Indemnifiable Claim"). In the event any Indemnifiable Claim is asserted or made within such six-year period, all rights to indemnification and advancement of costs in respect of any such Indemnifiable Claim shall continue until such Indemnifiable Claim is disposed of or all judgments, orders, decrees or other rulings in connection with such Indemnifiable Claim are fully satisfied. To the extent permitted by the DGCL, advancement of expenses pursuant to this Section 6.6 shall be mandatory rather than permissive and the Surviving Corporation shall advance all Costs in connection with such indemnification. (b) For six years after the Effective Time, Buyer will cause the Surviving Corporation, its successors and assigns to provide officers' and directors' liability insurance in respect of acts or omissions occurring at or prior to the Effective Time covering each such Person currently covered by the Company's officers' and directors' liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof; provided that in satisfying its obligations under this Section 6.6(b), Buyer shall not be obligated to pay premiums in excess of 150% of the premium for the officers and directors liability insurance policy paid by the Company as of the date hereof, which amount has been disclosed to Buyer. Buyer shall cause the Surviving Corporation to continue to indemnify in accordance with the Company's past practices each of the employees listed in Section 6.6 of the Company Disclosure Schedule in respect of the lawsuit set forth opposite such employee's name in such Section. (c) Notwithstanding any other provisions hereof, the obligations of the Company, the Surviving Corporation and Buyer contained in this Section 6.6 shall be binding upon the successors and assigns of Buyer and the Surviving Corporation. In the event the Company or the Surviving Corporation or any of their respective successors or assigns (I) consolidates with or merges into any other Person or (ii) transfers all or substantially all of its properties or assets to any Person, then, and in each case, proper provision shall be made so that successors and assigns of the Company or the Surviving Corporation, as the case may be, honor the indemnification obligations set forth in this Section 6.6. (d) The obligations of the Company, the Surviving Corporation and Buyer under this Section 6.6 shall not be terminated or modified in such a manner as to affect adversely any director or officer to whom this Section 6.6 applies without the consent of such affected director or officer (it being expressly agreed that the directors and officers to whom this Section 6.6 applies shall be third party beneficiaries of this Section 6.6). (e) Each Continuing Stockholder agrees, severally and not jointly, to indemnify and hold harmless Buyer and the Company and their respective officers, directors and affiliates from and against all Costs arising out of or attributable to a breach by such Continuing Stockholder of the representations and warranties of such Continuing Stockholder contained in Section 5.1(b). 6.7 Reasonable Best Efforts. (a) Upon the terms and subject to the conditions herein provided, each of the parties hereto agrees to use its reasonable best efforts to take or cause to be taken all action, to do or cause to be done, and to assist and cooperate with the other party hereto in doing, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including, but not limited to, (I) the satisfaction of the conditions precedent to the obligations of any of the parties hereto, (ii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the performance of the obligations hereunder, (iii) the execution and delivery of such instruments, and the taking of such other actions as the other party hereto may reasonably require in order to carry out the intent of this Agreement and (iv) in the case of Buyer and Merger Subsidiary, the obtaining of the funds referred to in the first sentence of Section 4.15 hereof and the listing of the Consideration Shares on the New York Stock Exchange. (b) The Company, Buyer and Merger Subsidiary agree to cooperate with Buyer to effect the transfers of any permits or other governmental authorizations under Environmental Laws that will be required to permit the Surviving Corporation to conduct the business as conducted by the Company and its Subsidiaries immediately prior to the Closing Date. 6.8 Regulatory Compliance. (a) The parties hereto shall make or cause to be made all necessary filings, as promptly as practicable, including, without limitation, those required under the HSR Act, the Exchange Act, and applicable state laws, in order to facilitate prompt consummation of the transactions contemplated hereby. In addition, Buyer, Merger Subsidiary and the Company will each use its reasonable best efforts, and will cooperate fully with each other to (I) comply as promptly as practicable with all governmental requirements applicable to the transactions contemplated hereby and (ii) obtain promptly all approvals, permits, orders, qualifications or other consents of any applicable governmental authorities necessary for the consummation of the transactions contemplated by this Agreement. Each of the parties hereto will furnish to the other party such necessary information and reasonable assistance as such other party may reasonably request in connection with the foregoing. Notwithstanding the foregoing, nothing in this Agreement shall be deemed to require Buyer or its Subsidiaries to enter into any agreement with any Governmental Entity or to consent to any order, decree or judgment requiring Buyer or its Subsidiaries to hold separate or divest, or to restrict the dominion or control of, any of the assets, properties or businesses of the Company and any of its Subsidiaries or Buyer and any of its Subsidiaries. (b) Subject to the Confidentiality Agreement and applicable law, the Company, Buyer and Merger Subsidiary will coordinate and cooperate with each other in exchanging such information and providing such assistance as the other may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods under the HSR Act or in connection with other regulatory approvals and consents. Each of the Company, Buyer and Merger Subsidiary agrees to (I) file the Notification and Report required by the HSR Act on or before January 31, 1997 and (ii) respond promptly to and to comply fully with any request for additional information or documents under the HSR Act. Subject to the Confidentiality Agreement, the Company will provide Buyer, and Buyer and Merger Subsidiary will provide the Company, with copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between such party or any of its representatives, on the one hand, and any governmental agency or authority or members of their respective staffs, on the other hand, with respect to this Agreement and the transactions contemplated hereby. 6.9 Public Announcements. Neither the Company, Buyer nor any of their respective affiliates shall issue or cause the publication of any press release or other public announcement with respect to the Merger, this Agreement or the other transactions contemplated hereby without the prior approval of the other party, except such disclosure as may be required by law or by any listing agreement with a national securities exchange; provided, if such disclosure is required by law, the Company, Buyer or any of their respective affiliates may not make such disclosure without prior consultation of the other party. 6.10 Further Assurances. At and after the Effective Time, the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of the Company or Merger Subsidiary, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Subsidiary, any other actions to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to or under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with the Merger. 6.11 Employee Matters. (a) General Medical has entered into the Employment Agreements in substantially the form of Exhibit A attached hereto with those Persons listed on Schedule 3.1(c) of the Company Disclosure Schedule. Following the Effective Time, the Buyer shall cause the Surviving Corporation to honor all obligations under the Employment Agreements and any other Plan as to which the disclosure required pursuant to Section 3.11(a) has been timely made and provide the employees of the Company and its Subsidiaries with employee benefits which are no less favorable in the aggregate than those currently provided by the Company, provided that the foregoing shall not require Buyer to maintain in effect any specific employee benefit plan, program or policy of the Company or its Subsidiaries. In addition, subject to the terms of any Company Plan or Buyer Plan, Buyer will, or will cause the Surviving Corporation and its Subsidiaries to (I) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the employees of the Company and its Subsidiaries under any welfare plan that such employees may be eligible to participate in after the Effective Time, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Effective Time under any welfare plan maintained for such employees immediately prior to the Effective Time, and (ii) provide each employee of the Company and its Subsidiaries with credit for any co-payments and deductibles paid prior to the Effective Time in satisfying any applicable deductible or out-of-pocket requirements under any welfare plan that such employees may be eligible to participate in after the Effective Time. 6.12 Treatment of Public Debt. The Company will cooperate with Buyer (i)to commence a debt tender offer to be made by the Company (together with a solicitation of consents to eliminate certain restrictive covenants) of the Company's 121/8% Series A Subordinated Pay-In-Kind Debentures Due 2005 and the Company's 107/8% Series A Senior Subordinated Notes due 2003 on conditions as to the timing of acceptance for payment acceptable to the Company, and (ii) provided Buyer provides the Company with financing on terms and conditions satisfactory to the Company, in its sole discretion, to give the required notice of and consummate the redemption at par, prior to the Effective Time, of all of Holding's 12 1/2% Senior Notes due 2004 (the "Holdings Notes"), provided, in each case, that prior to the Closing Date no funds or related out-of-pocket transaction expenses necessary to effect any such repurchase shall be provided or paid for by the Company. In connection with such redemption of the Holdings Notes, the PGI Holders will waive any applicable notice period with respect to such redemption. ARTICLE VII CONDITIONS TO THE MERGER 7.1 Conditions to Each Party's Obligations. The respective obligations of the Company, Buyer and Merger Subsidiary to consummate the Merger are subject to the satisfaction or, to the extent permitted by applicable law, the waiver on or prior to the Effective Time of each of the following conditions: (a) HSR Act. Any waiting periods applicable to the transactions contemplated by this Agreement under applicable U.S. and foreign antitrust or trade regulation laws and regulations, including, without limitation, under the HSR Act, shall have expired or been terminated and all governmental authorizations or approvals required in connection with the transactions contemplated by this Agreement shall have been obtained or given (except such consents, approvals or other actions that may be required to novate, assign or transfer any contract or agreement with any Governmental Entity), other than those authorizations and approvals, the failure of which to have been obtained, would not, in the aggregate, have or be reasonably expected to have a Material Adverse Effect or Buyer Material Adverse Effect; (b) No Injunction. No temporary restraining order, preliminary or permanent injunction or other order by any federal or state court preventing the consummation of the Merger shall have been issued and be continuing in effect, and no provision of any applicable law or regulation shall prohibit the consummation of the Merger. There is no claim, action or proceeding pending or, to the knowledge of the Company or Buyer, threatened against the Company by any Governmental Entity that challenges the validity of this Agreement or the Merger or any material transaction contemplated hereby; and (c) NYSE Listing. The Consideration Shares shall have been approved for listing on the New York Stock Exchange subject to notice of issuance. 7.2 Conditions to the Obligations of the Company. The obligations of the Company to consummate the Merger are further subject to the satisfaction or, to the extent permitted by applicable law, the waiver on or prior to the Effective Time of the following conditions: (a) Performance of Obligations by Buyer and Merger Subsidiary. Each of Buyer and Merger Subsidiary will have performed in all material respects each of its respective agreements and covenants contained in or contemplated by this Agreement that are required to be performed by it at or prior to the Effective Time pursuant to the terms hereof; (b) Representations and Warranties. The representations and warranties of Buyer continued in Article IV hereof shall be true and correct in all material respects as of the Closing Date, except (I) to the extent such representations and warranties speak as of an earlier date, in which case they shall be true and correct in all material respects as of such earlier date, and (ii) for such inaccuracies (without giving effect to any materiality or Material Adverse Effect qualifications or materiality exceptions contained therein) that do not in the aggregate result in a Buyer Material Adverse Effect; (c) Closing Certificate. The Company shall have received a certificate signed by the chief executive officer of Buyer, dated the Closing Date, to the effect that, to such officer's knowledge, the conditions set forth in Section 7.2(a) and 7.2(b) hereof have been satisfied of waived; and (d) Registration Rights Agreement. Buyer shall have executed and delivered the Registration Rights Agreement substantially in the form attached hereto as Exhibit B (the "Registration Rights Agreement"). 7.3 Conditions to the Obligations of Buyer and Merger Subsidiary. The obligations of Buyer and Merger Subsidiary to consummate the Merger are further subject to the satisfaction or, to the extent permitted by applicable law, the waiver on or prior to the Effective Time of the following conditions: (a) Performance of Obligations the Company. The Company and the Continuing Stockholders will have performed in all material respects each of its agreements and covenants continued in or contemplated by this Agreement that are required to be performed by it at or prior to the Effective Time pursuant to the terms hereof; (b) Representations and Warranties. The representations and warranties of the Company contained in Article III hereof and the representations and warranties of the Continuing Stockholders contained in Article V shall be true and correct in all material respects as of the Closing Date, except (I) to the extent such representations and warranties speak as of an earlier date, in which case they shall be true and correct in all material respects as of such earlier date, and (ii) for such inaccuracies (without giving effect to any materiality or Material Adverse Effect qualifications or materiality exceptions contained therein) that do not in the aggregate result in a Material Adverse Effect; (c) Closing Certificate. Buyer and Merger Subsidiary shall have received a certificate signed by the chief executive officer of the Company, dated the Closing Date, to the effect that, to such officer's knowledge, the conditions set forth in Section 7.3(a) and 7.3(b) hereof have been satisfied or waived; and (d) Registration Rights Agreement. Each of the Continuing Stockholders shall have executed and delivered the Registration Rights Agreement. ARTICLE VIII TERMINATION 8.1 Termination. Notwithstanding anything herein to the contrary, this Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Company has obtained stockholder approval: (a) by the mutual written consent of the Board of Directors of each of the Company and Buyer; (b) by either the Company or Buyer, if the Merger has not been consummated by April 1, 1997, or such other date, if any, as the Company and Buyer shall agree upon, provided, that if the Closing shall not have occurred by such date solely as a result of the failure to satisfy the condition relating to the expiration or termination of the applicable waiting period under the HSR Act, then such date shall be extended until May 1, 1997 ; (c) by either the Company or Buyer, if there shall be any law or regulation that makes consummation of the Merger illegal or if any judgment, injunction, order or decree enjoining Buyer or the Company from consummating the Merger is entered and such judgment, injunction, order or decree shall become final and nonappealable; or (d) by the Company if the Average Price is less than $45.55. The party desiring to terminate this Agreement pursuant to clauses (b), (c) or (d) shall give written notice of such termination to the other party; provided, no party in breach of any of its obligations under this Agreement may terminate this Agreement pursuant to this Section 8.1. 8.2 Effect of Termination. If this Agreement is terminated pursuant to Section 8.1 hereof, this Agreement shall become void and of no effect with no liability on the part of any party hereto except for willful breach; provided, that the agreements contained in Sections 3.17, 4.14, 6.3(b), 9.2 and 9.4 hereof shall survive the termination hereof. ARTICLE IX MISCELLANEOUS 9.1 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement to any party hereunder shall be in writing and deemed given upon (a) personal delivery, (b) transmitter's confirmation of a receipt of a facsimile transmission, (c) confirmed delivery by a standard overnight carrier or when delivered by hand or (d) when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by notice given hereunder): If to Buyer or Merger Subsidiary, to: McKesson Corporation One Post Street San Francisco, CA 94104 Fax: (415) 983-8826 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022-9931 Fax: (212) 735-2000 Attention: Peter A. Atkins If to the Company, to: General Medical Inc. 8741 Landmark Road Richmond, VA 23228 Fax: (804) 264-7586 Attention: Steven B. Nielsen, Chairman and Chief Executive Officer with a copy to: Kelso & Company 320 Park Avenue, 24th Floor New York, New York 10022 Fax: (212) 223-2379 Attention: James J. Connors, II, Esq. with a copy to: McGuire, Woods, Battle & Boothe, L.L.P. One James Center 901 East Cary Street Richmond, Virginia 23219-4030 Fax: (804) 775-1061 Attention: Wellford L. Sanders, Jr. 9.2 No Survival of Representations and Warranties. The representations and warranties, covenants and agreements contained herein and in any certificate or other writing delivered pursuant hereto, other than the representations and warranties contained in Sections 5.1, 5.4, 5.5 and 5.6, which shall survive indefinitely, shall not survive the Effective Time or the termination of the Agreement, provided, that covenants and agreements contained herein which by their terms are to be performed in whole or in part subsequent to the Effective Time shall survive the Merger in accordance with their terms. 9.3 Amendments, Modification and Waiver. (a) Except as may otherwise be provided herein, any provision of this Agreement may be amended, modified or waived by the parties hereto, by action taken by or authorized by their respective Board of Directors, prior to the Effective Time if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company, Buyer, Merger Subsidiary and the Continuing Stockholders and in the case of a waiver, by the party against whom the waiver is to be effective, provided however that Princes Gate, Acorn Partnership, PGI, PGI Sweden and Opel agree that PG Investors, Inc. is authorized to act as their agent and consent to any such amendment, modification or waiver on their behalf; provided, further, that after the adoption of this Agreement by the stockholders of the Company, no such amendment shall be made except as allowed under applicable law. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 9.4 Expenses. Except as otherwise provided herein, all costs and expenses incurred by the Company and the Continuing Stockholders in connection with this Agreement, the Merger and the transactions contemplated hereby, including legal fees and investment banking fees (including, but not limited to, those fees listed in Section 3.17 of the Company Disclosure Schedule), shall be paid by the Company and all such costs and expenses incurred by the Buyer or Merger Subsidiary shall be paid by the Buyer; provided that the amount, if any, by which the sum of the costs and expenses paid or payable by the Company pursuant to this Section 9.4 plus the out-of-pocket cash expenses paid or payable by the Company in connection with the planned initial public offering of Common Stock as described in the IPO Prospectus exceeds $6,000,000 shall be deemed to be the "Excess Expense Amount" and shall be applied to reduce the Equity Value pursuant to the provisions of Section 1.2(a) hereof. At least one day prior to the Closing Date, the Company and the Continuing Stockholders shall provide Buyer with a certificate, setting forth in reasonable detail the calculation of the Excess Expense Amount. In the event that the actual Excess Expense Amount is determined to be greater than the amount set forth in such certificate, the parties agree that the amount of such excess shall reduce, and be applied against, the Holdback Amount. 9.5 Successors and Assigns; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, directly or indirectly, including, without limitation, by operation of law, by any party hereto without the prior written consent of the other parties hereto. Subject to the preceding sentence, this Agreement and all of the provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 9.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof) as to all matters, including, but not limited to, matters of validity, construction, effect, performance and remedies. 9.7 Severability. If any term or other provision of the Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provision of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. 9.8 Third Party Beneficiaries. This Agreement is solely for the benefit of the Company and its successors and permitted assigns and the Continuing Stockholders and their successors and permitted assigns, with respect to the obligations of Buyer and Merger Subsidiary under this Agreement, and for the benefit of Buyer and Merger Subsidiary, and their respective successors and permitted assigns with respect to the obligations of the Company and the Continuing Stockholders under this Agreement, and this Agreement shall not, except to the extent necessary to enforce the provisions of Section 1.7 and 6.6 hereof be deemed to confer upon or give to any other third party any remedy, claim, liability, reimbursement, cause of action or other right. 9.9 Schedules. (a) Disclosure of any fact or item in any Section of the Company Disclosure Schedule or the Buyer Disclosure Schedule hereto referenced by a particular paragraph or section in this Agreement shall, should the existence of the fact or item or its contents be relevant to any other paragraph or section, be deemed to be disclosed with respect to that other paragraph or section whether or not an explicit cross-reference appears. (b) Certain of the representations and warranties set forth in this Agreement contemplate that there will be included in the Company Disclosure Schedule or the Buyer Disclosure Schedule setting forth information that might be "material" or have a "Material Adverse Effect" or a "Buyer Material Adverse Effect." The Company and the Buyer may, at their option, include in such schedules items that are not material or are not likely to have a Material Adverse Effect or a Buyer Material Adverse Effect in order to avoid any misunderstanding, and any such inclusion shall not be deemed to be an acknowledgment or representation that such items are material or would have a material effect, to establish any standard of materiality or material adverse effect, or to define further the meaning of such terms for purposes of this Agreement. 9.10 Entire Agreement. This Agreement, including any exhibits or schedules hereto constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements or understandings, both written and oral, between the parties or any of them with respect to the subject matter hereof. The only representations and warranties made by the parties hereto with respect to the subject matter hereof are the representations and warranties contained in or made pursuant to this Agreement. 9.11 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date and year first above written. GENERAL MEDICAL INC. By: /s/ Steven B. Nielsen Name: Steven B. Nielsen Title: MCKESSON CORPORATION By: /s/ Ivan D. Meyerson Name: Ivan D. Meyerson Title: Vice President SPIDER ACQUISITION CORPORATION By: /s/ Ivan D. Meyerson Name: Ivan D. Meyerson Title: Vice President KELSO INVESTMENT ASSOCIATES IV, L.P. By: /s/ Thomas R. Wall, IV Name: Thomas R. Wall, IV Title: General Partner KELSO EQUITY PARTNERS II, L.P. By: /s/ Thomas R. Wall, IV Name: Thomas R. Wall, IV Title: General Partner CHASE EQUITY ASSOCIATES, L.P. By: /s/ Brian J. Richmand Name: Brian J. Richmand Title: Partner JOHN RUTLEDGE PARTNERS, L.P. By: /s/ John Rutledge Name: John Rutledge Title: PRINCES GATE INVESTORS, L.P. By: /s/ David R. Powers Name: David R. Powers Title: Vice President, PG Investors, Inc., as General Partner ACORN PARTNERSHIP I, L.P. By: /s/ David R. Powers Name: David R. Powers Title: Vice President, PG Investors, Inc., as General Partner PGI INVESTMENTS LIMITED By: /s/ David R. Powers Name: David R. Powers Title: Vice President, PG Investors, Inc., as Attorney-In-Fact PGI SWEDEN AB By: /s/ David R. Powers Name: David R. Powers Title: Vice President, PG Investors, Inc., as Attorney-In-Fact /s/ David R. Powers - Attorney-In-Fact GREGOR VON OPEL THE LOUIS AND PATRICIA KELSO TRUST By: /s/ Patricia H. Kelso Name: Patricia H. Kelso /s/ William A. Marquard WILLIAM A. MARQUARD THE FRANK T. NICKELL IRA By: /s/ Annamarie Simonelli Name: Annamarie Simonelli Title: Assistant Vice President, Fleet Bank /s/ David M. Roderick DAVID M. RODERICK /s/ George L. Shinn GEORGE L. SHINN /s/ Steven B. Nielsen STEVEN B. NIELSEN /s/ F. De Wight Titus F. De WIGHT TITUS /s/ Donald B. Garber DONALD B. GARBER EX-99 3 EXHIBIT 99.1 - PRESS RELEASE EXHIBIT 99.1 Press Release Contact: Janet Bley (415) 983-9357 or Sandra Sternberg Sitric And Company 415-983-8671 or 310-788-2850 SOLIDIFYING ITS POSITION IN HEALTH CARE SUPPLY MANAGEMENT, McKESSON ACQUIRES GENERAL MEDICAL INC. Acquisition Opens New Markets, Higher Margin Businesses to McKesson SAN FRANCISCO, Tuesday, January 28, 1997 -- Continuing on a course of investments aimed at extending its leadership position in health care supply management, improving gross margins and broadening its market platform, McKesson Corp. (NYSE:MCK), today announced that it has signed a definitive agreement to acquire privately-held General Medical Inc. The McKesson/General Medical business combination will create the largest health care supply management company in North America. The company expects the acquisition to be accretive in the first year, effectively increasing McKesson's overall operating margin and working capital turnover. General Medical is the nation's leading supplier to the full range of alternate-site health care facilities, including physicians and clinics, long-term care and home- care sites, and is the third largest distributor of medical- surgical supplies to hospitals. Alan Seelenfreund, McKesson's chairman and chief executive officer, said, "This acquisition, which extends McKesson's position into the fast-growing alternate-site market, is a major step forward in our goal to become the world leader in health care supply management. The combination of McKesson and General Medical will create a strong new force for shaping the health care supply market, addressing the increasingly complex clinical supply needs of physicians, extended-care facilities and integrated health care net works (IHNs). "In today's fast changing health care environment, McKesson will innovate to provide our health care partners, which include customers and manufacturers alike, with services that improve the quality of health care while maintaining a focus on controlling costs," Mr. Seelenfreund continued. "Through this acquisition, we are reaffirming McKesson's leadership in pharmaceutical services and entering the field of medical-surgical supply management. McKesson's unique combination of a nationwide logistics network, unparalleled information technology, and strong financial resources equips us to meet this market challenge successfully." Under terms of the acquisition agreement, * McKesson will pay approximately $775 million for General Medical including $347 million for the equity, half in McKesson common stock and half in cash, and the assumption of approximately $428 million in debt. * The number of shares to be issued will be based upon an average of the company's common stock price shortly prior to closing, but will be no more than approximately 3.72 million or less than 2.75 million shares. Based upon yesterday's closing price, the number of shares issued would be approximately 3.16 million. * General Medical will become a wholly-owned subsidiary of McKesson. * Members of General Medical's senior management team will continue with the company in their current positions. The alternate-site market is the fastest growing market for pharmaceutical and medical supplies. With the aging of the U.S. population and the shift towards more cost- effective locations for care delivery, the alternate-site market is expected to continue to grow well into the 21st century. General Medical distributes more than 130,000 products produced by more than 4,000 medical and surgical product manufacturers through a 700-person sales force to more than 200,000 care providers nationwide, including 500 account managers calling on physicians. Mark A. Pulido, McKesson's president and chief operating officer, said, "General Medical will enable McKesson to build on its national scale, offering unparalleled marketing services to pharmaceutical and medical-surgical manufacturers, as well as products and services to health care providers who are demanding well- coordinated supply solutions. "McKesson and General Medical are coming together at exactly the right time," Pulido continued. "General Medical is overhauling its distribution network, and has reorganized its sales management structure and invested heavily in new products and programs. Since 1991, General Medical sales have grown at an annual compound rate of approximately 20% reaching $1.7 billion in 1996. EBIT has increased approximately 65% during the last year and is expected to be approximately $58 million for the fiscal year ended December 31, 1996. Operating margins have increased to 3.4% of revenues. "We are acquiring General Medical at just the point that its turnaround is starting to pay off," he said. "Given McKesson's significant growth in pharmaceutical distribution, our combined momentum will lead to improved gross margins, increased operating income and higher profit margins." General Medical's chairman and chief executive officer, Steven B. Nielsen, said, "We are overwhelmingly confident that McKesson's capital resources and industry position will provide General Medical with the ability to realize our vision -- to be the leading national supplier to integrated health systems. The opportunity to build our business with McKesson, the nation's leading health care supply management company, and to join a team having considerable management expertise in this field was more than enough to convince us to terminate our initial public offering mid-stream." Last Friday, McKesson reported that in the third quarter ended December 31, 1996, net income was $38.0 million or 86 cents per fully diluted share. Revenues increase to $3.5 billion from $2.6 billion in the comparable quarter of fiscal 1996. For the nine-month period ending December 31, 1996, the company reported net income of $96.2 million, or $2.16 per fully diluted share, versus $2.08 per fully diluted share in the prior year. Revenues increased to $8.9 billion from $7.4 billion in the comparable nine- month period. The General Medical acquisition is the latest in a series of recent initiatives that have moved McKesson to the forefront of the health care supply management business: * In December 1996, as part of a program to focus its businesses in health care, McKesson announced the sale of its 55% stake in Armor All Products Corp. for $220 million. * In November 1996, the Company completed the acquisition of FoxMeyer Drug, adding approximately $3 billion to McKesson annual revenues and expanding its lead as the largest distributor in the pharmaceutical segment. * In April 1996, McKesson purchased Automated Healthcare (AHI), a company producing robotic drug dispensing equipment offering unique pharmaceutical handling technology to health care facilities, including the RxOBOT automated medication-retrieval system for hospitals. * In February 1996, McKesson launched the OmniLink centralized pharmacy technology platform, linking independent pharmacies into a "virtual chain" for contracting with pharmaceutical suppliers and managed care customers. * In 1995, the Company established McKesson Health Systems to serve as the platform for the Company's institutional strategy and initiatives. This transaction is subject to customary conditions, including expiration of the waiting period under the Hart- Scott-Rodino Act. The company, which is being advised by Peter J. Solomon Company Limited in the transaction, anticipates that it will close within two months. General Medical, headquartered in Richmond, Virginia, operates through a network of 50 distribution centers, seven sales offices and three product assembly centers throughout the United States. The company was founded in 1950 and has been privately held since. In 1994 and 1995, General Medical acquired F.D. Titus & Son, the medical supplies business of Foster Medical Supply, Randolph Medical Inc., and the assets of Denver Surgical Supply and Goetze-Niemer Co. Through McKesson's U.S. health care business, its Canadian subsidiary, Media Health and Pharmaceutical Services, and its minority interest in Mexico's Nadro, S.A., McKesson is the largest distributor of pharmaceutical and health care products in North America. The company also owns McKesson Water Products, one of the nation's largest distributors of bottled drinking water. Except for historical information contained herein, the matters discussed in this release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These include the trends for continued growth of McKesson's and General Medical's core health care businesses and risks and uncertainties described in the company's SEC reports. The company assumes no obligation to update information contained in this release. # # # McKesson news releases are available at no charge through McKesson's NewsOnDemand fax service. To immediately receive an index of available releases, call 1-800-344-6495 and press 2. On the Internet, visit us on the World Wide Web at: http://www.McKesson.com EX-99 4 EX-99.2 - REGISTRATION RIGHTS AGREEMENT EXHIBIT 99.2 REGISTRATION RIGHTS AGREEMENT Dated as of January 28, 1997 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of January 28, 1997, among McKesson Corporation, a Delaware corporation (the "Company"), and the other undersigned parties hereto. 1. Introduction; Term of Agreement. The Company is a party to the separate Agreement and Plan of Merger (the "Merger Agreement"), dated as of January __, 1997, among the Company, Spider Acquisition Corporation, a Delaware corporation, General Medical Inc., a Delaware corporation ("GMI"), Kelso Investment Associates IV, L.P., a Delaware limited partnership("KIA IV"), Kelso Equity Partners II, L.P., a Delaware limited partnership ("KEP II"), Chase Equity Associates, a California limited partnership ("CEA"), John Rutledge Partners, L.P., a Delaware limited partnership ("Rutledge Partners"), Princes Gate Investors L.P., a Delaware limited partnership ("Princes Gate"), Acorn Partnership I, L.P., a Delaware limited partnership ("Acorn Partnership"), PGI Investments Limited, a British Virgin Islands corporation ("PGI"), PGI Sweden AB, a Swedish corporation ("PGI Sweden"), Gregor Von Opel, The Lewis and Patricia Kelso Trust, William A. Marquard, The Frank T. Nickell IRA, David M. Roderick, George L. Shinn, Steven B. Nielsen, F. De Wight Titus and Donald B. Garber, pursuant to which the Company has agreed, among other things, to acquire through merger GMI and, in connection therewith, to issue to the Investor Group cash and shares of common stock of the Company (the "Common Stock") as specified in the Merger Agreement. This Agreement shall become effective upon the Effective Time (as defined in the Merger Agreement). This Agreement shall terminate and be of no further force and effect on the earlier to occur of (i) the third anniversary date of the Effective Time or (ii) such time as the holders of Registrable Securities in the aggregate own less than 2% of the outstanding shares of Common Stock. Certain capitalized terms used in this Agreement are defined in section 3 hereof; references to sections shall be to sections of this Agreement. 2. Registration under Securities Act, etc. 2.1 Registration on Request. (a) Demand Request. Upon the written request of the Initiating Holder (on its own and/or on behalf of the other members of the Investor Group), requesting that the Company effect the registration under the Securities Act of all or part of such Initiating Holder's Registrable Securities or the Registrable Securities owned by other members of the Investor Group and specifying the intended method or methods of disposition thereof (a "Demand Request"), the Company will, as promptly as reasonably practicable but in no event later than 20 days after such request, give written notice of such requested registration to all registered holders of Registrable Securities who would be entitled to participate in such registration, and thereupon the Company will, subject to the terms of this Agreement, use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been so requested to register by such Initiating Holder (on its own and/or on behalf of the other members of the Investor Group) for disposition in accordance with the intended method or methods of disposition stated in such request; (ii) all other Registrable Securities the holders of which shall have made a written request to the Company for registration thereof within 30 days after the giving of such written notice by the Company (which request shall specify the intended method or methods of disposition of such Registrable Securities); (iii) all shares of Common Stock which the Company may elect to register in connection with the offering of Registrable Securities pursuant to this section 2.1; and (iv) all shares of Common Stock which the Company may be required to register in connection with "piggyback" or incidental registration rights granted to any other Person; all to the extent requisite to permit the disposition (in accordance with the intended method or methods of distribution specified in the Demand Request) of the Registrable Securities and the additional shares of Common Stock, if any, so to be registered, provided, however, that each such Demand Request shall be for a number of shares of Common Stock which represent at least 2% of the then outstanding shares of Common Stock, unless the Demand Request is the last Demand Request available hereunder, in which event the Demand Request may cover the remainder of the Registrable Securities even if such amount of Registrable Securities is less than 2% of such then outstanding shares. Subject to the provisions of section 2.1(d), the Initiating Holder (on its own and/or on behalf of the other members of the Investor Group) will have the right pursuant to this section 2.1(a) to make an aggregate of two Demand Requests. Without limiting the generality of the foregoing, the Initiating Holder shall have the right to request registration pursuant to this section 2.1 and specify that one of the methods of disposition of Registrable Securities shall be a block trade or trades involving Registrable Securities held by the Initiating Holder and/or other members of the Investor Group and that, in connection therewith, the Company shall file with the Commission a registration statement under Rule 415 covering all of the Registrable Securities to be sold in the block trade or trades. In such case, the Company shall file an appropriate shelf registration statement with the Commission as promptly as reasonably practicable and in accordance with the provisions of section 2.3. Subject to the provisions of section 2.1(d), any shelf registration which involves a block trade or block trades as an intended method of disposition, whether or not any such block trade is made, shall be considered as the exercise of one of the three Demand Requests permitted by this section 2.1(a). Notwithstanding anything herein to the contrary, it is understood and agreed that the Initiating Holder shall not be entitled to make a Demand Request for registration pursuant to this section 2.1(a) until the date which is the sixtieth day after the Effective Time and, in the event the Initiating Holder makes such a request, the Company shall use its best efforts to file a registration statement with the Commission with respect to such request not later than the thirtieth day following such request. It is furthermore understood and agreed that if the Initiating Holder makes a Demand Request on or within ten days after such sixtieth day, the provisions of section 2.1(g) shall not apply and the Company shall not be entitled to initiate a Delay Period as therein provided, except as required by applicable law arising from events outside of the control of the Company. (b) Registration Statement Form. Registrations under this section 2.1 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Company and, as shall be reasonably acceptable to the Initiating Holder of the Registrable Securities so to be registered and (ii) as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in the request for such registration. (c) Expenses. The Company will pay all Registration Expenses in connection with any registration requested pursuant to this section 2.1 (including any registration deemed not to be "effected" under section 2.1). (d) Effective Registration Statement. A registration requested pursuant to this section 2.1 shall not be deemed to have been effected (and therefore not requested for purposes of the limitations in section 2.1(a) on the number of requests for registration that can be made pursuant to section 2.1(a)) (i) unless a registration statement with respect thereto has become effective, provided that a registration which does not become effective after the Company has filed a registration statement with respect thereto solely by reason of the refusal to proceed of the Initiating Holder (other than a refusal to proceed based upon the advice of counsel relating to a matter with respect to the Company) shall be deemed to have been effected by the Company at the request of the Initiating Holder unless the Initiating Holder shall have elected to pay all Registration Expenses in connection with such registration, (ii) if, after it has become effective, such registration becomes subject to any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, or (iii) if the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than by reason of some act or omission by the Initiating Holder or any other holder of Registrable Securities. (e) Selection of Underwriters. If a requested registration pursuant to this section 2.1 involves an underwritten offering, the underwriter or underwriters thereof shall be selected by the Initiating Holder from a list of underwriters to be agreed upon by the Initiating Holder and the Company. (f) Priority in Requested Registrations. If a requested registration pursuant to this section 2.1 involves an underwritten offering, and the managing underwriter shall advise the Company in writing (with a copy to each holder of Registrable Securities requesting registration) that, in its opinion, the number of securities requested to be included in such registration (including securities of the Company which are not Registrable Securities) exceeds the number which can be sold in such offering within a price range acceptable to the holders of a majority of the Registrable Securities requested to be included in such registration, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (i) first, Registrable Securities requested to be included in such registration by any member of the Investor Group which is a holder of Registrable Securities, pro rata among such holders requesting such registration on the basis of the number of such securities then beneficially owned by such holders, (ii) second, Registrable Securities requested to be included in such registration by any other holder of Registrable Securities, pro rata among such other holders requesting such registration on the basis of the number of such securities requested to be included by such holders and (iii) third, subject to section 2.1(a) hereof, securities the Company proposes to sell and other securities of the Company included in such registration by other holders who may have "piggyback" or incidental registration rights. (g) Delay Periods. The Company shall be entitled to postpone the filing of any registration statement otherwise required to be prepared and filed by the Company pursuant to this section 2, or suspend the use of any effective registration statement under this section 2, for a reasonable period of time, but not in excess of 90 days (a "Delay Period"), if any executive officer of the Company determines that in such executive officer's reasonable good faith judgment the registration and distribution of the Registrable Securities covered or to be covered by such registration statement would materially interfere with any pending material financing, acquisition or corporate reorganization or other material corporate development involving the Company or any of its subsidiaries or would require premature disclosure thereof and promptly gives the Initiating Holder written notice of such determination, and an approximation of the period of the anticipated delay; provided, however, that (i) the aggregate number of days included in all Delay Periods during any consecutive 12 months shall not exceed the aggregate of 180 days and (ii) a period of at least 90 days shall elapse between the termination of any Delay Period and the commencement of the immediately succeeding Delay Period. Immediately upon receipt of a written notice of suspension, each holder of Registrable Securities shall cease all disposition efforts with respect to Registrable Securities held by such holder. If the Company shall so postpone the filing of a registration statement, the Holders of Registrable Shares to be registered shall have the right to withdraw the request for registration by giving written notice within 45 days after receipt of the notice of postponement or, if earlier, the termination of such Delay Period (and, in the event of such withdrawal, such request shall not be counted for purposes of determining the number of Demand Requests for registration to which the Initiating Holder of Registrable Shares is entitled pursuant to this section 2). The time period for which the Company is required to maintain the effectiveness of any registration statement shall be extended by the aggregate number of days of all Delay Periods during such registration. The Company shall not be entitled to initiate a Delay Period unless it shall (A) to the extent permitted by agreements with other security holders of the Company, concurrently prohibit sales by such other security holders under registration statements covering securities held by such other security holders and (B) in the case of a delay arising as a result of premature disclosure, in accordance with the Company's policies from time to time in effect, forbid purchases and sales in the open market by senior executives of the Company. 2.2 Incidental Registration. (a) Right to Include Registrable Securities. If the Company at any time proposes to register any of its shares of Common Stock (other than in connection with a registration of securities which are convertible or exchangeable into Common Stock) under the Securities Act (other than by a registration on Form S-4 or S-8, or any successor or similar forms and other than pursuant to section 2.1), whether or not for sale for its own account, it will each such time give prompt written notice to all holders of Registrable Securities of its intention to do so and of such holders' rights under this section 2.2. Upon the written request of any such holder made within 30 days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holder and the intended method or methods of disposition thereof), the Company will, subject to the terms of this Agreement, use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the holders thereof, to the extent requisite to permit the disposition (in accordance with the intended method or methods of distribution thereof specified in the requests of such holders) of the Registrable Securities so to be registered, by inclusion of such Registrable Securities in the registration statement which covers the securities which the Company proposes to register; provided that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registrable Securities entitled to do so to request that such registration be effected as a registration under section 2.1, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities. No registration effected under this section 2.2 shall relieve the Company of its obligation to effect any registration upon request under section 2.1, nor shall any such registration hereunder be deemed to have been effected pursuant to section 2.1. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this section 2.2, and each Requesting Holder whose Registrable Securities are included in a registration requested pursuant to this section 2.2 will pay any underwriting discounts and commissions and fees of such holder's counsel in connection therewith. (b) Priority in Incidental Registrations. If (i) a registration pursuant to this section 2.2 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, to be distributed (on a firm commitment basis) by or through one or more underwriters of recognized standing under underwriting terms appropriate for such a transaction, (ii) the Registrable Securities so requested to be registered for sale for the account of holders of Registrable Securities are not also to be included in such underwritten offering (either because the Company has not been requested so to include such Registrable Securities pursuant to section 2.4(b) or, if requested to do so, is not obligated to do so under section 2.4(b)), and (iii) the managing underwriter of such underwritten offering shall inform the Company and holders of the Registrable Securities requesting such registration by letter of its belief that the number of securities requested to be included in such registration exceeds the number which can be sold in (or during the time of) such offering, then the Company will include in such registration: (i) first, all the securities the Company proposes to sell for its own account, (ii) second all securities of any other holder who has made a demand for registration, and (iii) third, to the extent that the number of securities which the Company and any such other holders proposed to include pursuant to clauses (i) and (ii) is less than the number of securities which the Company has been advised can be sold in such offering, the number of such Registrable Securities requested to be included in such registration by the Requesting Holders pursuant to this section 2.2(a) hereof shall be allocated pro rata among all such Requesting Holders on the basis of the relative number of Registrable Securities each such holder has requested to be included in such registration. 2.3 Registration Procedures. Subject to section 2.1(a), if and whenever the Company is required to effect the registration of any Registrable Securities under the Securities Act as provided in sections 2.1 and 2.2, the Company shall, as expeditiously as reasonably possible: (i) prepare and file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations promulgated thereunder) and thereafter cause such registration statement to become and remain effective ro a period of at least 120 days, provided however that the Company may discontinue any registration of its securities which are not Registrable Securities (and, under the circumstances specified in section 2.2(a), its securities which are Registrable Securities) at any time prior to the effective date of the registration statement relating thereto; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of at least 120 days and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until the earlier of such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or such other time as is required by the Securities Act; (iii) furnish to each seller of Registrable Securities covered by such registration statement and each Requesting Holder and each underwriter, if any, of the securities being sold by such seller such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed pursuant to Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller and underwriter, if any, may reasonably request; (iv) use its best efforts to register or qualify all Registrable Securities and other securities covered by such registration statement under such other state securities laws or blue sky laws of such jurisdictions as any seller thereof and any underwriter of the securities being sold by such seller and any Requesting Holder shall reasonably request, to keep such registrations or qualifications in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such seller and underwriter to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subsection (iv) be obligated to be so qualified or to consent to general service or process in any such jurisdiction; (v) furnish to each seller of Registrable Securities and each Requesting Holder a signed counterpart, addressed to such seller, such Requesting Holder and the underwriters, if any, of: (X) an opinion of counsel for the Company (which shall be outside counsel if outside counsel is rendering such opinion in the transaction and otherwise may be the Company's inside counsel), dated the effective date of such registration statement (or, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), customary for a transaction of such type, and (Y) a "comfort" letter (or, in the case of any such Person which does not satisfy the conditions for receipt of a "comfort" letter specified in Statement on Auditing Standards No. 72, an "agreed upon procedures" letter), dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter of like kind dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities (with, in the case of an "agreed upon procedure" letter, such modifications or deletions as may be required under Statement on Auditing Standards No. 35) and, in the case of the accountants' letter, such other financial matters customarily covered in a transaction of such type; (vi) notify the holders of Registrable Securities and the managing underwriter or underwriters, if any, promptly: (V) when the registration statement, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement has been filed, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective: (W) of any request by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information; (X) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings by any Person for that purpose; (Y) if at any time the representations and warranties of the Company made as contemplated by section 2.4 below cease to be true and correct; and (Z) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose; (vii) notify each seller of Registrable Securities covered by such registration statement and each Requesting Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon the Company's discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of any such seller or Requesting Holder promptly prepare and furnish to such seller or Requesting Holder and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (viii) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible moment; (ix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and, if required, make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first day of the Company's first full calendar quarter after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, and will use its best efforts to furnish to each such seller and each Requesting Holder at least one business day prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any thereof to which any such seller or any Requesting Holder shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (x) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; and (xi) use its best efforts to list all Registrable Securities covered by such registration statement on any securities exchange on which any of the securities of the same class as the Registrable Securities are then listed. The Company will not file any registration statement or amendment thereto or any prospectus or any supplement thereto to which the holders of at least a majority of the Registrable Securities covered by such registration statement or the underwriter or underwriters, if any, shall reasonably object. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in paragraph (viii) of this section 2.3, such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by paragraph (viii) of this section 2.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the period mentioned in paragraph (ii) of this section 2.3 shall be extended by the length of the period from and including the date when each seller of any Registrable Securities covered by such registration statement shall have received such notice to the date on which each such seller has received the copies of the supplemented or amended prospectus contemplated by paragraph (viii) of this section 2.3. If any such registration statement refers to any holder of Registrable Securities by name or otherwise as the holder of any securities of the Company, then such holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such holder, to the effect that the holding by such holder of such securities does not necessarily make such holder a "controlling person" of the Company within the meaning of the Securities Act is not to be construed as a recommendation by such holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such holder. 2.4 Underwritten Offerings: (a) Requested Underwritten Offerings. If requested by the underwriters for any underwritten offering by holders of Registrable Securities pursuant to a registration requested under section 2.1, the Company will enter into an underwriting or similar agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company, each such holder and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of this type, including, without limitation, indemnities to the effect and to the extent provided in section 2.7. The holders of the Registrable Securities will cooperate with the Company in the negotiation of the underwriting or similar agreement and will give consideration to the reasonable suggestions of the Company regarding the form thereof, provided that nothing herein contained shall diminish the foregoing obligations of the Company. The holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. No underwriting or similar agreement shall require any holder of Registrable Securities to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties or agreements regarding such holder, such holder's Registrable Securities and such holder's intended method or methods of distribution and any other representation required by law or to make any agreements with the Company or the underwriters with respect to indemnification of any Person or the contribution obligations of any Person that would impose any obligation which is broader than the indemnity furnished by such holder pursuant to the provisions of section 2.7. In addition, the Requesting Holders shall cooperate with the Company in an effort to provide that any such agreement will contain a provision modifying the indemnification of the underwriter to the effect that the Company will not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities with respect to any preliminary prospectus, to the extent that any such loss, claim, damage or liability of such underwriter results from such underwriter having sold Registrable Securities to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus, if the Company has previously furnished thereof to such underwriter and such final prospectus as then amended or supplemented, has corrected any such misstatement or omission. (b) Incidental Underwritten Offerings. If the Company at any time proposes to register any of its securities under the Securities Act as contemplated by section 2.2 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registrable Securities as provided in section 2.2 and subject to the provisions of section 2.2(b), use its best efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters. The holders of Registrable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. Any such holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law or to make any agreements with the Company or the underwriters with respect to indemnification of any Person or the contribution obligations of any Person that would impose any obligation which is broader than the indemnity furnished by such holder pursuant to the provisions of section 2.7. In addition, the Requesting Holders shall cooperate with the Company in an effort to provide that any such agreement will contain a provision modifying the indemnification of the underwriter to the effect that the Company will not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities with respect to any preliminary prospectus, to the extent that any such loss, claim, damage or liability of such underwriter results from such underwriter having sold Registrable Securities to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus, if the Company has previously furnished thereof to such underwriter and such final prospectus as then amended or supplemented, has corrected any such misstatement or omission. (c) Holdback Agreements. (i) Each holder of Registrable Securities agrees by acquisition of such Registrable Securities, if and to the extent so required by the managing underwriter, not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of any securities of the Company, during the 7 days prior to and the 90 days after any underwritten registration pursuant to section 2.1 or 2.2 has become effective, except as part of such underwritten registration, whether or not such holder participates in such registration, provided that the foregoing restrictions shall not apply with regard to any member of the Investor Group in a distribution of Registrable Securities to its partners or to the transfer to any Affiliate of such Persons or to any other transferee in a private transaction not requiring registration under the Securities Act, or to any bona fide pledge of such Registrable Securities, provided that such Affiliate or other transferee and/or lender or creditor acknowledges in writing that it is bound by the provisions of this section 2.4(c). Each holder of Registrable Securities agrees that the Company may instruct its transfer agent to place stop transfer notations in its records to enforce this section 2.4(c). (ii) The Company agrees (X) if so required by the managing underwriter not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of its equity securities or securities convertible into or exchangeable or exercisable for any of such securities during the seven days prior to and the 90 days after any underwritten registration pursuant to section 2.1 or 2.2 has become effective, except as part of such underwritten registration and except pursuant to registrations on Form S-4, S-8, or any successor or similar forms thereto, and (Y) to cause each holder of its securities purchased from the Company at any time after the date of this Agreement (other than in a public offering) to agree not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of such securities during such periods. (d) Participation in Underwritten Offerings. No Person may participate in any underwritten offering hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the Company and the holders of a majority of Registrable Securities to be included in such underwritten offering and (ii) completes and executes all questionnaires, indemnities, underwriting agreements and other documents (other than powers of attorney) required under the terms of such underwriting arrangements. Notwithstanding the foregoing, no underwriting agreement (or other agreement in connection with such offering) shall require any holder of Registrable Securities to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties regarding such holder, such holder's Registrable Securities and such holder's intended method or methods of distribution and any other representation required by law or to make any agreements with the Company or the underwriters with respect to indemnification of any Person or the contribution obligations of any Person that would impose any obligation which is broader than the indemnity furnished by such holder pursuant to the provisions of section 2.7. 2.5 Preparation: Reasonable Investigation. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company will give the holders of Registrable Securities registered under such registration statement, their underwriters, if any, each Requesting Holder and their respective counsel and accountants, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such reasonable access during normal business hours to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 2.6 Rights of Requesting Holders. The Company will not file any registration statement relating to Common Stock under the Securities Act (other than by a registration on Form S-4 or Form S-8 or in connection with a registration of securities which are convertible into or exchangeable for Common Stock), unless it shall first have given to each holder of Registrable Securities (who would be entitled to participate in such registration) at the time outstanding (other than any such Person who acquired all such securities held by such Person in a public offering registered under the Securities Act or as the direct or indirect transferee of shares initially issued in such an offering), at least 30 days prior written notice thereof. Any such Person who shall so request within 30 days after such notice (a "Requesting Holder") shall have the rights of a Requesting Holder provided in sections 2.3, 2.5 and 2.7. In addition, if any such registration statement refers to any Requesting Holder by name or otherwise (other than through a document filed by or on behalf of any Requesting Holder which is incorporated by reference) as the holder of any securities of the Company, then such holder shall have the right to require (a) the insertion therein of language, in form and substance satisfactory to such holder, to the effect that the holding by such holder of such securities does not necessarily make such holder a "controlling person" of the Company within the meaning of the Securities Act and is not to be construed as a recommendation by such holder of the investment quality of the Company's debt or equity securities covered thereby and that such holding does not imply that such holder will assist in meeting any future financial requirements of the Company, or (b) in the event that such reference to such holder by name or otherwise is not required by the Securities Act or any rules and regulations promulgated thereunder, the deletion of the reference to such holder. 2.7 Indemnification. (a) Indemnification by the Company. In the event of any registration of any securities of the Company under the Securities Act, the Company will, and hereby does agree to, indemnify and hold harmless (i) in the case of any registration statement filed pursuant to section 2.1 or 2.2, the holder of any Registrable Securities covered by such registration statement and its partners, if any, its and their respective directors, officers, partners, agents and Affiliates, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such holder or any such underwriter within the meaning of the Securities Act, and (ii) in the case of any registration statement of the Company, any Requesting Holder and its partners, if any, its and their respective directors, officers, partners, agents and Affiliates and each other Person, if any, who controls such Requesting Holder within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder or Requesting Holder or partner thereof or any such director or officer or partner or agent or Affiliate or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse such holder, such Requesting Holder, their respective partners and each such director, officer, partner, agent, Affiliate, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding, provided, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such holder or Requesting Holder, as the case may be, specifically stating that it is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or such Requesting Holder or partner thereof or any such director, officer, partner, agent, Affiliate, underwriter or controlling person and shall survive the transfer of such securities by such holder. The indemnity agreement contained in this section 2.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of the Company. (b) Indemnification by the Sellers. The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to section 2.3, that the Company shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities, to indemnify severally and hold harmless (in the same manner and to the same extent as set forth in subsection (a) of this section 2.7) the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. The indemnity agreement provided for in this section 2.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of such seller (which consent shall not be unreasonably withheld). The parties hereto hereby acknowledge and agree that, unless otherwise expressly agreed to in writing by holders of Registrable Securities to the contrary, for all purposes of this Agreement the only information furnished or to be furnished to the Company for use in any registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto are statements specifically relating to (i) transactions between such holder and its Affiliates, on the one hand, and the Company, on the other hand, (ii) the beneficial ownership of shares of Common Stock by such holders and its Affiliates,(iii) the name and address of such holder and (iv) solely in offerings that are underwritten offerings, the method or methods of distribution of such holders. The indemnity provided for under this section 2.7(b) shall be limited in amount to the net amount of proceeds actually received by such seller from the sale of Registrable Securities pursuant to such registration statement. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subsections of this section 2.7, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subsections of this section 2.7, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement of any such action which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability, or a covenant not to sue, in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment or enter into any settlement of any such action the defense of which has been assumed by an indemnifying party without the consent of such indemnifying party. (d) Indemnification Payments. The indemnification required by this section 2.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (e) Contribution. If the indemnification provided for in the preceding subsections of this section 2.7 is unavailable to an indemnified party in respect of any expense, loss, claim, damage or liability referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such expense, loss, claim, damage or liability in such proportion as is appropriate to reflect the relative benefits and the relative fault of the Company on the one hand and the holder or underwriter, as the case may be, on the other in connection with the distribution of the Registrable Securities and the statements or omissions which result in any expense, loss, damage or liability, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the holder or underwriter, as the case may be, on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company, by the holder or by the underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the holders of Registrable Securities agree that it would not be just and equitable if contribution pursuant to this subsection (e) were determined by pro rata allocation (even if the holders, Requesting Holders and any underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in the preceding sentence and subsection (c) of this section 2.7, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), no holder of Registrable Securities or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any such holder the net proceeds received by such holder from the sale of Registrable Securities or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. No party shall be liable for contribution under this section 2.7 except to the extent and under such circumstances as such party would have been liable to indemnify under this section 2.7 if such indemnification were enforceable under applicable law. 3. Definitions. As used herein, unless the context otherwise requires, the following terms have the following respective meanings. Affiliate: As defined in Rule 12b-2 promulgated under the Exchange Act. Beneficially Own or Beneficial Ownership: With respect to any securities shall mean having "beneficial ownership" of such securities (as determined pursuant to rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a person shall include securities Beneficially Owned by all Affiliates of such Person and all other Persons with whom such person would constitute a "group" within the meaning of Section 13 (d) of the Exchange Act and the rules promulgated thereunder. Commission: The Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. Common Stock: As defined in section 1. Company: As defined in the introductory paragraph of this Agreement. Delay Period: As defined in section 2.1(g). Demand Request: As defined in section 2.1(a). Effective Time: As defined in the Merger Agreement. Exchange Act: The Securities Exchange Act of 1934, or any similar Federal Statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934 shall include a reference to the comparable Section, if any, of any such similar federal statute. Initiating Holder: KIA IV. Investor Group: Collectively, KIA IV, KEP II, CEA, Rutledge Partners, Princes Gate, Acorn Partnership, PGI, PGI Sweden, Gregor Von Opel, The Lewis and Patricia Kelso Trust, William A. Marquard, The Frank T. Nickell IRA, David M. Roderick, George L. Shinn, Steven B. Nielsen, F. De Wight Titus and Donald B. Garber. KIA IV: As defined in section 1. Merger Agreement: As defined in section 1. Person: A corporation, an association, a partnership, an organization, business, an individual, a governmental or political subdivision thereof or a governmental agency. Purchase Notice: As defined in section 15. Registrable Securities: The Common Stock issued pursuant to the transactions contemplated by the Merger Agreement and any securities issued or issuable with respect to any Common Stock by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities when (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities have been disposed of in accordance with such registration statement, (b) they shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) a disposition of all of them by the holder thereof shall not require registration or qualification of them under the Securities Act or shall be eligible for disposition under Rule 144, or (d) they shall have ceased to be outstanding. Registration Expenses: All expenses incident to the Company's performance of or compliance with section 2, including, without limitation, all registration, filing and NASD fees, all stock exchange listing fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, and any fees and disbursements of underwriters customarily paid by issuers or sellers or securities, but excluding underwriting discounts and commissions and transfer taxes, if any. Requesting Holder: As defined in section 2.6. Sale Notice: As defined in section 15. Securities Act: The Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as of the same shall be in effect at the time. References to a particular section of the Securities Act of 1933 shall include a reference to the comparable Section, if any, of any such similar Federal Statute. Standstill Period: As defined in section 16. Transfer: A transfer, sale, pledge, hypothecation, encumbrance, assignment or other conveyance or disposition except an assignment by operation of law. 4. Rule 144. The Company shall timely file the reports required to be filed by it under the Securities Act and the Exchange Act (including but not limited to the reports under sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder and will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended form time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities, the Company will (a) deliver to such holder a written statement as to whether it has complied with the requirements of this section 4 or (b) take such action as is necessary to allow transfer of such Registrable Securities in accordance with the provisions of Rule 144(k) (or any successor provision) under the Securities Act including without limitation, if necessary, the issuance of new certificates for such Registrable Securities bearing a legend restricting further transfer. 5. Amendments and Waivers. This Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the holder or holders of more than 50% of the shares of Registrable Securities and in the case of any such amendment, action or omission to act in respect of the first sentence of Section 4, the written consent of each holder affected thereby; provided however, for so long as any shares of Common Stock are held by any member of the Investor Group, any amendment, action or omission to act is also subject to the prior written consent of KIA IV. Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any consent authorized by this section 5, whether or not such Registrable Securities shall have been marked to indicate such consent. 6. Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election, be treated as the holder of such Registrable Securities for purposes of any request or other action by any holder or holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any holder or holders of Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. 7. Notices. Except as otherwise provided in this Agreement, all notices, requests and other communications to any Person provided for hereunder shall be in writing and shall be given to such Person (a) in the case of any member of the Investor Group, addressed to such party care of Kelso & Company, 320 Park Avenue, 24th Floor, New York, New York 10022 to the attention of James J. Connors, III, Esquire or at such other address as such party shall have furnished to the Company in writing, (b) in the case of any other holder of Registrable Securities, at the address that such holder shall have furnished to the Company in writing, or, until any such other holder so furnishes to the Company an address, then to and at the address of the last holder of such Registrable Securities who has furnished an address to the Company or (c) in the case of the Company, at McKesson Corporation, One Post Street, San Francisco, California 94104, to the attention of its General Counsel, or at such other address, or to the attention of such other officer, as the Company shall have furnished to each holder of Registrable Securities at the time outstanding. Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mail with first class postage prepaid, addressed as aforesaid or (ii) if given by any other means (including without limitation, by air courier), when delivered at the address specified above, provided that any such notice, request or communication to any holder of Registrable Securities shall not be effective until received. 8. Assignment. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. No holder of Registrable Securities shall assign this Agreement or any rights hereunder without the prior written consent of the Company (which consent may be withheld for any reason in the sole discretion of the Company), except that this Agreement and any rights hereunder may be assigned by operation of law. 9. Descriptive Headings. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof. 10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS. 11. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. 12. Entire Agreement. This Agreement embodies the entire agreement and understanding between the Company and each other party hereto relating to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. 13. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF DELAWARE OR OF THE UNITED STATES OF AMERICA FOR THE STATE OF DELAWARE AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF. EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF TO SUCH PARTY BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 7. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY AND ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENCE WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. 14. Severability. If any provision of this Agreement, or the application of such provisions to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provisions to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. 15. Restrictions on Transfer; Disposition of Shares. (a) Registered Offerings. In the event of any public sales or distribution of the Registrable Securities effected pursuant to Section 2 of this Agreement, the Investor Group shall use their reasonable best efforts to effect, or cause to be effected, such public sale or distribution, so that, without the prior written consent of the Company (which shall not be unreasonably withheld), no participant or purchaser would Beneficially Own in the aggregate 4% or more of all outstanding Common Stock of the Company. The Investor Group agrees to use their respective reasonable efforts in cooperation with the Company to effect as broad a disposition in any such public sale or distribution as is reasonably practicable. (b) Limitations on Dispositions. The Investor Group agrees that during the Standstill Period (as defined), they will not, and will cause their Affiliates not to, directly or indirectly, without the prior written consent of the Company (which consent shall not be unreasonably withheld), transfer, sell, pledge, hypothecate, encumber, assign or otherwise dispose of or convey a legal or beneficial interest ("Transfer") (A) to any Person, an aggregate of 2% or more of the Common Stock of the Company then outstanding; or (B) to any person, any of the Common Stock of the Company if, to the knowledge of the Investor Group or any of their Affiliates, after due inquiry which is reasonable in the circumstances, immediately following such transaction the acquiror of such Common Stock of the Company, together with its Affiliates, would Beneficially Own in the aggregate 4% or more of the Common Stock of the Company then outstanding; provided, however, the foregoing limitations on Transfer shall not apply to any Transfer to a passive institutional investor such as (x) a "qualified institutional buyer" (as such term is defined in Rule 144A of the Securities Act) or (y) an "accredited" investor (within the meaning of Rule 501(a)(1), (2), (3) or (7) of the Securities Act) which, in each case, would be eligible to file a Schedule 13G with respect to the shares of Common Stock owned by such Person and provided, further, that such person has not disclosed, pursuant to Item 4 of Schedule of 13D, an intent, or reserved the right, to engage in any change in control transaction or to engage in a contested proxy or consent solicitation or to otherwise seek to control or influence the business, management or policies of the Company. (c) Right of First Refusal; Procedures. The Investor Group shall, prior to effecting any Transfer of the Common Stock of the Company representing more than 1% of the outstanding shares of Common Stock to any Person, offer the Company a right of first refusal to purchase the shares proposed to be Transferred on the following terms. The Investor Group shall provide the Company with written notice (the "Sale Notice") of any proposed sale, which Sale Notice shall contain the identity of the purchaser, the number of shares of the Common Stock of the Company proposed to be Transferred to such purchaser, the purchase price for such shares and the form of consideration payable for such shares. The Sale Notice shall also contain an irrevocable offer to sell the shares subject to such Sale Notice to the Company for cash at a price equal to the price contained in such Sale Notice. The Company shall have the right and option, by written notice delivered to the Investor Group (the "Purchase Notice") within 15 days of receipt of the Sale Notice, to accept such offer as to all, but not less than all, of the Common Stock of the Company subject to such Sale Notice. The Company shall have the right to assign to any Person such right to purchase the shares subject to the Sale Notice. In the event the Company (or its assignee) elects to purchase the shares subject to the Sale Notice, the closing of the purchase of the Common Stock of the Company shall occur at the principal office of the Company (or its assignee) on or before the 10th day following such Shareholder's receipt of the Purchase Notice. In the event the Company does not elect to purchase the shares subject to the Sale Notice, such Shareholder shall be free, for a period of 60 days following the receipt of notice from the Company of its election not to purchase such shares or, in the absence of any such notice, for a period of 60 days following the 15th day after receipt by the Company of the Sale Notice, to sell the shares subject to the Sale Notice in accordance with the terms of, and to the person identified in, the Sale Notice. If such sale is not effected within such 60 day period such shares shall remain subject to the provisions of this Agreement. Notwithstanding the foregoing, the right of first refusal set forth in this Section shall not apply to the sale by the Investor Group of the Common Stock of the Company (i) made pursuant to section 2 of this Agreement, or (ii) made in a tender offer, merger or other similar business combination transaction, whether or not approved by the Board of Directors of the Company. 16. Standstill and Related Provisions. The Investor Group agrees that for a period commencing on the date of this Agreement and terminating on the third anniversary of the Effective Time (the "Standstill Period"), without the prior written consent of the Board of Directors of the Company specifically expressed in a resolution adopted by a majority of the directors of the Company, the Investor Group will not, directly or indirectly, alone or in concert with others: (a) acquire, offer or propose to acquire, or agree to acquire any additional shares of Common Stock of the Company (or its rights to acquire such Common Stock), except, in any case, by way of stock dividends or other distributions or rights offerings made available to holders of any shares of the Common Stock of the Company generally, share-splits, reclassifications, recapitalizations, reorganizations and any other similar action taken by the Company; (b) make, or in any way participate, directly or indirectly, in any "solicitation" (as such term is used in the proxy rules of the Securities and Exchange Commission as in effect on the date hereof) of proxies or consents (whether or not relating to the election or removal of directors), seek to advise, encourage or influence any Person with respect to the voting of any of the Common Stock of the Company, initiate, propose or otherwise "solicit" (as such term is used in the proxy rules of the Commission as in effect on the date hereof) shareholders of the Company for the approval of shareholder proposals, whether made pursuant to Rule 14a-8 of the Exchange Act or otherwise, or induce or attempt to induce any other Person to initiate any such shareholder proposal or otherwise communicate generally with the Company's shareholders; (c) otherwise act, alone or in concert with others, to control or seek to control or influence or seek to influence the management, Board of Directors or policies of the Company; (d) seek, propose, or make any public statement with respect to, any merger, consolidation, business combination, tender or exchange offer, sale or purchase of assets, sale or purchase of securities, dissolution, liquidation, reorganization, restructuring, recapitalization, change in capitalization, change in corporate structure or business or similar transaction involving the Company or its subsidiaries; (e) form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any of the Common Stock of the Company, other than groups consisting solely of members of the Investor Group; and (f) request or cause to be requested for any purpose, the Company's stock ledger, a list of the Company's shareholders, or the Company's other books and records; or to call or seek to have called any meeting of the shareholders of the Company or execute any written consent with respect to the Common Stock of the Company. Notwithstanding the foregoing, Affiliates of the Investor Group in the ordinary course of the conduct of such Affiliates' business may engage in investment banking activities and purchases and sales of Common Stock and other securities of the Company as broker-dealers or otherwise. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. MCKESSON CORPORATION By: /s/ Ivan D. Meyerson KELSO INVESTMENT ASSOCIATES IV, L.P. By: /s/ Thomas R. Wall, IV KELSO EQUITY PARTNERS II, L.P. By: /s/ Thomas R. Wall, IV CHASE EQUITY ASSOCIATES, L.P. By: Chase Capital Partners By: /s/ Brian Richmond, Partner JOHN RUTLEDGE PARTNERS, L.P. By: /s/ John Rutledge PRINCES GATE INVESTORS, L.P. By: /s/ David R. Powers PG Investors, Inc. as General Partner ACORN PARTNERSHIP I, L.P. By: /s/ David R. Powers PG Investors, Inc. as General Partner PGI INVESTMENTS LIMITED By: /s/ David R. Powers PG Investors, Inc. as Attorney-in-Fact PGI SWEDEN AB By: /s/ David R. Powers PG Investors, Inc. as Attorney-in-Fact /s/ David R. Powers, Attorney-in-Fact Gregor Von Opel THE LOUIS AND PATRICIA KELSO TRUST By: /s/ Patricia H. Kelso, Trustee /s/ William A. Marquard William A. Marquard THE FRANK T. NICKELL IRA By: /s/ Annamarie Simonelli Assistant V.P.- Fleet Bank /s/ David M. Roderick David M. Roderick /s/ George L. Shinn George L. Shinn /s/ Steven B. Nielsen Steven B. Nielsen /s/ F. De Wight Titus F. De Wight Titus /s/ Donald B. Garber Donald B. Garber -----END PRIVACY-ENHANCED MESSAGE-----