EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ON ASSIGNMENT, INC.,
ON ASSIGNMENT ACQUISITION CORP.,
HEALTH PERSONNEL OPTIONS CORPORATION
AND
CERTAIN STOCKHOLDERS OF
HEALTH PERSONNEL OPTIONS CORPORATION
MARCH 27, 2002
TABLE OF CONTENTS
PAGE
Article I
Definitions
1.1 Definitions.............................................................................................1
Article II
Merger
2.1 The Merger..............................................................................................7
2.2 Closing and Effective Time of the Merger................................................................8
2.3 Effects of the Merger...................................................................................8
Article III
Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates
3.1 Effect on Company Capital Stock.........................................................................8
3.2 Exchange of Certificates................................................................................9
3.3 Return of Merger Consideration.........................................................................11
Article IV
Representations and Warranties
4.1 Representations and Warranties of the Company and the Management Stockholders..........................13
4.2 Representations and Warranties of Parent and Sub.......................................................30
Article V
Covenants Relating to Conduct of Business
5.1 Conduct of Business by the Company Pending the Merger..................................................38
5.2 No Solicitation; Other Offers..........................................................................41
Article VI
Additional Agreements
6.1 Access to Information..................................................................................41
6.2 Legal Conditions to Merger.............................................................................42
6.3 Stock Options and Warrant..............................................................................43
6.4 Payment of Accrued Dividends...........................................................................44
6.5 Registration Rights Agreement..........................................................................44
6.6 Agreement to Defend....................................................................................44
6.7 Public Announcements...................................................................................44
6.8 Other Actions..........................................................................................44
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(continued)
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6.9 Advice of Changes......................................................................................45
6.10 Voting Agreements......................................................................................45
6.11 Stockholder Vote.......................................................................................45
6.12 Registration of Form S-3...............................................................................45
6.13 Limitation on Michael's Representations and Warranties.................................................45
Article VII
Conditions Precedent
7.1 Conditions to Each Party's Obligation to Effect the Merger.............................................45
7.2 Conditions to Obligations of Parent and Sub............................................................46
7.3 Conditions to Obligations of the Company...............................................................47
Article VIII
Survival of Representations and Warranties; Indemnification
8.1 Survival of Representations and Warranties.............................................................48
8.2 Indemnification by the Company and the Company Stockholders............................................48
8.3 Indemnification by Parent..............................................................................49
8.4 Damages................................................................................................50
8.5 Procedure..............................................................................................50
8.6 Limitation on Indemnification After the Effective Time.................................................51
Article IX
Termination and Amendment
9.1 Termination............................................................................................53
9.2 Effect of Termination..................................................................................54
9.3 Amendment..............................................................................................54
9.4 Extension; Waiver......................................................................................55
Article X
General Provisions
10.1 Payment of Expenses....................................................................................55
10.2 Survival of Representations, Warranties and Agreements.................................................55
10.3 Notices................................................................................................55
10.4 Interpretation.........................................................................................58
10.5 Counterparts...........................................................................................58
10.6 Entire Agreement; No Third-Party Beneficiaries.........................................................58
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(continued)
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10.7 Governing Law..........................................................................................58
10.8 No Remedy in Certain Circumstances.....................................................................59
10.9 Assignment.............................................................................................59
10.10 Enforcement of the Merger Agreement....................................................................59
10.11 Performance by Sub.....................................................................................59
10.12 Severability...........................................................................................59
10.13 Titles and Section Headings............................................................................59
10.14 Further Assurances.....................................................................................60
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 27, 2002 (this "MERGER
AGREEMENT"), among On Assignment, Inc., a Delaware corporation ("PARENT"), On
Assignment Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("SUB"), Health Personnel Options Corporation, an Ohio
corporation (the "COMPANY"), Xxxxxxx X. Xxxxxxx ("XXXXXXX") and J. Xxxxxxx
XxXxxxx ("DEVILLE", and collectively with Xxxxxxx, the "MANAGEMENT
STOCKHOLDERS") and for purposes of Sections 3.3, 6.5, 6.10 and Article VIII only
of this Merger Agreement, River Cities Capital Fund Limited Partnership, a
Delaware limited partnership, River Cities Capital Fund II Limited Partnership,
a Delaware limited partnership and Xxxxxxxxxx Management Company Limited
Partnership, an Ohio limited partnership (collectively, the "VENTURE
STOCKHOLDERS").
WHEREAS, each of the Boards of Directors of Parent, Sub and the Company
deem it advisable and in the best interests of its corporation and its
stockholders to consummate the business combination transaction provided for
herein;
WHEREAS, the combination of Parent and the Company is to be effected by
the terms of this Merger Agreement through a merger as described below (the
"MERGER");
WHEREAS, pursuant to the Merger, among other things, the outstanding
shares of Company Capital Stock are to be converted into the right to receive
the Merger Consideration upon the terms and conditions set forth herein;
WHEREAS, immediately prior to the execution of this Merger Agreement,
the Board of Directors of the Company has approved the Merger in accordance with
the requirements of Ohio law and the charter documents of the Company;
WHEREAS, Parent, Sub, the Company, and the Management Stockholders
desire to make certain representations, warranties, covenants and agreements in
connection with the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"), and the regulations
promulgated thereunder.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes of this Merger Agreement:
(a) "ACQUISITION PROPOSAL" means any proposal or offer, other
than a proposal or offer by Parent or any of its Affiliates, for a tender or
exchange offer, a merger,
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consolidation or other business combination involving the Company or any
proposal to acquire in any manner a substantial (10% or more) equity interest
in, or substantially all of the assets of, the Company.
(b) "AFFILIATE" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person.
(c) "AGGREGATE COMPANY CAPITAL STOCK" means the sum of (i) the
number of shares of Company Common Stock outstanding immediately prior to the
Effective Time, plus (ii) the number of Company Common Stock Equivalents
outstanding immediately prior to the Effective Time.
(d) "AVERAGE PRICE" means the average of the per share daily
closing price of Parent Common Stock as reported on Nasdaq during the ten
consecutive trading days ending on the trading day immediately prior to the date
on which this Merger Agreement is executed.
(e) "BUSINESS DAY" means any day other than (i) Saturday or
Sunday or (ii) any other day on which banks in California or Ohio are permitted
or required to be closed.
(f) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.).
(g) "COMPANY CAPITAL STOCK" means the shares of Company Common
Stock and Company Preferred Stock.
(h) "COMPANY COMMON STOCK" means the shares of the Company's
common stock, no par value.
(i) "COMPANY COMMON STOCK EQUIVALENTS" means, with respect to any
share of Company Preferred Stock, that number of shares of Company Common Stock
into which such share is convertible immediately prior to the Effective Time.
(j) "COMPANY DEBT" means the sum of all outstanding notes
payable, capitalized leases, overdrafts (excluding overdrafts that are used
solely as working capital to pay for bona fide accounts payable of the Company,
including related accrued payroll and accrued withholding taxes incurred in the
Ordinary Course of Business) and lines of credit of the Company and the Company
Sub, less all cash and cash equivalents of the Company and the Company Sub, all
as reflected on the Company's balance sheet as of February 28, 2002, plus (A)
the sum of (i) the Investment Banking Fees, (ii) the Management Bonus Payments,
less the amount of the aggregate accrued bonuses on the books of the Company at
February 28, 2002, for Xxxx and DeVille, which are verified to the satisfaction
of Parent (iii) one-half of the filing fees incurred by Parent and the Company
in connection with the HSR filing, (iv) the payment in cash of any dividends in
respect of the Company Preferred Stock, (v) all payments to optionholders in
connection with the cash out of their options (vi) any loans or advances to
employees which have not been repaid by the Closing Date, (vii) all payments
made between February 28, 2002 and the Closing Date in connection with any
transaction by the Company not in the Ordinary Course of Business, including all
payments to Xxxxxxx pursuant to the Xxxxxxx Agreement, (viii) all
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income, withholding, payroll and excise taxes payable by the Company in
connection with the Management Bonus Payments, the cash out of the Vested
Options, the exercise of the Vested Options (but only to the extent such taxes
have not been withheld by the Company from any such payment or in connection
with any such transaction or have otherwise been paid to the Company in
connection with any such transaction) and/or the Warrant (as defined in Section
4.1(c)(i)) or arising out of or related to any other transactions of the Company
not in the Ordinary Course of Business and (ix) all other fees and expenses,
including, without limitation, legal fees, incurred by the Company in connection
with this Merger Agreement and the transactions contemplated hereunder, less (B)
any cash received by the Company upon the exercise of the Vested Options or the
Warrant.
(k) "COMPANY DISCLOSURE LETTER" means the disclosure letter to be
delivered by the Company to Parent and Sub in connection with this Merger
Agreement.
(l) "COMPANY INTANGIBLE PROPERTY" means all trademarks, trade
names, patents, service marks, brand marks, brand names, computer programs,
database, industrial designs, know how, trade secrets, copyrights and other
intellectual property rights that the Company uses in its business operations.
(m) "COMPANY PREFERRED STOCK" means the shares of the Company's
Series A Preferred Stock and Series B Preferred Stock.
(n) "COMPANY STOCKHOLDERS" means (i) the Management Stockholders,
(ii) those certain non-management stockholders of the Company identified on
Exhibit A hereto, including the Venture Stockholders, and (iii) Xxxxxxx Xxxx
("Xxxx") ((ii) and (iii) are collectively referred to herein as the
"NON-MANAGEMENT STOCKHOLDERS").
(o) "COMPANY SUB" means Nurse Bridge Consultants, LLC, a limited
liability company organized under the laws of Ohio.
(p) "CONTRACT" means any agreement, contract, obligation, promise
or undertaking (whether written or oral and whether express or implied) that is
legally binding.
(q) "DGCL" means the Delaware General Corporation Law.
(r) "ENCUMBRANCE" means any mortgage, pledge, lien (statutory or
other), security interest, charge, claim, restriction on transfer, restriction
on conveyance, assignment or license, or conditional sale or other title
retention device or arrangement (including, without limitation, a capital
lease), of any kind or any nature whatsoever, or restriction on the creation of
any of the foregoing, whether relating to any property or right or the income or
profits therefrom.
(s) "ENVIRONMENTAL LAW" means any applicable law regulating,
prohibiting or requiring the notification of any Releases into any part of the
natural environment, pertaining to the protection of natural resources, the
environment and public and employee health and safety, or governing or
regulating the use, storage, handling, transportation, treatment, processing,
disposal or generation of any Hazardous Materials, including, without
limitation, CERCLA, the Hazardous Materials Transportation Act (49 U.S.C.
Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Water Act
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(33 U.S.C. Section 1251 et seq.), the Clean Air Act (33 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 7401 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
seq.), Emergency Planning and Community Right to Know Act (42 U.S.C. Section
11001 et seq.), Safe Drinking Water Act (Section 42 U.S.C. Section 300 et seq.)
and the regulations promulgated pursuant thereto, and all other applicable Legal
Requirements promulgated pursuant thereto, as such Legal Requirements have been
and may be amended or supplemented through the Closing Date.
(t) "ESCROW ACCOUNT" means the escrow account established in
accordance with, and subject to the terms of, the Escrow Agreement.
(u) "ESCROW AGENT" means an independent institution that provides
escrow services and which will be selected by Parent and the Company prior to
the Closing and any successor pursuant to the Escrow Agreement.
(v) "ESCROW AGREEMENT" shall mean the Escrow Agreement in the
form attached hereto as Exhibit H.
(w) "ESCROW AMOUNT" means that portion of the Merger
Consideration equal to $15 million to be transferred at the Effective Time to
the Escrow Agent for immediate deposit into the Escrow Account; 50% of such
amount shall be paid in cash from the Cash Merger Consideration and 50% shall be
paid in the form of Parent Company Stock received as Merger Consideration (such
Parent Common Stock to be valued at the Average Price of Parent Common Stock).
(x) "GAAP" means United States generally accepted accounting
principles as of the date hereof.
(y) "GOVERNMENTAL ENTITY" means any federal, state, local or
non-U.S. court, administrative agency or commission or other governmental
authority or instrumentality.
(z) "HAZARDOUS MATERIAL" means any substance, material or waste
which is regulated pursuant to any Environmental Law by any Governmental Entity
in the jurisdictions in which the applicable party conducts business, or in the
United States, including, without limitation, any material or substance which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste" or "restricted hazardous waste," "contaminant,"
"pollutant," "toxic waste" or "toxic substance" under any provision of
Environmental Law.
(aa) "HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
(bb) "INVESTMENT BANKING FEES" means all the fees incurred from
SunTrust Xxxxxxxx Xxxxxxxx Capital Markets, and any other investment banker,
broker or advisor, by the Company and the Company Stockholders in connection
with the Merger and the transactions contemplated hereunder.
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(cc) "KNOWLEDGE OF THE COMPANY" means, with respect to any matter
stated herein to be to the "knowledge of the Company or the Management
Stockholders" or similar language, the actual knowledge of the Chairman of the
Board, the Chief Executive Officer, President, any Vice President or Controller
of the Company, or the actual knowledge of any of the Management Stockholders.
(dd) "KNOWLEDGE OF PARENT" means, with respect to any matter
stated herein to be to the "knowledge of Parent" or similar language, the actual
knowledge of the Chairman of the Board, the Chief Executive Officer, President,
any Vice President, Chief Financial Officer or Controller of Parent.
(ee) "LEGAL REQUIREMENT" means any federal, state, local,
municipal, foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.
(ff) "LIABILITY" means, with respect to any Person, any liability
or obligation of such Person of any kind, character or description, whether
known or unknown, absolute or contingent, accrued or unaccrued, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined, determinable or
otherwise, and whether or not the same is required to be accrued on the
financial statements of such Person.
(gg) "LOSS" means any action, cost, damage, disbursement,
expense, Liability (including consequential and incidental damages), obligation,
indebtedness, expense, claim, deficiency, loss, guaranty of any type, diminution
in value, penalty or settlement of any kind or nature, whether foreseeable or
unforeseeable, including, but not limited to, interest or other carrying costs,
penalties, legal, accounting and other professional fees and expenses incurred
in the investigation, collection, prosecution and defense of claims, and amounts
paid in settlement, that may be imposed on or otherwise incurred or suffered by
an Indemnified Party.
(hh) "MATERIAL ADVERSE EFFECT" means any effect or change that is
or is reasonably likely to be materially adverse to the business, operations,
assets, condition (financial or otherwise), prospects or results of operations
of (i) the Company, or (ii) Parent, Operating Sub and Sub taken as a whole, as
the case may be.
(ii) "MANAGEMENT BONUS PAYMENTS" means all payments, and all
withholding taxes related thereto, that have been made or will be made at or
prior to the Closing Date by the Company to Xxxxxxx pursuant to the Xxxxxxx
Agreement, and the contemplated bonus payments of $500,000 to DeVille and
$300,000 to Xxxx.
(jj) "XXXXXXX AGREEMENT" means that certain Agreement between
Xxxxxxx and the Company, dated March 22, 2002.
(kk) "NASDAQ" means the Nasdaq National Market.
(ll) "OHIO LAW" means Title XVII of the Ohio Revised Code.
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(mm) "OPERATING SUB" means Assignment Ready, Inc., a Delaware
corporation and wholly-owned subsidiary of Parent.
(nn) "ORDINARY COURSE OF BUSINESS" refers to any action taken by
a Person, but only if that action (i) is consistent in nature, scope and
magnitude with the past practices of such Person and is taken in the ordinary
course of the normal, day-to-day operations of such Person and (ii) does not
require authorization by the Board of Directors or stockholders of such Person
(or by any Person or group of Persons exercising similar authority) and does not
require any other separate or special authorization of any nature other than
approval of an officer of such Person.
(oo) "OSHA" means the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.).
(pp) "PBGC" means the Pension Benefit Guaranty Corporation.
(qq) "PARENT COMMON STOCK" means shares of the common stock of
Parent, par value $0.01 per share.
(rr) "PARENT DISCLOSURE LETTER" means the Disclosure Letter to be
delivered by Parent to the Company and to the Company Stockholders in connection
with this Merger Agreement.
(ss) "PERSON" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
joint venture, enterprise or other entity, including any Governmental Entity.
(tt) "PER SHARE RATIO" means, (i) with respect to any share of
Company Common Stock, the percentage obtained by dividing (A) that share of
Company Common Stock by (B) the Aggregate Company Capital Stock, and (ii) with
respect to any share of Company Preferred Stock, the percentage obtained by
dividing (A) the Company Common Stock Equivalents represented by such share by
(B) the Aggregate Company Capital Stock.
(uu) "PRO-RATA SHARE" means, (i) with respect to a holder of
Company Common Stock, the percentage obtained by dividing (A) the number of such
holder's shares of Company Common Stock immediately prior to the Effective Time
by (B) the Aggregate Company Capital Stock, and (ii) with respect to a holder of
Company Preferred Stock, the percentage obtained by dividing (A) the number of
such holder's Company Common Stock Equivalents immediately prior to the
Effective Time, by (B) the Aggregate Company Capital Stock.
(vv) "RELATED DOCUMENTS" means any certificate, schedule,
exhibit, document, agreement or instrument required to be delivered under, or in
connection with, this Merger Agreement.
(ww) "RELEASE" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, or into or out of any
property owned, operated or leased by the applicable party.
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(xx) "REMEDIAL ACTION" means all actions, including, without
limitation, any capital expenditures, required by a Governmental Entity or
required under any Environmental Law, or voluntarily undertaken to (i)
investigate, clean up, remove, treat, or in any other way ameliorate or address
any Hazardous Materials or other substance in the indoor or outdoor environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not endanger or threaten to endanger the
public health or welfare of the indoor or outdoor environment; (iii) perform
pre-remedial studies and investigations or post-remedial monitoring and care
pertaining or relating to a Release; or (iv) bring the applicable party into
compliance with any Environmental Law.
(yy) "SERIES A PREFERRED STOCK" means the Series A senior
convertible preferred stock of the Company, $1,000 par value.
(zz) "SERIES B PREFERRED STOCK" means the Series B senior
convertible preferred stock of the Company, $1,000 par value.
(aaa) "SUBSIDIARY" means, with respect to any Person, any
corporation or other organization, whether incorporated or unincorporated, of
which at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is, directly or indirectly, owned or controlled by such Person or
by any one or more of its Subsidiaries, or by such Person and any one or more of
its Subsidiaries.
(bbb) "TAX" means any tax (including, without limitation, any
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and capital gains, value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise, gift and property taxes),
levy, assessment, tariff, duty (including any customs duty), deficiency or other
fee, and any related charge or amount (including any fine, penalty, interest or
addition to tax), imposed, assessed or collected by or under the authority of
any Governmental Entity or payable pursuant to any tax-sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency or fee.
ARTICLE II
MERGER
2.1 The Merger. Upon the terms and subject to the conditions of this
Merger Agreement, and in accordance with the DGCL and Ohio law, the Company
shall be merged with and into Sub at the Effective Time. Following the Merger,
the separate corporate existence of the Company shall cease and Sub shall
continue as the surviving corporation (the "SURVIVING CORPORATION").
2.2 Closing and Effective Time of the Merger. Upon the terms and
subject to the conditions set forth in Article VII and the termination rights
set forth in Article IX, the closing of the Merger (the "CLOSING") will take
place on a date to be specified by the parties, which date shall be no later
than the third Business Day after satisfaction (or waiver in accordance with
this Merger Agreement) of the latest to occur of the conditions (excluding the
conditions that, by
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their nature, can not be satisfied until the Closing Date) set forth in Article
VII, at the offices of Fulbright & Xxxxxxxx L.L.P., 000 X. Xxxxxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, unless another date or place is agreed to in
writing by the parties (the actual time and date of the Closing being referred
to herein as the "CLOSING DATE"). At the Closing, the parties shall cause the
Merger to become effective by filing a certificate of merger (the "CERTIFICATE
OF MERGER"), prepared and executed in accordance with the relevant provisions of
the DGCL with the Secretary of State of the State of Delaware. The time of the
filing of the Certificate of Merger, or any later time that the parties may
agree and specify in the Certificate of Merger, is referred to as the "EFFECTIVE
TIME". The parties shall also take such other action that is required to
effectuate the Merger pursuant to the Ohio Law.
2.3 Effects of the Merger.
(a) Surviving Corporation. At and after the Effective Time, the
Merger will have the effects set forth in the DGCL and as set forth in the Ohio
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and Sub shall be vested in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
(b) Certificate of Incorporation. The Certificate of
Incorporation of Sub as in effect immediately prior to the Effective Time shall
be the Certificate of Incorporation of the Surviving Corporation.
(c) Bylaws. The Bylaws of Sub as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation.
(d) Officers and Directors. The directors and officers of Sub at
the Effective Time shall, from and after the Effective Time, be the directors
and officers of the Surviving Corporation and shall serve until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
3.1 Effect on Company Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders of Company
Capital Stock or Parent Common Stock:
(a) Merger Consideration for Company Capital Stock. Each share of
Company Common Stock and each share of Company Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than shares to be
canceled in accordance with Section 3.1(c)) shall, at the Effective Time, be
exchanged for and converted into the right to receive the Per Share Ratio
applicable to each such share of Company Common Stock or Company Preferred
Stock, as the case may be, of (i) that number of validly issued, fully paid and
non-assessable
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shares of Parent Common Stock, rounded to the nearest thousandth, equal to the
quotient derived by dividing $75 million by the Average Price of Parent Common
Stock (the "EXCHANGE RATIO") (together with any cash in lieu of fractional
shares of Parent Common Stock to be paid pursuant to Section 3.2(d)), less that
number of shares, if any, in the Escrow Account (A) returned to Parent or sold
pursuant to the indemnification obligations of the Company Stockholders
contained in Article VIII or (B) returned to Parent pursuant to Section 3.3 of
this Agreement, and (ii) cash of $75 million less the amount of (A) Company Debt
and (B) any cash in the Escrow Account that is remitted to Parent pursuant to
the indemnification obligations of the Company Stockholders contained in Article
VIII or returned to Parent pursuant to Section 3.3 of this Agreement (the "CASH
MERGER CONSIDERATION"). The shares of Parent Common Stock described in clause
(i) above and the Cash Merger Consideration described in clause (ii) above are
collectively referred to herein as the "MERGER CONSIDERATION".
If, prior to the Effective Time, Parent should split or combine the
Parent Common Stock, or pay a stock dividend or other stock distribution in
Parent Common Stock, then the Exchange Ratio shall be appropriately adjusted to
reflect such split, combination, dividend or other distribution.
(b) Stock of Sub. Each share of capital stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into one
fully paid and non-assessable share of common stock of the Surviving Corporation
and the stock of the Surviving Corporation issued in that conversion shall
constitute all of the issued and outstanding shares of capital stock of the
Surviving Corporation.
(c) Cancellation of Treasury Stock and Related Party Stock. Each
share of Company Capital Stock owned by the Company, the Company Sub, any entity
controlling the Company or any wholly-owned Subsidiary of such entities shall
automatically be canceled and retired without any conversion thereof and no
Merger Consideration shall be delivered with respect thereto.
3.2 Exchange of Certificates.
(a) Exchange Procedures. Upon the surrender to Parent of a
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock (the "CERTIFICATES"),
each record holder thereof shall be entitled to receive in exchange therefor the
applicable Merger Consideration provided for in Section 3.1(a) for each share of
Company Capital Stock represented by the Certificates, reduced by such holder's
Pro-Rata Share of the Escrow Amount ("PRO-RATA ESCROW AMOUNT") attributable to
such Merger Consideration for such shares of Company Capital Stock. Parent shall
transfer the Escrow Amount to the Escrow Agent for deposit in the Escrow Account
immediately after the Effective Time and the Escrow Amount shall be held in
accordance with and subject to the terms of the Escrow Agreement. All Cash
Merger Consideration shall be paid by the wire transfer of immediately available
funds to the accounts of the Company Stockholders. Each Company Stockholder
shall provide Parent with written instructions identifying his or its account at
least three Business Days prior to the Closing. All Certificates surrendered
pursuant to this Section 3.2(a) shall immediately be canceled. In the event of a
transfer of ownership of the Company Common Stock or Company Preferred Stock
that is not registered in the transfer records of the
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Company, a certificate representing the appropriate number of shares of Parent
Common Stock and the Cash Merger Consideration (less the Pro-Rata Escrow Amount)
may be issued and delivered to a transferee if the Certificate representing such
Company Common Stock or Company Preferred Stock, as applicable, is presented to
Parent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 3.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration (less the Pro-Rata
Escrow Amount) applicable to the shares of Company Capital Stock represented by
such Certificate) and all dividends or other distributions thereon with a record
date after the Effective Time as contemplated by Section 3.2(b).
(b) Distributions with Respect to Shares Prior to Exchange of
Certificates. No dividends or other distributions with respect to Parent Common
Stock declared or made after the Effective Time with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the Parent Common Stock represented thereby as a result of the
exchange and conversion provided in Section 3.1(a), and no cash payment in lieu
of fractional shares of Parent Common Stock shall be paid to any such holder
pursuant to Section 3.2(d), until the holder of such Certificate surrenders such
Certificate. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder thereof, without
interest: (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 3.2(d) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock; and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Parent Common Stock.
(c) No Further Ownership Rights in Company Common Stock or
Company Preferred Stock. All shares of Parent Common Stock issued in exchange
for and upon the conversion of the Company Common Stock or Company Preferred
Stock in accordance with the terms hereof (including any cash paid pursuant to
Section 3.2(b) or 3.2(d)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock or
Company Preferred Stock, as applicable, and after the Effective Time there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock or Company Preferred
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article
III.
(d) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock or book-entry credit of the same shall
be issued pursuant to this Article III, and, except as provided in this Section
3.2(d), no dividend or other distribution, stock split or interest shall relate
to any such fractional security, and such fractional interests shall not entitle
the owner thereof to vote or to any rights of a security holder of Parent. In
lieu of any fractional security, Parent shall pay to each holder of shares of
Company Common Stock or Company Preferred Stock who would otherwise have been
entitled to a fraction of a share of Parent
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Common Stock pursuant to this Article III an amount in cash (without interest)
equal to such holder's proportionate interest in the sum of (i) the fraction of
a share of Parent Common Stock to which such holder would otherwise have been
entitled, multiplied by the Average Price of Parent Common Stock, and (ii) the
aggregate dividends or other distributions that are payable with respect to such
shares of Parent Common Stock pursuant to Section 3.2(b) (such dividends and
distributions being herein called the "FRACTIONAL DIVIDENDS"). For purposes of
determining whether a holder of shares of the Company Common Stock or Company
Preferred Stock is to receive payment in lieu of fractional shares, all shares
of Company Capital Stock held of record by such holder shall be aggregated.
3.3 Return of Merger Consideration. Parent shall be entitled to have
returned to it $5 million of the Merger Consideration to be deposited into the
Escrow Account if the Revenues (as defined below), do not meet or exceed the
"Revenue Hurdle" for the Term. For purposes of clarification, the $5 million
deposited into the Escrow Account is part of the aggregate Escrow Amount. If
this $5 million in Merger Consideration is returned to Parent pursuant to this
Section 3.3, it shall consist of $2.5 million in immediately available funds and
$2.5 million in Parent Common Stock valued for purposes of this Section 3.3 at a
per share price equal to the average daily closing price of Parent Common Stock
as reported on Nasdaq during the ten (10) consecutive trading days ending on the
last trading day immediately prior to December 31, 2002 (the "SECTION 3.3
AVERAGE PRICE"). The Revenues shall be determined at the end of the Term in the
manner set forth in Section 3.3(b) below.
(a) Definitions. The following terms shall have the following
meanings for purposes of this Section 3.3:
(i) "Acquired Business" means the "Nurse Travel" and
"Allied Travel" operations conducted by the Company and the Company Sub
immediately prior to the Effective Time and by the Surviving Corporation and the
Company Sub thereafter; for purposes of this Section 3.3, the operating results
of "Nurse Travel" and "Allied Travel" shall be reported in a manner consistent
with the existing practices of the Company;
(ii) "REVENUE HURDLE" means $112,570,000;
(iii) "REVENUES" has the meaning set forth in Section
3.3(b); and
(iv) "TERM" means the period that began on January 1, 2002
and ends at the close of business on December 31, 2002.
(b) Manner of Revenue Computation. For purposes of this Merger
Agreement, the "Revenues" of the Acquired Business during the Term shall mean
the revenues from operations of the Acquired Business as determined in
accordance with GAAP as consistently applied by the Company for its fiscal year
ended June 30, 2001. Notwithstanding the foregoing, consistent with the
Company's past practice for its fiscal year ended June 30, 2001, pass-through
travel expenses of nurse and allied staff billed to the Company's customers
shall not be included in the computation of Revenues. In determining the
Revenues, there shall be excluded:
(i) Any revenues from the sale of any assets or property
of the Acquired Business; and
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(ii) Any revenues that are generated by any Person or
business acquired by Parent, the Surviving Corporation, or any Affiliate thereof
following the Effective Time; provided, however that revenues generated from any
customers of the Company that are acquired by Parent, Surviving Corporation or
any Affiliate thereof during the Term shall be included in Revenues.
(c) Time of Determination. The Revenues shall be determined
promptly after December 31, 2002, but in no event later than forty-five (45)
days thereafter, by Parent. Copies of the report setting forth Parent's
computation of the Revenues of the Acquired Business shall be submitted in
writing to Stockholder Representative (as defined in the Escrow Agreement) and,
unless Stockholder Representative notifies Parent in writing within thirty (30)
days after receipt of the report (the "OBJECTION PERIOD") that it objects to the
computation of the Revenues set forth therein, the report shall be binding and
conclusive on all parties to this Agreement and all Company Stockholders for the
purposes of this Merger Agreement. Stockholder Representative or its authorized
representative shall have access to the books and records of the Company and the
Surviving Corporation during regular business hours to verify the computation of
Revenues made by Parent. If Stockholder Representative notifies Parent in
writing within the Objection Period that it objects to the computation of
Revenues set forth therein, Parent and Stockholder Representative shall meet to
attempt to resolve the objection. If Parent and Stockholder Representative are
unable to reach agreement within thirty (30) Business Days after such
notification, KPMG or such other independent accounting firm agreed to by Parent
and the Stockholder Representative (but excluding Deloitte & Touche L.L.P. and
Ernst & Young L.L.P.) ("SPECIAL ACCOUNTANTS") shall perform agreed-upon
procedures and issue a report on such procedures (the "AGREED-UPON PROCEDURES
REPORT") for determining whether the Revenue Hurdle has been met. The
Agreed-Upon Procedures Report shall be binding and conclusive on Parent and
Stockholder Representative. Stockholder Representative or its authorized
representative shall have access to the workpapers relating to the Agreed-Upon
Procedures Report. If the Agreed-Upon Procedures Report indicates that the
Revenue Hurdle has been met, then Parent shall pay the Special Accountants'
fees, costs and expenses. If the Agreed-Upon Procedures Report indicates that
the Revenue Hurdle has not been met, then the Special Accountants' fees, costs
and expenses shall be paid to Parent from the Escrow Account by the Escrow
Agent. If Parent is entitled to the return of the $5 million of Merger
Consideration pursuant to this Section 3.3, such amount shall be delivered to
Parent within three (3) Business Days of the earlier of (i) the expiration of
the Objection Period (assuming no objection was brought within the Objection
Period) or the date prior to the expiration of the Objection Period that
Stockholder Representative notifies the Escrow Agent that it does not object to
the determination contained in Parent's report, (ii) Parent and Stockholder
Representative's delivery of a joint written notice to the Escrow Agent that the
Revenue Hurdle was not met, or (iii) delivery to the Escrow Agent of the Agreed
Upon Procedures Report that indicates the Revenue Hurdle was not met. The
parties agree that notwithstanding anything to the contrary contained in this
Merger Agreement or the Escrow Agreement, (i) the return of the $5 Million of
Merger Consideration pursuant to this Section 3.3 shall be satisfied solely from
the funds held in the Escrow Account and (ii) if the Escrow Account would
otherwise be distributed pursuant to the terms of the Escrow Agreement and
assuming that there is still sufficient Merger Consideration remaining in the
Escrow Account, Escrow Agent shall continue to hold at least $5 million of the
Merger Consideration (or such lesser amount then remaining in the Escrow
Account) until there has been a final determination pursuant to this Section 3.3
as to whether Parent is entitled to the
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return of the $5 million of Merger Consideration. Any Merger Consideration which
continues to be held for such purpose shall consist of 50% of the Cash Merger
Consideration and 50% of Parent's Common Stock, valued at the Section 3.3
Average Price.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company and the Management
Stockholders. The Company, Xxxxxxx and DeVille, each, severally, but not
jointly, represent and warrant to Parent and Sub as follows, subject to any
exceptions set forth in the Company Disclosure Letter to be delivered to Parent
by the Company concurrently herewith:
(a) Organization, Standing and Power.
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation, has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and except as
set forth in Section 4.1(a) of the Company Disclosure Letter, is duly qualified
and in good standing to do business in each jurisdiction in which the business
it is conducting, or the operation, ownership or leasing of its properties,
makes such qualification necessary. The Company has previously made available to
Parent complete and correct copies of its Articles of Incorporation and Code of
Regulations.
(ii) The Company Sub is a limited liability company duly
organized, validly existing and in good standing under the laws of its state of
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification necessary. The Company Sub has previously
made available to Parent complete and correct copies of its Articles of
Organization and Operating Agreement.
(b) Subsidiaries. The Company does not own, directly or
indirectly, any capital stock or other ownership interest in any Person other
than its ownership of one hundred percent (100%) of the membership interests in
the Company Sub.
(c) Capital Structure.
(i) The authorized capital stock of the Company consists
of 1,000,000 shares of Company Common Stock and 4,257.14 shares of Company
Preferred Stock, of which 1400 shares have been designated Series A Preferred
Stock and 2,857.14 shares have been designated Series B Preferred Stock. At the
close of business on the last Business Day prior to the execution of this Merger
Agreement, (i) 173,100 shares of Company Common Stock and 3,304.76 shares of
Company Preferred Stock (comprising 1,400 shares of Series A Preferred Stock and
1,904.76 shares of Series B Preferred Stock) were issued and outstanding; (ii)
an aggregate of 304,476 shares of Company Common Stock were authorized and are
available for issuance by the Company upon conversion of the Company Preferred
Stock, 50,300 shares of Company Common Stock were authorized and are available
for issuance upon the exercise of
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outstanding options granted under the Company's 1999 Stock Option Plan, which is
the only stock award, stock bonus or any other stock plan or program of the
Company or the Company Sub (the "COMPANY STOCK PLAN") and 5,100 shares of
Company Common Stock were authorized and are available for issuance upon
exercise of the Warrant (described below); (iii) 21,100 shares of Company Common
Stock were held by the Company in its treasury; and (iv) no bonds, debentures,
notes or other indebtedness having the right to vote (or convertible into
securities having the right to vote) on any matters on which the Company
Stockholders may vote ("VOTING DEBT") were issued or outstanding. At the close
of business on the last Business Day prior to execution of this Merger Agreement
and immediately prior to the Effective Time the issued and outstanding Series A
Preferred Stock was and will be convertible into 114,000 shares of Company
Common Stock, and the issued and outstanding Series B Preferred Stock was and
will be convertible into 190,476 shares of Company Common Stock. At the close of
business on the last Business Day prior to the execution of this Merger
Agreement, (i) the Company had outstanding 50,300 options granted under the
Company Stock Plan which upon exercise will entitle the holders thereof to
receive 50,300 shares of Company Common Stock, subject to any adjustment in the
number of shares resulting from a cashless exercise of the options held by the
Management Stockholders and Xxxx, and (ii) the Company had outstanding a Warrant
held by a Venture Stockholder which provides for the purchase of 5,100 shares of
Company Common Stock at an exercise price of $21.00 per share, as more fully
described in Schedule 4.1(c) of the Company Disclosure Letter (the "WARRANT"),
subject to any adjustment in the number of shares resulting from the cashless
exercise of the Warrant. Except as provided in Schedule 4.1(c) of the Company
Disclosure Letter, all outstanding shares of Company Common Stock and Company
Preferred Stock are validly issued, fully paid and non-assessable and are not
subject to any preemptive rights, and all shares that may be issued upon the
conversion of the Company Preferred Stock and upon the exercise of the Vested
Options and the Warrant will be, when issued, validly issued, fully paid and
non-assessable. Except as set forth in Schedule 4.1(c), there are no other
accrued, but unpaid dividends on any of the Company's Capital Stock. Except as
set forth in this Section 4.1(c) or Schedule 4.1(c) of the Company Disclosure
Letter, (i) there are no authorized, outstanding, reserved or issued (A) shares
of Company Capital Stock, Voting Debt or other voting securities of the Company;
(B) securities of the Company convertible into or exchangeable for shares of
Company Capital Stock, Voting Debt or other voting securities of the Company; or
(C) options, warrants, calls, rights (including preemptive rights), commitments
or agreements to which the Company is a party or by which it is bound in any
case obligating the Company to issue, deliver, sell, purchase, redeem or acquire
additional shares of Company Capital Stock or any Voting Debt or other voting
securities of the Company, or obligating the Company to grant, extend or enter
into any such option, warrant, call, right, commitment or agreement, (ii) there
are no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities, (iii) there are no dividends or other
amounts owing to the holders of Company Preferred Stock and (iv) the Company
Stockholders own all of the issued and outstanding Company Capital Stock. Except
as set forth in Schedule 4.1(c) of the Company Disclosure Letter, there are not
as of the date hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting of
any Company Capital Stock.
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(ii) One hundred percent (100%) of the membership
interests in the Company Sub are, and have been from the date of organization of
the Company Sub, owned of record and beneficially by the Company.
(d) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of the Company has duly
approved the Merger and this Merger Agreement in accordance with the Company's
Articles of Incorporation, the Ohio Law and all agreements between the Company
and the holders of Company Preferred Stock, and have declared the Merger and
this Merger Agreement to be in the best interests of the stockholders of the
Company. The Company has all requisite corporate power and authority to enter
into this Merger Agreement and any Related Documents to which it is a party and
to consummate the transactions contemplated hereby. Each of the Management
Stockholders, and, to the knowledge of the Company, each of the Venture
Stockholders, has all necessary legal capacity to enter into this Merger
Agreement and any Related Documents to which such Management Stockholders and
Venture Stockholders are parties and to perform their respective obligations
hereunder and thereunder. The execution, delivery and performance of this Merger
Agreement and any Related Documents by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company, except for securing the
requisite Company Stockholder Approval (described in Section 4.1(e)). This
Merger Agreement has been duly executed and delivered by the Company. Assuming
this Merger Agreement constitutes the valid and binding obligation of each of
Parent and Sub, subject to securing the Company Stockholder Approval, this
Merger Agreement also constitutes a valid and binding obligation of the Company
and each of the Management Stockholders and, to the knowledge of the Company and
the Management Stockholders, as to Sections 3.3, 6.5, 6.10 and Article VIII, of
each of the Venture Stockholders, enforceable in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws or judicial decisions now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(ii) Except as set forth on Schedule 4.1(d) to the Company
Disclosure Letter, the execution and delivery of this Merger Agreement does not,
and the consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in any Encumbrance upon any of
the properties or assets of the Company or the Company Sub under any provision
of (A) the Articles of Incorporation or Code of Regulations of the Company or
the charter documents of the Company Sub, (B) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other Contract, instrument, permit,
concession, franchise or license applicable to the Company or the Company Sub or
their properties or assets or (C) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in Schedule
4.1(d) to the Company Disclosure Letter and in subparagraph (iii) of this
Section 4.1(d) are duly and timely obtained or made, any judgment, order, decree
or Legal Requirement applicable to the Company or the Company Sub or any of
their properties or assets.
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(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from, a Governmental Entity
is required by or with respect to the Company, or the Company Sub or the Company
Stockholders in connection with the execution and delivery of this Merger
Agreement and the Related Documents by the Company and the Company Stockholders
or the consummation by the Company of the transactions contemplated hereby,
except for: (A) the filing of a premerger notification report by the Company
under the HSR Act and the expiration or termination of the applicable waiting
period with respect thereto; (B) the filing of the Certificate of Merger with
the Delaware Secretary of State pursuant to the DGCL and with the Ohio Secretary
of State pursuant to the Ohio Law; (C) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover laws; and
(D) such filings and approvals as may be required by any applicable non-U.S.
Governmental Entity.
(e) Vote Required. The only vote of the Company Stockholders
necessary to adopt this Merger Agreement and approve the Merger and the other
transactions contemplated hereby on behalf of the Company and the Company
Stockholders is (i) the vote required by Section 1701.79 of the Ohio Law and
(ii) the vote of a majority of the holders of the Company Preferred Stock voting
together as a class (collectively (i) and (ii) are referred to herein as the
"COMPANY STOCKHOLDER APPROVAL").
(f) Reports and Financial Statements. The Company has delivered
to Parent: (i) an audited balance sheet of the Company as at June 30, 2001
(including the notes thereto, the "AUDITED BALANCE SHEET"), and the related
audited statements of operations, changes in stockholders' equity and cash flows
for the fiscal year then ended, including the notes thereto, together with the
report thereon of Ernst & Young L.L.P., independent certified public
accountants; (ii) audited balance sheets of the Company as at June 30, 2000,
1999 and 1998, and the related audited statements of operations, changes in
stockholders' equity and cash flows for each of the fiscal years then ended,
including the notes thereto together with the report thereon of Xxxxxx XxXxxxxx
and Company, CPAs, independent certified public accountants (all of the
preceding are collectively the "AUDITED FINANCIAL STATEMENTS"); and (iii) an
unaudited balance sheet of the Company as at February 28, 2002 (the "CURRENT
BALANCE SHEET") and the related unaudited statements of operations, changes in
stockholders' equity and cash flows for the eight (8) months then ended,
including any notes thereto (the "INTERIM FINANCIAL STATEMENTS"), certified by
the Company's Controller. The Audited Financial Statements and the Interim
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and present fairly the
financial condition of the Company as of such dates and the results of
operations, changes in stockholders' equity and cash flows of the Company as at
the respective dates of and for such periods; provided, however, that the
Interim Financial Statements are subject to normal year-end adjustments, which
are not material individually or in the aggregate, and may lack footnotes and a
statement of changes in stockholders' equity. The Company has also delivered to
Parent copies of all letters from the Company's auditors to the Company's Board
of Directors or the audit committee thereof in connection with the audits of the
Company's fiscal year 2001, 2000 and 1999 Audited Financial Statements, together
with copies of all responses thereto. Except as set forth in Schedule 4.1(f) of
the Company Disclosure Letter, there are no debts, Liabilities or obligations,
of any nature, of or affecting the Company, except (i) to the extent expressly
set forth or reserved against in the Audited Balance Sheet, the Current Balance
Sheet or in the notes to the Audited Balance Sheet
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or the Current Balance Sheet and (ii) current Liabilities incurred in the
Ordinary Course of Business of the Company in amounts and on terms consistent
with past practices (and in compliance with this Merger Agreement) since the
date of the Current Balance Sheet and, in the case of both clause (i) and clause
(ii), in compliance with the requirements of Section 13(B)(2) of the Securities
Exchange Act of 1934, as amended, (the "EXCHANGE ACT") (regardless of whether
the Company or the Company Sub is subject to that Section).
(g) Books and Records. The books of account and other financial
records of each of the Company and the Company Sub, all of which have been made
available to Parent, are complete and correct and represent actual, bona fide
transactions and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
Except as set forth in Schedule 4.1(g) of the Company Disclosure Letter, the
minute books of the Company and the Company Sub, all of which have been made
available to Parent, contain accurate and complete records of all meetings held
of, and corporate action taken by, the stockholders, the Board of Directors and
committees of the Board of Directors of the Company and members and managers of
the Company Sub, and no meeting of any such stockholders, Board of Directors,
committee, members or managers has been held for which minutes have not been
prepared or are not contained in such minute books. At the Closing, all of those
books and records will be in the possession of the Surviving Corporation by
virtue of the Merger.
(h) Accounts Receivable. All accounts receivable of the Company
and the Company Sub that are reflected on the Audited Balance Sheet, the Current
Balance Sheet or on the accounting records of the Company and the Company Sub as
of the Closing Date (collectively, the "ACCOUNTS RECEIVABLE"), less the reserve
for bad debt set forth in the Audited Balance Sheet, the Current Balance Sheet
or on the accounting records of the Company and the Company Sub as of the
Closing Date have been collected or are or will be at the Closing Date valid and
enforceable claims, fully collectible and subject to no setoff or counterclaim.
There is no contest, claim or right of set-off under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Schedule 4.1(h) to the Company Disclosure Letter contains a
complete and accurate list of all Accounts Receivable as of the date of the
Current Balance Sheet, which list sets forth the aging of such Accounts
Receivable. Except as set forth on Schedule 4.1(h) to the Company Disclosure
Letter, since the date of the Current Balance Sheet, there have not been any
write-offs as uncollectible of any Accounts Receivable.
(i) Absence of Certain Changes or Events. Except as disclosed in,
or reflected in, the financial statements described in Section 4.1(f) or
included on Schedule 4.1(i) to the Company Disclosure Letter, or except as
contemplated by this Merger Agreement or the Merger, since June 30, 2001, the
Company and the Company Sub each has conducted its business in the ordinary
course consistent with past practice and there has not been: (i) any Material
Adverse Effect on the Company or the Company Sub; (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any Company Capital Stock; (iii) any purchase,
redemption or other acquisition of any shares of Company Capital Stock or any
other securities of the Company or any options, warrants, calls or rights to
acquire such shares or other securities; (iv) any split, combination or
reclassification of any Company Capital Stock or any issuance or the
authorization of any issuance of any other
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securities in respect of, in lieu of or in substitution for shares of Company
Capital Stock; (v) any amendment of any term of any outstanding equity security
of the Company; (vi) (A) any granting by the Company or the Company Sub to any
current or former director, consultant, executive officer or other employee of
the Company or the Company Sub of any increase in compensation, bonus or other
benefits, except for normal increases in cash compensation in the Ordinary
Course of Business consistent with past practice or as was required under any
employment agreements in effect as of June 30, 2001, (B) any granting by the
Company or the Company Sub to any such current or former director, consultant,
executive officer or employee of any increase in severance or termination pay,
(C) any amendment to or modification of, any Company Stock Plans, (D) any
adoption of, or amendment to, any Company Benefit Plan, or (E) any payment of a
bonus or other benefit to any current or former employee or director of the
Company or the Company Sub; (vii) except insofar as may have been required by a
change in GAAP, any change in accounting methods, principles or practices by the
Company or the Company Sub affecting its assets, liabilities or business; (viii)
any tax election that individually or in the aggregate would reasonably be
expected to adversely affect the tax liability or tax attributes of the Company
or the Company Sub; (ix) any settlement or compromise of any material income tax
liability; (x) any material change in any Contract of the Company; (xi) any
change in the terms and conditions of any services or payment therefor provided
or to be provided by the Company or the Company Sub to any of their clients;
(xii) any workers' compensation claim or reopening of any claim for which the
sum of medical payments, indemnity payments and reserves exceeds $25,000; (xiii)
any claims or complaints related to professional liability, employment practices
or medical malpractice brought against the Company or the Company Sub; (xiv) any
damage, Loss or destruction, whether or not covered by insurance; or (xv) any
other changes, circumstances or events in the business, operations, properties,
prospects, assets or condition of either the Company or the Company Sub outside
the Ordinary Course of Business.
(j) Compliance with Applicable Laws. The Company and the Company
Sub each holds all permits, licenses, variances, exemptions, orders, franchises
and approvals of all Governmental Entities necessary for it to own, lease or
operate its properties and assets and for the lawful conduct of its business as
currently conducted or as contemplated by the Management Stockholders to be
conducted (the "COMPANY PERMITS"). To the knowledge of the Company and the
Management Stockholders, the Company and the Company Sub are in compliance with
the terms of the Company Permits. Except as set forth on Schedule 4.1(j) to the
Company Disclosure Letter, neither the business of the Company nor the business
of the Company Sub is being conducted in violation of any Legal Requirement of
any Governmental Entity, except such violations that individually or in the
aggregate could not result in a Material Adverse Effect on the Company. Except
as set forth in Schedule 4.1(j) of the Company Disclosure Letter, no
investigation or review by any Governmental Entity with respect to the Company
or the Company Sub is pending or, to the knowledge of the Company or the
Management Stockholders, threatened. The Company and the Company Sub each is,
and since July 1, 1999, has been, in compliance with all Legal Requirements.
(k) Condition and Sufficiency of Assets. All of the buildings,
plants, structures, furniture, fixtures, equipment and other assets of the
Company and the Company Sub (the "COMPANY ASSETS") are structurally sound, are
in good operating condition and repair (subject to normal wear and tear), and
are adequate for the uses to which they are being put, and none of such Company
Assets is in need of maintenance or repairs except for ordinary, routine
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maintenance and repairs that are not material in nature or cost. The Company
Assets are sufficient for the continued conduct of the Company's business after
the Closing in substantially the same manner as conducted prior to the Closing.
(l) Litigation and Claims. Except as set forth on Schedule 4.1(l)
to the Company Disclosure Letter, there is no (i) suit, action, claim or
proceeding pending, or, to the knowledge of the Company or the Management
Stockholders, threatened against the Company or the Company Sub ("COMPANY
LITIGATION"), or (ii) judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or the Company
Sub ("COMPANY ORDER"). To the knowledge of the Company, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as a
basis for the commencement of any such Company Litigation. Schedule 4.1(l) to
the Company Disclosure Letter lists all Company Litigation or other proceedings,
including, without limitation, any Company Litigation relating to any workers'
compensation (pending, settled or reopened), employer practices, medical
malpractice or professional liability matters and any Company Litigation
involving any employee of the Company, threatened, filed or otherwise brought to
the attention of the Company, the Company Sub or the Management Stockholders
since July 1, 1999, by any Governmental Entity, client of the Company, client of
the Company Sub or other Person.
(m) Taxes.
(i) The Company, the Company Sub and any affiliated,
combined or unitary group of which the Company or the Company Sub is or was a
member each has (A) timely (taking into account any extensions) filed all true
and complete federal, state, local and non-U.S. returns, declarations, reports,
estimates, information returns and statements ("RETURNS") required to be filed
by or with respect to it in respect of any Taxes, except as set forth in
Schedule 4.1(m)(i)(A) of the Company Disclosure Letter, (B) timely paid all
Taxes that are due and payable (except for audit adjustments to the extent that
liability therefor is reserved for in the Company's Current Balance Sheet) for
which the Company or the Company Sub may be liable, except as set forth in
Schedule 4.1(m)(i)(B) of the Company Disclosure Letter, (C) established reserves
(determined in accordance with GAAP) which are included in the Current Balance
Sheet that are adequate for the payment of all Taxes not yet due and payable
with respect to the results of operations of the Company or the Company Sub
through the date of such Current Balance Sheet, and (D) complied with all Legal
Requirements relating to the payment and withholding of Taxes and has timely
withheld from employee wages and paid over to the proper Governmental Entities
all amounts required to be so withheld and paid over.
(ii) Schedule 4.1(m)(ii) to the Company Disclosure Letter
sets forth the last taxable period through which the federal income Tax Returns
of the Company and the Company Sub have been examined by the Internal Revenue
Service ("IRS") or otherwise closed. Except to the extent being contested in
good faith, all deficiencies asserted as a result of such examinations and any
examination by any applicable state, local or non-U.S. taxing authority have
been paid, fully settled or adequately provided for in the Current Balance
Sheet. No federal, state, local or non-U.S. Tax audits or other administrative
proceedings or court proceedings are currently pending with regard to any Taxes
for which the Company or the Company Sub would be liable and no deficiency for
any such Taxes has been proposed, asserted
-19-
or assessed against the Company or the Company Sub by any federal, state, local
or non-U.S. taxing authority with respect to any period.
(iii) Neither the Company nor the Company Sub has executed
or entered into (or prior to the close of business on the Closing Date will
execute or enter into) with the IRS or any other taxing authority any Contract
or other document extending or having the effect of extending the period for
assessments or collection of any Taxes for which the Company or the Company Sub
would be liable.
(iv) Neither the Company nor the Company Sub is a party
to, is bound by or has any obligation under, any tax sharing agreement, tax
indemnity agreement or similar agreement or arrangement.
(v) Neither the Company nor the Company Sub has taken or
agreed to take any action nor has it any knowledge of any fact, agreement, plan
or other circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of section 368(a) of the Code.
(vi) There are no Encumbrances for Taxes upon the assets
or properties of the Company or the Company Sub (whether real, personal or
mixed, tangible or intangible) except for statutory Encumbrances for Taxes not
yet due or payable.
(vii) Nether the Company nor the Company Sub is required
(or will be required as a result of this transaction) to include in income any
amount for an adjustment pursuant to section 481(a) of the Code or the
regulations thereunder or any similar provision of state law.
(viii) Neither the Company, the Company Sub nor, to the
knowledge of the Company, any Common Stockholder is a "foreign person" for
purposes of section 1445 of the Code.
(ix) To the knowledge of the Company, no claim has been
made during the last five years by an authority in a jurisdiction where the
Company or the Company Sub does not file Tax Returns that the Company or the
Company Sub is or may be subject to taxation by that jurisdiction.
(x) Neither the Company nor the Company Sub has filed a
consent under Code section 341(f) concerning collapsible corporations.
(xi) Neither the Company nor the Company Sub has been a
United States real property holding corporation within the meaning of Code
section 897(c)(2) during the applicable period specified in Code section
897(c)(1)(A)(ii).
(xii) Except as set forth in Schedule 4.1(m)(xii) of the
Company Disclosure Letter, neither the Company nor the Company Sub (i) has been
a member of an affiliated group of corporations within the meaning of section
1504 of the Code and (ii) has any liability for the Taxes of any Person under
Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise.
-20-
(xiii) The Company and the Company Sub each has withheld
or paid all Taxes required to have been withheld or paid in connection with
amounts paid or owed to any employee, independent contractor, creditor,
stockholder, member or other third party.
(xiv) The Company and the Company Sub each has disclosed
on its federal income tax returns all positions taken therein that could give
rise to a substantial understatement of federal income tax within the meaning of
Code Section 6662.
(xv) The Company and the Company Sub each has complied
with all sales Tax resale certificate exemption requirements.
(xvi) Except as set forth in Schedule 4.1(m)(xvi) of the
Company Disclosure Letter, there are no Company Benefit Plans covering any
employee or former employee or other Person who is a "disqualified individual"
as defined in section 280G(c) of the Code with respect to the Company or the
Company Sub that could give rise to the payment of an amount that would not be
deductible pursuant to the terms of section 280G of the Code or create any
excise tax liability under section 4999 of the Code.
(xvii) Except as set forth in Schedule 4.1(m)(i)(A) of the
Company Disclosure Letter, to the knowledge of the Company, there is, and since
June 30, 2001, has been, no Company Benefit Plan covering any employee or former
employee of the Company or the Company Sub that could give rise to the payment
of an amount that would not be deductible pursuant to the terms of section 162
of the Code.
(xviii) To the knowledge of the Company and the Management
Stockholders, the records of each of the Company and the Company Sub contain all
information and documentation necessary to support the Tax Returns filed by it.
(xix) The Company has not, at any time, constituted either
a "distributing corporation" or a "controlled corporation" (within the meaning
of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
Tax-free treatment under Section 355 of the Code.
(xx) Neither the Company nor the Company Sub has entered
into any transaction that would be considered listable or reportable under
Section 6111 or 6112 of the Code.
(n) Employee Matters; ERISA.
(i) Benefit Plans. Schedule 4.1(n)(i) to the Company
Disclosure Letter contains a true and complete list of each of the following
items: each employee benefit plan, program, arrangement or customary practice
covering any current or former officer, director, employee or independent
contractor of the Company or any Affiliate of the Company or any of their
dependents or beneficiaries (each, a "COMPANY BENEFICIARY") or with respect to
which the Company or any Affiliates of the Company may have any liability,
including, but not limited to, any "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any stock option plan, stock purchase plan, cafeteria plan,
scholarship program, retention incentive program, vacation
-21-
policy and sick pay policy. The items described above, together with each
management, employment, deferred compensation, severance, change in control,
bonus or other contract for personal services with or covering any Company
Beneficiary, whether or not terminated, if the Company or the Company Sub could
have statutory or contractual liability with respect thereto on or after the
date hereof, are referred to collectively herein as the "COMPANY BENEFIT PLANS."
(ii) Contributions and Payments. All contributions and
other payments required to have been made by the Company, the Company Sub or any
entity required to be aggregated therewith pursuant to section 414 of the Code
("COMPANY ERISA AFFILIATE") with respect to any Company Benefit Plan (or to any
person pursuant to the terms thereof) have been made or are properly accrued
through the date of this Merger Agreement as liabilities that are reflected in
the financial statements of the Company or the Company Sub.
(iii) Qualification; Compliance. The terms of each Company
Benefit Plan that is intended to be "qualified" within the meaning of section
401(a) of the Code have been determined by the IRS to satisfy the requirements
of section 401(a) of the Code, or the applicable remedial period applicable to
the Company Benefit Plan will not have ended prior to the Effective Time, and no
event or condition exists or has occurred that could result in the revocation or
denial of any such determination. With respect to each Company Benefit Plan, the
Company and each Company ERISA Affiliate are in compliance with, and each
Company Benefit Plan and related source of benefit payment is and has been
operated in compliance with, all applicable laws, rules and regulations
governing such plan or source, including, without limitation, ERISA, the Code
and applicable local law (including non-U.S. law). No Company Benefit Plan is
subject to any ongoing audit, investigation or other administrative proceeding
of the IRS, the Department of Labor or any other Governmental Entity.
(iv) Liabilities. With respect to the Company Benefit
Plans, individually and in the aggregate, there exists no condition or set of
circumstances that could subject the Company or any Company ERISA Affiliate to
any liability arising under the Code, ERISA or any other applicable law
(including, without limitation, any liability to or under any such plan or to
the PBGC, or under any indemnity agreement to which the Company or any Company
ERISA Affiliate is a party). No claim, action or litigation has been made,
commenced or, to the knowledge of the Company, threatened, by or against the
Company, or the Company Sub with respect to any Company Benefit Plan (other than
routine claims for benefits).
(v) Payments Resulting from Merger. Except as disclosed on
Schedule 4.1(n)(v) to the Company Disclosure Letter, the consummation or
announcement of any transaction contemplated by this Merger Agreement will not
(either alone or upon the occurrence of any additional or further acts or
events) result in (A) any payment (whether of severance pay or otherwise)
becoming due from the Company or the Company Sub to any Company Beneficiary, or
(B) any benefit under any Company Benefit Plan being established or increased,
or becoming accelerated, vested or payable.
(vi) Absence of Defined Benefit Plans. Neither the Company
nor any entity (whether or not incorporated) that was at any time during the
past six years a Company ERISA Affiliate has ever maintained or had any
liability (contingent or otherwise) with respect
-22-
to any pension plan (within the meaning of Section 3(2) of ERISA) that is or was
subject to Title IV of ERISA or Section 412 of the Code.
(vii) Documents Provided. With respect to each Company
Benefit Plan, the Company and the Company Sub have heretofore delivered to
Parent, as applicable, complete and correct copies of each of the following
documents:
(A) the Company Benefit Plan and any amendments
thereto (or if any the Company Benefit Plan is not a written agreement, a
description thereof);
(B) its three most recent annual Form 5500 reports
filed with the IRS;
(C) its most recent statement filed with the
Department of Labor pursuant to 29 U.S.C.Section 2520.104-23;
(D) a written summary of the legal basis for an
exemption from the obligation to file annual Form 5500 reports;
(E) its three most recent annual Form 990 and 1041
reports filed with the Internal Revenue Service;
(F) its most recent summary plan description and
summaries of material modifications thereto;
(G) the trust agreement, group annuity contract or
other funding agreement that provides for the funding of the Company Benefit
Plan;
(H) its most recent financial statement;
(I) the most recent determination letter received
from the IRS with respect to the Company Benefit Plan that is intended to
qualify under section 401 of the Code; and
(J) any Contract pursuant to which the Company or
the Company Sub is obligated to indemnify any person.
(viii) No Company Benefit Plans provide medical, surgical,
hospitalization, or life insurance benefits (whether or not insured by a third
party) for employees or former employees of the Company, the Company Sub or a
Company ERISA Affiliate for periods extending beyond their terminations of
employment, other than coverage mandated by the Consolidated Omnibus Budget
Reconciliation Act of 1985 or similar state law.
(o) Labor Matters. Except as set forth in Schedule 4.1(o) to the
Company Disclosure Letter,
(i) neither the Company nor the Company Sub is a party to
any collective bargaining agreement or other current labor agreement with any
labor union or
-23-
organization, and there is no current union representation dispute involving
employees of the Company or the Company Sub, nor do the Company, the Company Sub
or the Management Stockholders know of any activity or proceeding of any labor
organization (or representative thereof) or employee group (or representative
thereof) to organize any such employees;
(ii) there is no unfair labor practice charge or grievance
arising out of a collective bargaining agreement or other grievance procedure
against the Company or the Company Sub pending, or, to the knowledge of the
Company, threatened;
(iii) there is no complaint, lawsuit or proceeding in any
forum by or on behalf of any current or former employee or any applicant for
employment alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship against the Company or the Company Sub pending, or, to the
knowledge of the Company or the Management Stockholders, threatened;
(iv) the Company and the Company Sub each is in compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational safety and
health; and
(v) there is no proceeding, claim, suit, action or
governmental investigation pending or, to the knowledge of the Company or the
Management Stockholders, threatened, in respect of which any current or former
director, officer, employee or agent of the Company or the Company Sub is or may
be entitled to claim indemnification from the Company or the Company Sub (A)
pursuant to the Company's Articles of Incorporation or Code of Regulations or
the Company Sub's charter documents, (B) as provided in any indemnification
agreement to which the Company or the Company Sub is a party or (C) pursuant to
applicable law.
(p) Intangible Property. The Company and the Company Sub each
possesses or has adequate rights to use all Company Intangible Property. Except
as set forth on Schedule 4.1(p) to the Company Disclosure Letter, (i) all of the
Company Intangible Property is owned by the Company or the Company Sub free and
clear of any and all Encumbrances or (ii) the Company has a right to use the
Company Intangible Property pursuant to a valid and enforceable, written
license, sublicense or agreement. Neither the operation of the business of the
Company nor of the Company Sub conflicts with, infringes upon, violates or
interferes with or constitutes an appropriation of any right, title, interest or
goodwill, including, without limitation, any intellectual property right, trade
secret, trademark, trade name, patent, service xxxx, brand xxxx, brand name,
computer program, database, industrial design, copyright or any pending
application therefor of any other Person and there have been no claims made in
connection therewith, and neither the Company, the Company Sub nor the
Management Stockholders have received any notice of any claim or otherwise knows
that any of the Company Intangible Property is invalid or conflicts with the
rights of any other Person or has not been used or enforced or has been failed
to be used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Company Intangible Property.
Except as provided on Schedule 4.1(p), each key salaried employee of the Company
whose time is not billed to clients and who is neither part-time, temporary nor
an on-site nursing coordinator
-24-
of each of the Company and the Company Sub has executed adequate proprietary
information and confidentiality agreements and all such agreements are in full
force and effect.
(q) Contracts.
(i) Schedule 4.1(q) to the Company Disclosure Letter
contains a complete and accurate list, and the Company and the Company Sub has
delivered to Parent true and complete copies, of:
(A) Each Contract that involves performance of
services by the Company or the Company Sub of an amount or value in excess of
$50,000;
(B) Each Contract that involves performance of
services or delivery of goods or materials to the Company or the Company Sub of
an amount or value in excess of $25,000;
(C) Each Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts by the
Company or the Company Sub in excess of $10,000;
(D) Each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $10,000 and with terms less than one (1)
year);
(E) Each Contract with any labor union or other
employee representative of a group of employees relating to wages, hours and
other conditions of employment;
(F) Each Contract (however named) involving a
sharing of profits, Losses, costs or liabilities by the Company or the Company
Sub with any other Person;
(G) Each Contract containing covenants that in any
way purport to restrict the Company's or the Company Sub's business activity or
limit the freedom of the Company or the Company Sub to engage in any line of
business or to compete with any Person;
(H) Each Contract providing for payments to or by
any Person based on sales, purchases or profits, other than direct payment for
services;
(I) Each power of attorney of the Company or the
Company Sub that is currently effective and outstanding;
(J) Each Contract entered into other than in the
Ordinary Course of Business or that contains or provides for an express
undertaking by the Company or the Company Sub to be responsible for
consequential damages;
-25-
(K) Each Contract for capital expenditures in
excess of $25,000;
(L) Each written warranty, guaranty or other
similar undertaking with respect to contractual performance extended by the
Company or the Company Sub other than in the Ordinary Course of Business;
(M) Each Contract with a Governmental Entity; and
(N) Each amendment, supplement and modification
(whether oral or written) in respect of any of the foregoing.
(ii) No Company Stockholder or Affiliate of the Company
has or may acquire any rights under, and no Company Stockholder or Affiliate has
or may become subject to any obligation or liability under, any Contract that
relates to the business of the Company or the Company Sub.
(iii) Each Contract identified or required to be
identified in Schedule 4.1(q)(i) of the Company Disclosure Letter is in full
force and effect and is valid and enforceable in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws or judicial decisions now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(iv) Except as set forth on Schedule 4.1(q)(iv) to the
Company Disclosure Letter,
(A) the Company and the Company Sub each is, and at
all times since July 1, 1999 has been, in full compliance with all applicable
terms and requirements of each Contract under which the Company or the Company
Sub has or had any obligation or liability or by which the Company or the
Company Sub or any of the assets owned or used by the Company or the Company Sub
is or was bound;
(B) to the Knowledge of the Company and the
Management Stockholders, each other Person that has or had any obligation or
liability under any Contract under which the Company or the Company Sub has or
had any rights is, and at all times since July 1, 1999 has been, in full
compliance with all applicable terms and requirements of such Contract;
(C) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or the Company Sub or,
to the knowledge of the Company and the Management Stockholders, any other
Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Contract; and
-26-
(D) neither the Company nor the Company Sub has
received from any Person, at any time since July 1, 1999, any notice or
communication (whether oral or written) regarding any actual, alleged, possible
or potential violation or breach of, or default under, any Contract.
(v) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate, any amounts paid or payable
to the Company or the Company Sub under current or completed Contracts with any
Person and no such Person has made written demand for such renegotiation.
(vi) The Contracts relating to the sale or provision of
services by the Company or the Company Sub have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
(r) Environmental Matters.
(i) The operation of each of the Company and the Company
Sub has been and, as of the Closing Date, will be substantially in compliance
with all Environmental Laws;
(ii) The Company and the Company Sub each has obtained and
will, as of the Closing Date, maintain all permits required under applicable
Environmental Laws for the continued operations of their respective businesses;
(iii) Neither the Company nor the Company Sub is subject
to any outstanding written orders, investigations or contracts with any
Governmental Entity or other person respecting (A) Environmental Laws, (B)
Remedial Action or (C) any Release or threatened Release of a Hazardous
Material;
(iv) Neither the Company nor the Company Sub has received
any written communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law or liability attributable
to the Release of any Hazardous Material; and
(v) Neither the Company nor the Company Sub has any
contingent liabilities in connection with the Release of any Hazardous Material
into the indoor or outdoor environment (whether on-site or off-site).
(s) Title to Properties.
(i) The Company and the Company Sub each has good title
to, or valid leasehold interests in, all the properties and assets owned or used
by it, except for such as are no longer used or useful in the conduct of its
business or as have been disposed of in the Ordinary Course of Business, and
except for minor defects in title, easements, restrictive covenants and similar
Encumbrances that, in the aggregate, do not and will not have an effect on the
Company's or the Company Sub's ability to conduct its business as currently
conducted. All such assets and properties, other than assets and properties in
which the Company or the
-27-
Company Sub has leasehold interests, are free and clear of all Encumbrances,
other than those disclosed in Schedule 4.1(s)(i) of the Company Disclosure
Letter.
(ii) The Company has complied in all material respects
with the terms of all leases to which it is a party and under which it is in
occupancy, and all such leases are in full force and effect. The Company and the
Company Sub each enjoy peaceful and undisturbed possession under all such
leases.
(t) Insurance. The Company and the Company Sub each is, has been
since inception, and will be through the Effective Time, adequately insured with
responsible insurers in respect of its properties, assets and business,
including, without limitation, professional liability, medical malpractice,
employer practices liability and workers' compensation insurance, against risks
normally insured against by companies in similar lines of business under similar
circumstances. Schedule 4.1(t) to the Company Disclosure Letter correctly
describes (by type, carrier, policy number, limits, premium, and expiration
date) the insurance coverage carried by the Company and the Company Sub, which
insurance will remain in full force and effect with respect to all events
occurring prior to the Effective Time. Neither the Company nor the Company Sub
(i) has failed to give any notice or present any claim under any such policy or
binder in due and timely fashion, (ii) has received notice of cancellation or
non-renewal of any such policy or binder, (iii) is aware of any threatened or
proposed cancellation or non-renewal of any such policy or binder, (iv) has
received notice of any insurance premiums which will be increased in the future,
or (v) is aware of any insurance premiums which will be increased in the future.
There are no outstanding claims under any such policy which have gone unpaid for
more than forty-five (45) days, or as to which the insurer has disclaimed
liability. Schedule 4.1(t) to the Company Disclosure Letter sets forth a
complete listing of any and all claims under any insurance coverage carried by
the Company and the Company Sub since July 1, 1999, including, without
limitation, any claims under the Company's or the Company Sub's professional
liability, medical malpractice, employer practices liability or workers'
compensation insurance. Except as set forth in Schedule 4.1(t), there are no
other claims, notices or pending actions under any insurance coverage carried by
the Company or the Company Sub.
(u) Verification of Credentials. Except as set forth in Schedule
4.1(u) of the Company Disclosure Letter, the Company and the Company Sub each
has implemented effective policies and procedures to verify the credentials,
including, but not limited to, education and licensure, of personnel that it
places with its clients and for collecting, maintaining and updating such
credentialling information. The employees of the Company and the Company Sub
each consistently follow such policies and procedures.
(v) Training. Except as set forth in Schedule 4.1(v) of the
Company Disclosure Letter, the Company and the Company Sub each has in place a
comprehensive training program for the personnel who provide services to clients
of the Company and the Company Sub that satisfies the Company's and the
Company's Sub's training obligations to its clients. To the extent that the
Health Insurance Portability and Accountability Act of 1996 ("HIPAA") applies to
the Company or the Company Sub, the Company has developed a plan to comply with
any obligations it may have under the privacy standards of HIPAA.
-28-
(w) Clients and Suppliers. Schedule 4.1(w) of the Company
Disclosure Letter sets forth a complete and accurate list of (i) the twenty (20)
largest clients (by dollar volume) with respect to the Company and the Company
Sub during each of the Company's and the Company's Sub's last two (2) fiscal
years ended June 30, 2001, and for the eight (8)-month period ended February 28,
2002, indicating the existing contractual arrangements with each such client by
service and Company division and (iii) all suppliers of significant services to
the Company or the Company Sub.
(x) Off Balance Sheet Transactions. Except for transactions,
arrangements and other relationships otherwise specifically identified on the
Company's Audited Financial Statements, including, but not limited to,
identification of the information set forth below, Schedule 4.1(x) of the
Company Disclosure Letter sets forth a true, complete and correct list of all
transactions, arrangements and other relationships between or among the Company,
and the Company Sub's any Affiliates and any unconsolidated Person, including,
but not limited to, any structured finance, special purpose or limited purpose
Person (each, a "COMPANY OFF-BALANCE SHEET TRANSACTION"). Schedule 4.1(x) of the
Company Disclosure Letter also sets forth (a) the business purpose and
activities of each Company Off-Balance Sheet Transaction, (b) the economic
substance of each Company Off-Balance Sheet Transaction, (c) the key terms and
conditions of each Company Off-Balance Sheet Transaction, (d) the Company's
and/or Affiliates' potential risk associated with each Company Off-Balance Sheet
Transaction, (e) the amounts of any guarantees, lines of credit, standby letters
of credit or commitments or take or pay contracts, throughput contracts or other
similar types of arrangements, including tolling, capacity or leasing
arrangements, that could require the Company or any of its Affiliates to provide
funding of any obligations under any Company Off-Balance Sheet Transaction,
including, but not limited to, guarantees of repayments, make whole agreements
or value guarantees and (f) any other information with respect to each Company
Off-Balance Sheet Transaction.
(y) Inducements.
(i) Neither the Company, the Company Sub nor the
Management Stockholders nor to their knowledge, any employee of Company or
Company Sub, have, to obtain or retain business, directly or indirectly,
offered, paid or promised to pay, or authorized the payment of, any money or
other thing of value (including any fee, gift, sample, travel expense or
entertainment with a value in excess of $100 in the aggregate to any one
individual in any year) or any commission payment to:
(A) Any Person who is an official, officer, agent,
employee or representative of any Governmental Entity or of any existing or
prospective client (whether government owned or non-government owned);
(B) Any political party or official thereof;
(C) Any candidate for political or political party
office; or
(D) Any other Person;
-29-
while knowing or having reason to believe that all or any portion of such money
or thing of value would be offered, given, or promised, directly or indirectly,
to any such official, officer, agent, employee, representative, political party,
political party official, candidate, individual or any Person affiliated with
such client, political party or official or political office.
(ii) Each transaction described in this Section 4.1(y) is
properly and accurately recorded on the books and records of the Company or the
Company Sub, as the case may be, and each document upon which entries in the
Company's or the Company Sub's books and records are based is complete and
accurate in all respects. The Company maintains a system of internal accounting
controls adequate to insure that neither the Company nor the Company Sub
maintains off-the-books accounts and that the Company's and the Company Sub's
assets are used only in accordance with the Company's management directives.
(z) Representations Complete. None of the representations or
warranties made by the Company, the Company Sub or any Management Stockholder in
this Merger Agreement or in any Related Document, nor any statement made in any
Related Document furnished by the Company, the Company Sub or any Management
Stockholder pursuant to this Merger Agreement, contains or will contain at the
Closing, any untrue statement of a material fact, or will omit at the Closing
any material fact necessary in order to make the statements contained herein or
therein, in the context of the circumstances under which they were made, not
misleading; provided, however, the representations or warranties made by Xxxxxxx
shall be subject to the limitations described in Section 6.13 if the Merger has
not been effected prior to June 1, 2002.
(aa) Brokers. Except for SunTrust Xxxxxxxx Xxxxxxxx Capital
Markets, no broker, investment banker or other person is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Merger Agreement based upon arrangements made
by or on behalf of the Company, the Company Sub or the Company Stockholders.
4.2 Representations and Warranties of Parent and Sub. Parent and Sub,
jointly and severally, represent and warrant to the Company and the Company
Stockholders as follows:
(a) Organization, Standing and Power. Each of Parent, Sub and
Operating Sub is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the business it is
conducting, or the operation, ownership or leasing of its properties, makes such
qualification necessary. Each of Parent and Sub has previously made available to
the Company complete and correct copies of its respective Certificates of
Incorporation and Bylaws.
(b) Subsidiaries. Neither Parent nor Sub owns directly or
indirectly, any capital stock or other ownership interest in any Person, except
as set forth in Schedule 4.2(b) of the Parent Disclosure Letter.
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(c) Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of the following: 75,000,000 shares of Parent
Common Stock, 2,033,184 shares of which are validly issued and outstanding, and
1,000,000 shares of preferred stock, par value $0.01 per share, no shares of
which are issued and outstanding. At the close of business on the last Business
Day prior to the date of this Merger Agreement, 10,000,000 shares of Parent
Common Stock were authorized and are available for issuance pursuant to
outstanding options granted under any of Parent's stock option, stock award,
stock bonus or any other stock plan or program. As of the date hereof, the
authorized capital stock of Sub consists of 1,000 shares of common stock, par
value $0.01 per share, all shares of which are validly issued, fully paid and
non-assessable and are owned by Parent. All shares of outstanding stock of
Operating Sub are validly issued, fully paid and non-assessable and are owned by
Parent. Sub was formed solely for the purpose of participating in the Merger,
has no assets other than a minimal amount of cash and has conducted no
activities to date, other than in connection with the Merger.
(d) Authority; No Violations, Consents and Approvals.
(i) The Board of Directors of each of Parent and Sub has
approved the Merger and this Merger Agreement in accordance with its Certificate
of Incorporation and the DGCL, and has declared the Merger and this Merger
Agreement to be in the best interest of its stockholders. The approval of the
Parent's stockholders is not required for the approval of the Merger or this
Merger Agreement under the DGCL or under the Parent's Certificate of
Incorporation or Bylaws. Each of Parent and Sub has all requisite corporate
power and authority to enter into this Merger Agreement and the Related
Documents, and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Merger Agreement and the Related
Documents, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action on the part
of Parent and Sub. This Merger Agreement has been duly executed and delivered by
Parent and Sub. Assuming this Merger Agreement constitutes the valid and binding
obligation of the Company, it also constitutes a valid and binding obligation of
each of Parent and Sub and is enforceable against each of them in accordance
with its terms; except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws or judicial
decisions now or hereafter in effect relating to creditors rights generally and
(ii) the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(ii) The execution and delivery of this Merger Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation of any Encumbrance upon any of the properties or assets of Parent, Sub
or Operating Sub under, any provision of (A) the Certificate of Incorporation or
Bylaws of Parent, Sub or Operating Sub, (B) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent, Sub, Operating Sub or
their respective properties or assets or (C) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in Section
4.2(d)(iii) are duly and timely obtained
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or made, any judgment, order, decree or Legal Requirements applicable to Parent,
Sub or Operating Sub or any of their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from, any Governmental
Entity is required by or with respect to Parent or Sub in connection with the
execution and delivery of this Merger Agreement and the Related Documents by
Parent and Sub or the consummation by Parent and Sub of the transactions
contemplated hereby or thereby, except for: (A) the filing of a premerger
notification report under the HSR Act and the expiration or termination of the
applicable waiting period with respect thereto; (B) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL; (C) filings with the Securities and Exchange Commission
(the "SEC") required under the Exchange Act; (D) such filings and approvals as
may be required by any applicable state securities, "blue sky" or takeover laws;
(E) such filings with the SEC under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), in connection with the registration of Parent Common Stock in
accordance with the Registration Rights Agreement described in Section 6.5; (F)
such filings and approvals as may be required by any applicable non-U.S.
Governmental Entity; and (G) such filings and approvals as may be required by
any non-U.S. premerger notification, securities, corporate or other Legal
Requirement.
(e) Parent SEC Documents. Parent has filed all required reports,
schedules, forms, statements and other documents with the SEC since December 31,
1999 (such documents, together with all exhibits and schedules thereto and
documents incorporated by reference therein, collectively referred to herein as
the "PARENT SEC DOCUMENTS"). No Subsidiary of Parent is required to file any
reports, schedules, forms, statements or other documents with the SEC. As of
their respective dates, the Parent 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 rules and regulations of the SEC thereunder applicable to
the Parent SEC Documents, and none of the Parent SEC Documents contained when
filed any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of Parent included in the Parent SEC Documents complied as
to form in all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal year-end adjustments and other adjustments discussed
therein) the consolidated financial position of Parent as of their respective
dates and the results of operations and the consolidated cash flows of Parent
and its consolidated Subsidiaries for the periods presented therein.
(f) Books and Records. The books of account and other financial
records of Parent, Sub and Operating Sub, all of which will be made available to
the Company upon written request by the Company, are complete and correct and
represent actual, bona fide transactions and have been maintained in accordance
with sound business practices and the requirements of Section 13(b)(2) of the
Exchange Act, as amended (regardless of whether Parent, Sub or Operating Sub is
subject to that Section), including the maintenance of an adequate system of
internal controls. The minute books of Parent, Sub and Operating Sub, all of
which will be made
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available to the Company upon written request of the Company contain accurate
and complete records of all meetings held of the stockholders, the Board of
Directors and committees of the Board of Directors of Parent, Sub or Operating
Sub, and no meeting of any such stockholders or Board of Directors has been held
for which minutes have not been prepared or are not contained in such minute
books.
(g) Absence of Certain Changes or Events. Except as disclosed in,
or reflected in, the financial statements included in the Parent SEC Documents
or on Schedule 4.2(g) to the Parent Disclosure Letter, or except as contemplated
by the Merger Agreement, since December 31, 2001, there has not been: (i) any
Material Adverse Effect on Parent, Sub or Operating Sub, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of Parent's capital stock, (iii) any
amendment of any material term of any outstanding equity security of Parent;
(iv) except insofar as may have been required by a change in GAAP, any change in
accounting methods, principles or practices by Parent affecting its assets,
liabilities or business; or (v) any other changes, circumstances or events in
the business, operations, properties, prospects, assets or condition of Parent
that would have a Material Adverse Effect on Parent.
(h) Compliance with Applicable Laws. Each of Parent, Sub and
Operating Sub holds all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for it to own,
lease or operate its properties and assets and for the lawful conduct of its
business as currently conducted (the "PARENT PERMITS"). Each of Parent, Sub and
Operating Sub is in compliance with the terms of the Parent Permits, as
applicable. Except as set forth in Schedule 4.2(h) to the Parent Disclosure
Letter, the business of Parent and Operating Sub is not being conducted in
violation of any Legal Requirement of any Governmental Entity, except such
violations that individually or in the aggregate could not result in a Material
Adverse Effect on Parent, Sub or Operating Sub. No investigation or review by
any Governmental Entity with respect to Parent or Operating Sub is pending or,
to the knowledge of Parent, threatened.
(i) Condition and Sufficiency of Assets. All of the buildings,
plans, structure, furniture, fixtures, equipment and other assets of Parent and
Operating Sub (the "PARENT ASSETS") are structurally sound, are in good
operating condition and repair (subject to normal wear and tear), and are
adequate for the uses to which they are being put, and none of such Parent
Assets is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The Parent
Assets are sufficient for the continued conduct of Parent's and Operating Sub's
business after the Closing in substantially the same manner as conducted prior
to the Closing.
(j) Litigation. Except as disclosed in the Parent SEC Documents
or on Schedule 4.2(j) to the Parent Disclosure Letter, there is no (i) suit,
action or proceeding pending or, to the knowledge of Parent, threatened against
or affecting Parent or Operating Sub ("PARENT LITIGATION"), or (ii) judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Parent or Operating Sub that (in any case) would have a
Material Adverse Effect on Parent on a consolidated basis or prevent Parent from
consummating the transactions contemplated by this Merger Agreement. To the
knowledge of Parent, no event has
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occurred or circumstance exists that is reasonably likely to give rise to or
serve as a basis for the commencement of any such Parent Litigation.
(k) Taxes.
(i) Parent and any affiliated, combined or unitary group
of which Parent is or was a member has (A) timely (taking into account any
extensions) filed all true and complete federal and all state, local and
non-U.S. returns, declarations, reports, estimates, information returns and
statements ("PARENT RETURNS") required to be filed by or with respect to it in
respect of any Taxes, (B) timely paid all Taxes that are due and payable (except
for audit adjustments to the extent that liability therefor is reserved for in
the unaudited current balance sheet of Parent as at February 28, 2002 ("PARENT'S
CURRENT BALANCE SHEET")) for which Parent is liable, (C) established reserves
(determined in accordance with GAAP) which are included in Parent's Current
Balance Sheet that are adequate for the payment of all Taxes not yet due and
payable with respect to the results of operations of Parent through the date of
such Parent's Current Balance Sheet, and (D) complied with all Legal
Requirements relating to the payment and withholding of Taxes and has timely
withheld from employee wages and paid over to the proper Governmental Entities
all amounts required to be so withheld and paid over.
(ii) Schedule 4.2(k)(ii) to the Parent Disclosure Letter
sets forth the last taxable period through which the federal income Tax Returns
of Parent have been examined by the IRS or otherwise closed. Except to the
extent being contested in good faith, all deficiencies asserted as a result of
such examinations and any examination by any applicable state, local or non-U.S.
taxing authority have been paid, fully settled or adequately provided for in
Parent's Current Balance Sheet. No federal, state, local or non-U.S. Tax audits
or other administrative proceedings or court proceedings are currently pending
with regard to any Taxes for which Parent or Operating Sub would be liable and
no deficiency for any such Taxes has been proposed, asserted or assessed against
Parent or Operating Sub by any federal, state, local or non-U.S. taxing
authority with respect to any period.
(iii) Parent has not executed or entered into (or prior to
the close of business on the Closing Date will not execute or enter into) with
the IRS or any other taxing authority any contract or other document extending
or having the effect of extending the period for assessments or collection of
any Taxes for which Parent would be liable.
(iv) Parent is not a party to, is not bound by and does
not have any obligation under, any tax sharing agreement, tax indemnity
agreement or similar agreement or arrangement.
(v) Parent has neither taken or agreed to take any action
nor has it any knowledge of any fact, agreement, plan or other circumstance that
is reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of section 368(a) of the Code.
(vi) There are no Encumbrances for Taxes upon the assets
or properties of Parent or Operating Sub (whether real, personal or mixed,
tangible or intangible) except for statutory Encumbrances for Taxes not yet due
or payable.
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(vii) Parent is not required (or will not be required as a
result of this transaction) to include in income any amount for an adjustment
pursuant to section 481(a) of the Code or the regulations thereunder or any
similar provision of state law.
(viii) To the knowledge of Parent, no claim has been made
during the last five years by an authority in a jurisdiction where Parent or
Operating Sub does not file Tax Returns that Parent or Operating Sub is or may
be subject to taxation by that jurisdiction.
(ix) Parent has not filed a consent under Code section
341(f) concerning collapsible corporations.
(x) Each of Parent and Operating Sub has withheld or paid
all Taxes required to have been withheld or paid in connection with amounts paid
or owed to any employee, independent contractor, creditor, stockholder, member
or other third party.
(xi) Parent has disclosed on its federal income tax
returns all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Code Section 6662.
(xii) Each of Parent and Operating Sub has complied with
all sales Tax resale certificate exemption requirements.
(l) Employee Matters. Schedule 4.2(l) to the Parent Disclosure
Letter contains a true and complete list of each of the following items: each
employee benefit plan, program, arrangement or customary practice covering any
current officer, director, employee or independent contractor of Parent or
Operating Sub, or any of their dependents or beneficiaries or with respect to
which Parent or any Affiliate of Parent may have any liability, including, but
not limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA and any stock option plan, stock purchase plan, cafeteria plan,
scholarship program, retention incentive program, vacation policy and sick pay
policy.
(m) Labor Matters. Except as set forth in Schedule 4.1(m) to the
Parent Disclosure Letter:
(i) Neither Parent nor Operating Sub is a party to any
collective bargaining agreement or other current labor agreement with any labor
union or organization, and there is no current union representation dispute
involving employees of Parent or Operating Sub, nor does Parent or Operating Sub
know of any activity or proceeding of any labor organization (or representative
thereof) or employee group (or representative thereof) to organize any such
employees;
(ii) there is no unfair labor practice charge or grievance
arising out of a collective bargaining agreement or other grievance procedure
against Parent or Operating Sub pending, or, to the knowledge of Parent,
threatened;
(iii) there is no complaint, lawsuit or proceeding in any
forum by or on behalf of any current or former employee or any applicant for
employment alleging breach of any express or implied contract of employment, any
law or regulation governing employment or
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the termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship against Parent or Operating Sub
pending, or, to the knowledge of Parent, threatened;
(iv) to the knowledge of Parent, each of Parent, Sub and
Operating Sub is substantially in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health; and
(v) there is no proceeding, claim, suit, action or
governmental investigation pending or, to the knowledge of Parent, threatened,
in respect to which any current or former director, officer, employee or agent
of Parent or Operating Sub is or may be entitled to claim indemnification from
Parent or Operating Sub (A) pursuant to their respective Articles of
Incorporation or Bylaws, (B) as provided in any indemnification agreement to
which Parent or Operating Sub is a party or (C) pursuant to applicable law.
(n) Title to Properties.
(i) Each of Parent and Operating Sub has good title to, or
valid leasehold interests in, all the properties and assets owned or used by it,
except for such as are no longer used or useful in the conduct of its business
or as have been disposed of in the Ordinary Course of Business, and except for
minor defects in title, easements, restrictive covenants and similar
Encumbrances that, in the aggregate, do not and will not have an effect on
Parent's or Operating Sub's ability to conduct its business as currently
conducted. All such assets and properties, other than assets and properties in
which Parent or Operating Sub has leasehold interests, are free and clear of all
Encumbrances, other than those disclosed in Section 4.2(n)(i) of the Parent
Disclosure Letter.
(ii) Each of Parent and Operating Sub has complied in all
material respects with the terms of all leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect. Each
of Parent and Operating Sub enjoys peaceful and undisturbed possession under all
such leases.
(o) Off Balance Sheet Transactions. Except for transactions,
arrangements and other relationships otherwise specifically identified on
Parent's audited financial statements, including, but not limited to,
identification of the information set forth below, Schedule 4.2(o) sets forth a
true, complete and correct list of all transactions, arrangements and other
relationships between or among Parent, any of its Affiliates and any
unconsolidated Person, including, but not limited to, any structured finance,
special purpose or limited purpose Person (each, a "PARENT OFF-BALANCE SHEET
TRANSACTION"). Schedule 4.2(o) also sets forth (a) the business purpose and
activities of each Parent Off-Balance Sheet Transaction, (b) the economic
substance of each Parent Off-Balance Sheet Transaction, (c) the key terms and
conditions of each Parent Off-Balance Sheet Transaction, (d) Parent's and/or its
Affiliates' potential risk associated with each Parent Off-Balance Sheet
Transaction, (e) the amounts of any guarantees, lines of credit, standby letters
of credit or commitments or take or pay contracts, throughput contracts or other
similar types of arrangements, including tolling, capacity or leasing
arrangements, that could require Parent or any of its Affiliates to provide
funding of any
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obligations under any Parent Off-Balance Sheet Transaction, including, but not
limited to, guarantees of repayments, make whole agreements or value guarantees
and (f) any other information with respect to each Parent Off-Balance Sheet
Transaction.
(p) Inducements.
(i) Neither Parent nor any Affiliate of Parent has, to
obtain or retain business, directly or indirectly, offered, paid or promised to
pay, or authorized the payment of, any money or other thing of value (including
any fee, gift, sample, travel expense or entertainment with a value in excess of
$100 in the aggregate to any one individual in any year) or any commission
payment to:
(A) Any Person who is an official, officer, agent,
employee or representative of any Governmental Entity or of any existing or
prospective client (whether government owned or non-government owned);
(B) Any political party or official thereof;
(C) Any candidate for political or political party
office; or
(D) Any other Person;
while knowing or having reason to believe that all or any portion of such money
or thing of value would be offered, given, or promised, directly or indirectly,
to any such official, officer, agent, employee, representative, political party,
political party official, candidate, individual or any Person affiliated with
such client, political party or official or political office.
(ii) Each transaction described in this Section 4.2(p) is
properly and accurately recorded on the books and records of Parent or its
Affiliate, as the case may be, and each document upon which entries in such
books and records are based is complete and accurate in all respects. Parent and
Parent's Affiliate maintain a system of internal accounting controls adequate to
insure that they maintain no off-the-books accounts and that their assets are
used only in accordance with Parent's management directives.
(q) No Vote Required. No vote of the holders of any class or
series of Parent capital stock is necessary to approve this Merger Agreement and
the transactions contemplated hereby, or the issuance of Parent Common Stock
pursuant to this Merger Agreement.
(r) Form S-3 Registration. Parent and Sub have no reason to
believe that Form S-3 is not available, or will not continue to be available, to
Parent for registration of the Parent Common Stock as provided under the terms
of the Registration Rights Agreement (described in Section 6.5). Parent and Sub
have complied with all requirements that are necessary to enable Parent to file
a Form S-3 to effect the registration of the Parent Common Stock concurrently
with the Closing.
(s) Brokers. Except for Xxxxxx Brothers, Inc., no broker,
investment banker, or other Person is entitled to any broker's, finder's or
other similar fee or commission in connection
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with the transactions contemplated by this Merger Agreement based upon
arrangements made by or on behalf of Parent.
(t) Representations Complete. None of the representations or
warranties made by Parent or Sub in this Merger Agreement or in any Related
Document, nor any statement made in any Related Document furnished by Parent or
Sub pursuant to this Merger Agreement, contains or will contain at the Closing,
any untrue statement of a material fact, or will omit at the Closing any
material fact necessary in order to make the statements contained herein or
therein, in the context of the circumstances under which they were made, not
misleading.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Business by the Company Pending the Merger. During the
period from the date of this Merger Agreement and continuing until the Effective
Time, the Company agrees that (except as expressly contemplated or permitted by
this Merger Agreement, or as described in the Company Disclosure Letter or to
the extent that Parent shall otherwise consent in writing):
(a) Ordinary Course. The Company shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, shall use all
reasonable efforts to preserve intact its current business organizations, keep
available the services of its current officers and employees and endeavor to
preserve its relationships with hospitals, other clients and other Persons
having business dealings with it, in each case consistent with past practices
and in compliance with all applicable Legal Requirements. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Merger Agreement, the Company shall not:
(i) Dividends; Changes in Stock. Except as required or
permitted by the terms of its Company Preferred Stock outstanding on the date
hereof or as contemplated by Section 6.4 of this Agreement or by any existing
Company Benefit Plans disclosed in Schedule 5.1(a)(i) of the Company Disclosure
Letter (A) declare or pay any dividends on or make other distributions in
respect of any of its Company Capital Stock (except for the payment of accrued
but unpaid dividends to be paid in respect of the Company Preferred Stock prior
to the Effective Time); (B) split, combine or reclassify any of its Company
Capital Stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of Company
Capital Stock; or (C) repurchase, redeem or otherwise acquire any shares of
Company Capital Stock, except as required by the terms of its securities
outstanding on the date hereof or as contemplated by any existing Company
Benefit Plan.
(ii) Issuance of Securities. Issue, deliver or sell, or
authorize or propose to issue, deliver or sell, any shares of its capital stock
of any class, any Voting Debt or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, Voting Debt or convertible
securities, other than: (A) the issuance of Company Common Stock upon the
exercise of stock options pursuant to the Company Stock Plan and Section 6.3(a)
and
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(B) the issuance of Company Common Stock upon exercise of the Warrant
pursuant to Section 6.3(b).
(iii) Governing Documents. Amend its Articles of
Incorporation or Code of Regulations, except as set forth in Section 6.4.
(iv) No Acquisitions. Acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any business,
Person or other business organization or division thereof or any assets other
than immaterial assets acquired in the Ordinary Course of Business consistent
with past practice.
(v) No Dispositions. Other than sales or leases in the
Ordinary Course of Business consistent with past practice, sell, lease, encumber
or otherwise dispose of, or agree to sell, lease (whether such lease is an
operating or capital lease), encumber or otherwise dispose of, any of its
assets.
(vi) No Dissolution, Etc. Except as otherwise permitted or
contemplated by this Merger Agreement, authorize, recommend, propose or announce
an intention to adopt a plan of complete or partial liquidation or dissolution
of the Company.
(vii) Release of Claims. Pay, discharge, settle or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), or litigation (whether or not commenced
prior to the date of this Merger Agreement) other than the payment, discharge,
settlement or satisfaction, in the Ordinary Course of Business consistent with
past practice or in accordance with their terms, of liabilities recognized or
disclosed in the Current Balance Sheet (or the notes thereto) of the Company or
incurred since the date of such Balance Sheet, or (B) waive the benefits of,
agree to modify in any manner, terminate, release any Person from or fail to
enforce any confidentiality or similar agreement to which the Company or any
Affiliate of the Company is a party or of which the Company or any Affiliate of
the Company is a beneficiary.
(viii) Certain Employee Matters. Except as may be required
by applicable law, any disclosed Contract to which the Company is a party on the
date hereof or as expressly contemplated by this Merger Agreement, the Company
agrees that the Company will not increase, modify or in any other way amend (or
enter into any agreement or arrangement to increase, modify or amend), in any
manner, the compensation, bonuses, benefits or any other terms and conditions of
any current or former director, officer, employee, consultant or independent
contractor who would be deemed an employee under state or federal law, or any
relation or dependent thereof, except for (A) the agreements with DeVille and
Xxxx regarding the Management Bonus Payments and the payment of such bonuses and
any deemed compensation payments by virtue of their exercise of any Vested
Options, (B) payments made or to be made pursuant to the Xxxxxxx Agreement, (C)
the cashout of all outstanding stock options other than those held by the
Management Stockholders and Xxxx and (D) an amendment to the Company Stock Plan
to provide for the cashless exercise of the Vested Options.
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(ix) Loans and Advances. Make any loans, advances or
capital contributions to, or investments in, any Person.
(x) Indebtedness; Leases; Capital Expenditures. (A) Incur
any indebtedness for borrowed money (other than in connection with the payment
of any post-February 28, 2002 items described in clauses (i) through (ix) of
Section 1.1(j) and paying for bona fide accounts payable of the Company,
including payment of accrued payroll and accrued withholding taxes, incurred in
the Ordinary Course of Business), or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities of
the Company or guarantee any debt securities of others, (B) pay, discharge or
satisfy any liability or Encumbrance, other than the payment, discharge or
satisfaction in the Ordinary Course of Business consistent with past practice of
any liability or Encumbrance reflected or reserved against in the Current
Balance Sheet or incurred in the Ordinary Course of Business since the date of
such Current Balance Sheet, (C) except in the Ordinary Course of Business, enter
into any lease (whether such lease is an operating or capital lease) or create
any Encumbrance on the property of the Company in connection with any
indebtedness thereof, except for those securing purchase money indebtedness not
in excess of $10,000 individually, or $50,000 in the aggregate, or (D) commit to
aggregate capital expenditures in excess of $50,000 or, in the aggregate, in
excess of $100,000, outside the capital budget for the Company's June 30, 2002
fiscal year, that was approved by the Company prior to the date hereof.
(xi) Taxes. Make any material election relating to Taxes
or compromise any material Tax liability.
(xii) Accounting. Change any material accounting principle
used by it, except as required by statements, rules or regulations promulgated
by the Financial Accounting Standards Board ("FASB") or the SEC.
(xiii) Intellectual Property Rights. Transfer or license
to any Person or otherwise extend, amend or modify any rights to the Company
Intangible Property other than in the Ordinary Course of Business consistent
with past practices; provided, that in no event shall the Company license on an
exclusive basis or sell any Company Intangible Property.
(xiv) Contracts. Enter into or amend any Contract of the
type listed in Section 4.1(q) except in the Ordinary Course of Business or with
the prior written consent of an authorized officer of Parent or Sub, which
consent shall not be unreasonably withheld.
(xv) Expansion. Obtain, through acquisition, lease,
sublease or otherwise, any real property for use as an office or similar
facility of the Company, unless pursuant to Contracts for leases of real
property as of February 28, 2002.
(xvi) Representations and Warranties. Take any action that
would, or that would reasonably be expected to, result in (A) any of the
representations and warranties made by the Company in this Merger Agreement that
are qualified as to materiality becoming untrue, (B) any of such representations
and warranties that are not so qualified becoming untrue in any material respect
or (C) any condition to the Merger set forth in Article VII not being satisfied.
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(xvii) Other. Authorize, or commit, resolve or agree to
take, any of the foregoing actions.
5.2 No Solicitation; Other Offers.
(a) From the date of the execution of this Merger Agreement
through the Effective Time, or until such time, if any, as this Merger Agreement
is terminated pursuant to Article IX, the Company shall not, and shall not
permit any of its officers, directors, employees, attorneys, investment bankers,
agents, representatives or Affiliates (collectively, "COMPANY REPRESENTATIVES")
to, (i) solicit, initiate or encourage any inquiry or proposal or the making of
any inquiry or proposal from any Person (other than Parent), or enter into any
agreement with any Person (other than Parent), with respect to any Acquisition
Proposal, (b) furnish to any Person (other than Parent) any information with
respect to, or otherwise cooperate in any way with, any Acquisition Proposal
(other than an Acquisition Proposal with Parent) or (c) enter into, continue or
otherwise participate in any discussions or negotiations regarding, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or which may reasonably be expected to result in, any Acquisition
Proposal (other than an Acquisition Proposal with Parent). The Company agrees to
notify Parent immediately upon the occurrence of any inquiry, proposal or
request for information with respect to an Acquisition Proposal, or any request
for nonpublic information relating to the Company by any Person who, to the
knowledge of the Company, is making or considering making or who has made an
Acquisition Proposal, that comes to the attention of the Company the terms
thereof, including, without limitation, the identity of the Person making such
inquiry or proposal.
(b) From the date of the execution of this Merger Agreement
through the Effective Time, or until such time, if any, as this Merger Agreement
is terminated pursuant to Article IX, the Board of Directors of the Company
shall not, except in connection with the termination of this Merger Agreement
pursuant to Section 9.1(a), (b), (c) or (e), (i) withdraw or modify in a manner
adverse to Parent their approval or recommendation of this Merger Agreement, the
Merger or the Related Documents, or take any action having such effect, or (ii)
approve or recommend any Acquisition Proposal (other than an Acquisition
Proposal with Parent).
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information. Subject to the provisions of Section 6.2,
upon reasonable notice, the Company shall afford to the officers, employees,
accountants, counsel and other representatives of Parent, access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
shall furnish promptly to Parent all information concerning its business,
properties and personnel as Parent may reasonably request. Parent agrees that
neither it nor its representatives will use any information obtained pursuant to
this Section 6.1 for any purpose unrelated to the consummation of the
transactions contemplated by this Merger Agreement. Notwithstanding the
foregoing, the Company shall not be required to give Parent any information that
is subject to a confidentiality agreement and that relates primarily to a party
other than the Company. The
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Confidentiality Agreement dated as of December 5, 2001 between Parent and the
Company (the "CONFIDENTIALITY AGREEMENT") shall apply with respect to
information furnished thereunder or hereunder and any other activities
contemplated thereby.
6.2 Legal Conditions to Merger.
(a) Except as otherwise provided herein, each of the Company, the
Company Sub, Parent and Sub will take all reasonable actions necessary to comply
promptly with all Legal Requirements that may be imposed on such party with
respect to the Merger (including, without limitation, furnishing all information
required under the HSR Act and in connection with approvals of or filings with
any other Governmental Entity) and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed upon
any of them in connection with the Merger. Each of the Company and Parent shall
take all reasonable actions as may be necessary to obtain (and will cooperate
with each other in obtaining) any consent, acquiescence, authorization, order or
approval of, or any exemption or nonopposition by, any Governmental Entity or
court required to be obtained or made by the Company, the Company Sub, Parent or
Sub in connection with the Merger or the taking of any action contemplated
thereby or by this Merger Agreement, including, without limitation, complying
with any requests or orders made by the Justice Department or the Federal Trade
Commission in connection with the Merger. Parent and the Company agree to share
equally in the payment of any and all filing fees relating to the HSR filing.
(b) Company and Parent shall each file a premerger notification
and report form under the HSR Act (and any other applicable foreign antitrust
law or regulation) with respect to the Merger as promptly as reasonably possible
following execution and delivery of this Merger Agreement. Each of the parties
agrees to use reasonable efforts to respond promptly to any request for
additional information that may be received from any Governmental Entity in
connection with the HSR filing or any filing under applicable foreign antitrust
laws and regulations. Except as otherwise required by United States regulatory
considerations, the Company will furnish to Parent copies of all correspondence,
filings or communications (or memoranda setting forth the substance thereof
(collectively, "COMPANY HSR DOCUMENTS")) between the Company, or any of its
representatives, on the one hand, and any Governmental Entity, or members of the
staff of such agency or authority, on the other hand, with respect to this
Merger Agreement or the Merger; provided, however, that (i) with respect to
documents and other materials filed by or on behalf of the Company with the
Antitrust Division of the Department of Justice, the Federal Trade Commission,
or any state attorneys general that are available for review by Parent, copies
will not be required to be provided to Parent and (ii) with respect to any
Company HSR Documents (1) that contain any information which, in the reasonable
judgment of Xxxxxxx, Xxxxxxxx & Xxxxxxx, P.L.L., should not be furnished to
Parent because of antitrust considerations or (2) relating to a request for
additional information pursuant to Section (e)(1) of the HSR Act, the obligation
of the Company to furnish any such Company HSR Documents to Parent shall be
satisfied by the delivery of such Company HSR Documents on a confidential basis
to Fulbright & Xxxxxxxx L.L.P., pursuant to a confidentiality agreement
containing terms reasonably satisfactory to Parent. Except as otherwise required
by United States regulatory considerations, Parent will furnish to the Company
copies of all correspondence, filings or communications (or memoranda setting
forth the substance thereof (collectively, "PARENT HSR DOCUMENTS")) between
Parent or any of its representatives, on the
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one hand, and any Governmental Entity, or member of the staff of such agency or
authority, on the other hand, with respect to this Merger Agreement or the
Merger; provided, however, that (i) with respect to documents and other
materials filed by or on behalf of Parent with the Antitrust Division of the
Department of Justice, the Federal Trade Commission, or any state attorneys
general that are available for review by the Company, copies will not be
required to be provided to the Company, and (ii) with respect to any Parent HSR
Documents (1) that contain information which, in the reasonable judgment of
Fulbright & Xxxxxxxx L.L.P., should not be furnished to the Company because of
antitrust considerations or (2) relating to a request for additional information
pursuant to Section (e)(1) of the HSR Act, the obligation of Parent to furnish
any such Parent HSR Documents to the Company shall be satisfied by the delivery
of such Parent HSR Documents on a confidential basis to Xxxxxxx, Muething &
Xxxxxxx, P.L.L. pursuant to a confidentiality agreement in form and substance
reasonably satisfactory to the Company.
(c) Notwithstanding the foregoing, nothing contained in this
Merger Agreement shall be construed so as to require Parent, Sub, the Company or
the Company Sub to sell, license, dispose of, or hold separate, or to operate in
any specified manner, any assets or businesses of Parent, Sub, the Company, the
Company Sub or the Surviving Corporation or to defend any lawsuits or other
legal proceedings by a Governmental Entity, whether judicial or administrative,
challenging this Merger Agreement or the consummation of the transactions
contemplated hereby, or to seek to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed (or to
require Parent, Sub, the Company or the Company Sub to agree to any of the
foregoing).
6.3 Stock Options and Warrant.
(a) Immediately prior to the Effective Time of the Merger, each
outstanding stock option granted under the Company Stock Plan to the Management
Stockholders and Xxxx, and to each other option holder who is not cashed out on
or prior to the Effective Time, that is vested or exercisable immediately prior
to or at the Effective Time (a "VESTED OPTION" and, collectively, the "VESTED
OPTIONS") shall be exercised and the Company shall issue that number of shares
of Company Common Stock that the holder thereof is entitled to receive pursuant
to such Vested Option, subject to any adjustment in the number of shares
resulting from any cashless exercise thereof. The holders of Company Common
Stock to be received upon exercise of the Vested Options shall be entitled to
receive the Merger Consideration received by the Company Stockholders pursuant
to Article III hereof. The Company's Board of Directors or any committee thereof
responsible for the administration of the Company Stock Plans shall take any and
all action necessary to effectuate the matters described in this Section 6.3(a)
on or before the Effective Time. Schedule 6.3(a) to the Company's Disclosure
Letter sets forth the number of shares of Company Common Stock authorized and
available for issuance upon exercise of outstanding Vested Options and sets
forth the exercise price for each such Vested Option. Any amounts payable
pursuant to this Section 6.3 shall be subject to any required withholding of
Taxes and shall be paid without interest. All other options granted by the
Company (other than Vested Options) shall be canceled without any conversion
thereof by the Company prior to the Effective Time and no consideration shall be
delivered with respect thereto.
(b) Immediately prior to the Effective Time of the Merger, the
Warrant shall be exercised and the Company shall issue 5,100 shares of Company
Common Stock to the holder
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thereof, subject to any adjustment in the number of shares resulting from a
cashless exercise thereof. The holder of the Warrant shall be entitled to
receive the Merger Consideration received by the Company Stockholders pursuant
to Article III hereof. The Company's Board of Directors or any committee thereof
responsible for overseeing the exercise of the Warrant shall take any and all
action necessary to effectuate the matters described in this Section 6.3(b) on
or before the Effective Time. Schedule 6.3(b) to the Company's Disclosure Letter
sets forth the number of shares of Company Common Stock authorized and available
for issuance upon exercise of the Warrant and the exercise price. The parties
acknowledge, however, that the holder of the Warrant intends to effect a
cashless exercise of the Warrant, and the Company Disclosure Letter does not
reflect the number of shares that will be issued to the Warrant holder upon a
cashless exercise of the Warrant.
6.4 Payment of Accrued Dividends. On or before the Closing Date, the
Company shall have paid all accrued dividends due to the holders of the Company
Preferred Stock, as set forth on Schedule 4.1(c) of the Company Disclosure
Letter. Notwithstanding the preceding, the Company may, prior to the Effective
Time, upon approval of the holders of the Company Preferred Stock and the
amendment of the Articles of Incorporation of the Company, issue a stock
dividend to the holders of the Company Preferred Stock in lieu of and in
complete satisfaction of the accrued dividends.
6.5 Registration Rights Agreement. Parent, the Non-Management
Stockholders, other than Xxxx, and Xxxxxxx shall enter into a Registration
Rights Agreement in the form attached hereto as Exhibit C (the "REGISTRATION
RIGHTS AGREEMENT"), which agreement shall be executed and delivered at the
Closing.
6.6 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Person, other than a Governmental
Entity, or other legal or administrative proceeding is commenced by a Person,
other than a Governmental Entity, that questions the validity or legality of the
transactions contemplated hereby or seeks damages in connection therewith, the
parties hereto agree to cooperate and use their reasonable efforts to defend
against and respond thereto.
6.7 Public Announcements. Parent shall consult with the Company before
issuing any press release or otherwise making any public statements with respect
to this Merger Agreement and the transactions contemplated by this Merger
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation, except that Parent may respond to
questions from stockholders and inquiries from financial analysts and media
representatives in a manner consistent with its past practice and may make such
disclosures as may be required by applicable law or by obligations pursuant to
any listing agreement with Nasdaq without prior consultation to the extent such
consultation is not reasonably practicable. The parties agree that the initial
press release or releases to be issued in connection with the execution of this
Merger Agreement shall be mutually agreed upon prior to the issuance thereof.
The Company may not make any press release or public statements with respect to
this Merger Agreement or the Merger without Parent's prior written consent.
6.8 Other Actions. Except as contemplated by this Merger Agreement,
neither Parent nor the Company shall take or agree or commit to take any action
that is reasonably likely to
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result in any of its representations or warranties hereunder being untrue in any
material respect or in any of the conditions to the Merger set forth in Article
VII not being satisfied.
6.9 Advice of Changes. The Company shall promptly advise Parent, and
Parent shall promptly advise the Company, orally and in writing of any change or
event having, or which, insofar as can reasonably be foreseen, could have, a
Material Adverse Effect on the Company or Parent, as the case may be. The
Company and Parent shall promptly provide each other (or their respective
counsel) copies of all filings made by such party with any state or federal
Governmental Entity in connection with this Merger Agreement and the
transactions contemplated hereby.
6.10 Voting Agreements. Each of the Company Stockholders who is
identified on Exhibit G attached hereto shall have executed a Voting Agreement
to be delivered to Parent concurrently with the execution of this Merger
Agreement (the "VOTING AGREEMENT").
6.11 Stockholder Vote. The Company shall call a special meeting of the
stockholders of the Company to be held no later than twenty (20) days following
the execution of this Merger Agreement for the purpose of approving this Merger
Agreement and the transactions contemplated hereunder and the Company's Board of
Directors shall recommend that the stockholders of the Company vote for such
approval.
6.12 Registration of Form S-3. Parent shall use its best efforts to
take all actions reasonably necessary from the time of signing through the
Effective Time to maintain the right to register the Parent Common Stock on Form
S-3. Parent shall comply with the requirements of Rule 144 as amended from time
to time.
6.13 Limitation on Michael's Representations and Warranties. It is
understood and agreed by all parties to this Merger Agreement that
notwithstanding anything to the contrary in the Xxxxxxx Agreement or this Merger
Agreement, if the Closing does not occur before June 1, 2002, the
representations and warranties of Xxxxxxx set forth in Section 4.1 of this
Merger Agreement that in any manner relate to the business, operations,
condition (financial or otherwise), prospects or results of the Company or the
Company Sub, collectively "Company Condition", shall speak only as of March 22,
2002, rather than as of the date of the execution of this Merger Agreement, and
shall not be considered for purposes of any indemnification Claim by an
Indemnified Parent Party arising under Section 8.2(a) of this Merger Agreement
to cover any change in the Company Condition that has occurred after that date.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Other Approvals. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and all filings required to be made prior to the Effective Time with,
and all consents, approvals, permits and authorizations
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required to be obtained prior to the Effective Time from, any Governmental
Entity in connection with the execution and delivery of this Merger Agreement
and the consummation of the transactions contemplated hereby shall have been
made or obtained (as the case may be), except where the failure to obtain such
consents, approvals, permits and authorizations would not be reasonably likely
to result in a Material Adverse Effect on Parent (assuming the Merger has taken
place) or to materially adversely affect the consummation of the Merger or the
Surviving Corporation.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "INJUNCTION")
preventing the consummation of the Merger shall be in effect; provided, however,
that prior to invoking this condition, each party shall have complied fully with
its obligations under Section 6.6 hereof and, in addition, shall have used all
reasonable efforts to have any such decree, ruling, injunction or order vacated,
except as otherwise contemplated by this Merger Agreement.
(c) Nasdaq National Market Listing. Parent shall cause the shares
of Parent Common Stock issuable to the Company's Stockholders pursuant to this
Merger Agreement to be approved for quotation on Nasdaq, subject to official
notice of issuance.
7.2 Conditions to Obligations of Parent and Sub. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction of the
following conditions, any or all of which may be waived in whole or in part by
Parent.
(a) Representations and Warranties. Each of the representations
and warranties of the Company and the Management Stockholders set forth in this
Merger Agreement, the Company Disclosure Letter and all the Related Documents
shall be true and correct in all material respects as of the date of this Merger
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date (except in connection with the circumstances set forth in Section
6.13 regarding the effective date of Michael's representations and warranties if
the Merger has not been effected prior to June 1, 2002) and Parent shall have
received a certificate dated the Closing Date on behalf of the Company by its
president and controller to that effect.
(b) Performance of Obligations of the Company. The Company and
the Company Stockholders shall have performed in all material respects all
obligations required to be performed by them under this Merger Agreement and the
Related Documents at or prior to the Closing Date.
(c) Lock-up Agreements. Parent, DeVille and Xxxx shall enter into
Lock-up Agreements in the form attached hereto as Exhibit D (the "LOCK-UP
AGREEMENTS"), which agreements shall be executed and delivered at the Closing.
(d) Consents. All necessary consents shall have been obtained in
connection with any third party Contracts of Company and Company Sub, including
the consents, identified in Schedule 4.1(d)(ii), other than such consents, the
failure of which to obtain would, in the
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reasonable determination of Parent, not have a Material Adverse Effect on the
Company and Company Sub.
(e) Employment Agreements. The employees identified in Exhibit E
attached hereto (the "KEY EMPLOYEES"), shall have entered into Employment
Agreements in the forms attached hereto as Exhibit F-1 and Exhibit F-2 (the
"EMPLOYMENT AGREEMENTS"), which agreements shall be delivered at the Closing.
The Company and each of the Management Stockholders shall use their best efforts
to cause each Key Employee to execute an Employment Agreement with Parent on or
prior to the Closing.
(f) Noncompetition; Nonsolicitation. Each Management Stockholder
and Xxxx shall have entered into a noncompetition and nonsolicitation agreement
in the form attached hereto as Exhibit B, (the "NONCOMPETITION AND
NONSOLICITATION AGREEMENTS"), which agreements shall be delivered by such
Persons at the Closing.
(g) Escrow Agreement. Each of the Escrow Agent, Parent and the
representative of the Company Stockholders ("STOCKHOLDER REPRESENTATIVE") shall
have executed an Escrow Agreement, dated as of the Closing, in the form attached
hereto as Exhibit H, which agreement shall be delivered at the Closing and shall
be in full force and effect.
(h) Opinion. The Company shall have furnished Parent with a
favorable opinion, dated the Closing Date, of its counsel, Xxxxxxx, Xxxxxxxx &
Xxxxxxx, P.L.L., and a favorable opinion, dated the Closing Date, of counsel to
the Venture Stockholders, Xxxxx Xxxxx Xxxx LLC, in form and substance reasonably
satisfactory to the Company and its counsel.
(i) Exercise of Vested Options and Warrant. The Company shall
have taken all actions necessary to issue the respective shares of Company
Common Stock issuable upon exercise of the Vested Options and the Warrant prior
to the Effective Time, as adjusted for any cashless exercise thereof, and to
issue any shares of Company Capital Stock to the holders of the Company
Preferred Stock pursuant to Section 6.4.
(j) Consent of Company Auditors. The Company shall have received
from Xxxxxx XxXxxxxx and Company all necessary consents to include the Company's
Audited Financial Statements for the fiscal years 1999 and 2000 in Parent's
filings with the SEC.
7.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by the
Company:
(a) Representations and Warranties. Each of the representations
and warranties of Parent and Sub set forth in this Merger Agreement, the Parent
Disclosure Letter and the Related Documents shall be true and correct in all
material respects as of the date of this Merger Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, and the Company
shall have received a certificate dated the Closing Date by a duly authorized
officer of Parent to that effect.
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(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Merger Agreement and the Related Documents at or
prior to the Closing Date.
(c) Registration Rights Agreement. Parent shall have entered into
the Registration Rights Agreement with Xxxxxxx, all of the Non-Management
Stockholders (other than Xxxx), any stockholders who hold Company Common Stock
as a result of having exercised their Vested Options, the Stockholder
Representative and X.X. Xxxxxxx & Sons, Custodian for Xxxxxxx X. Xxxxxxx, which
Registration Rights Agreement shall be executed and delivered at the Closing.
(d) Opinion. Parent shall have furnished the Company with an
opinion of Fulbright & Xxxxxxxx L.L.P., dated the Closing Date, in form and
substance reasonably satisfactory to the Company and its counsel.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 Survival of Representations and Warranties. All representations,
warranties, covenants and obligations of the Company, the Company Sub, any
Company Stockholders, Parent and Sub in this Merger Agreement, the Company
Disclosure Letter, and the Related Documents shall survive the Closing Date and
continue in full force and effect until twelve (12) months after the Closing
Date, except that, notwithstanding anything to the contrary contained in this
Merger Agreement, (i) any breach of a representation or warranty set forth in
Section 4.1(m) or Section 4.1(r) shall survive until the expiration of the
applicable statute of limitation, including any extensions thereof, and (ii) if
notice of a Claim (as hereafter defined) is given under Article VIII prior to
such expiration date, such Claim shall continue indefinitely until such Claim is
finally resolved; provided, however, that the availability of equitable remedies
for any breach of any covenant or agreement pursuant to Article VIII shall
survive indefinitely.
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8.2 Indemnification by the Company and the Company Stockholders.
(a) The Company and the Company Stockholders shall be obligated
to indemnify save and hold harmless Parent, its directors, officers, employees,
Affiliates, agents and assigns (each an "INDEMNIFIED PARENT PARTY"), from and
against any and all Losses (whether or not arising out of third-party claims)
and all amounts paid in investigation, defense or settlement of any of the
foregoing (collectively with Losses, "DAMAGES") incurred in connection with,
arising out of, resulting from or incident to (i) any breach of any
representation or warranty made by the Company or by any Management Stockholder
in this Merger Agreement, the Company Disclosure Letter or in any of the Related
Documents delivered pursuant hereto, (ii) any breach of any covenant, obligation
or agreement made by the Company or any Management Stockholder in this Merger
Agreement or in any of the Related Documents delivered pursuant hereto, and
(iii) any claim by any Person against Parent, Sub or the Surviving Corporation
for broker's or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with the
Company (or any person acting on the Company's behalf) in connection with the
Merger.
(b) In addition to the indemnification obligations pursuant to
Section 8.2(a) hereof and notwithstanding anything contained herein to the
contrary, the Company and the Company Stockholders shall be obligated to
indemnify, hold harmless, pay and reimburse Indemnified Parent Parties for all
Damages, in the aggregate, up to the amount of the Merger Consideration, but
limited for each Company Stockholder to each such Company Stockholder's Pro Rata
Share (except to the extent set forth below), without regard to any of the
limitations set forth in Sections 8.1 or 8.6, that are caused by (i) fraud
and/or "INTENTIONAL MISREPRESENTATION" by the Company or either of the
Management Stockholders of any of their representations and warranties contained
in this Merger Agreement, the Company Disclosure Letter or any of the Related
Documents, and (ii) knowing, intentional or willful breaches by the Company or
either of the Management Stockholders of their covenants or agreements contained
in this Merger Agreement or any of the Related Documents to which they are
parties; provided, however, that each Company Stockholder shall, with respect to
items (i) and (ii) of this Section 8.2(b) be liable only for Damages (A) arising
out of his, her or its own fraud or Intentional Misrepresentation or knowing,
intentional or willful breaches of his, her or its covenants or agreements
contained in this Merger Agreement or any of the Related Documents to which he,
she or it is a party, and (B) up to the amount of the Merger Consideration
received by such Company Stockholder. For purposes of this Merger Agreement,
"INTENTIONAL MISREPRESENTATION" by the Company or the Management Stockholders
shall mean a willful and intentional misrepresentation of any facts, information
or other matters that are the subject of their representations and warranties or
disclosures contained in this Merger Agreement, the Company Disclosure Letter or
any of the Related Documents or that are the subject of the covenants or
agreements of the Company or the Management Stockholders contained in this
Merger Agreement or any of the Related Documents to which they are parties. In
determining whether an Intentional Misrepresentation occurred regarding any
representations and warranties by the Company or the Management Stockholders,
the Management Stockholders shall not be deemed responsible for any other
Person's knowledge or intent nor shall there be any constructive or imputed
knowledge.
(c) The Management Stockholders and the Company each agree to
notify Parent of any liabilities, claims or misrepresentations, breaches or
other matters covered by this
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Article VIII upon discovery or receipt of notice thereof (other than from
Parent), whether before or after the Closing. Notwithstanding anything in this
Section 8.2 to the contrary, the Company shall not have any indemnification
obligations pursuant to this Section 8.2 after the Effective Time of the Merger.
8.3 Indemnification by Parent.
(a) Parent and Sub shall jointly and severally indemnify, save
and hold harmless the Company Stockholders and their directors, officers,
employees, Affiliates, agents and assigns (each an "INDEMNIFIED COMPANY PARTY"
and together with an Indemnified Parent Party, an "INDEMNIFIED PARTY") from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty
made by Parent or Sub in this Merger Agreement, the Parent Disclosure Letter or
any of the Related Documents delivered pursuant hereto or thereto, (ii) any
breach of any covenant or agreement made by Parent or Sub in this Merger
Agreement or any of the Related Documents delivered pursuant hereto or thereto,
or (iii) any claim by any Person for broker's or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by such Person with Parent or Sub (or any Person acting on Parent's or
Sub's behalf) in connection with the Merger.
(b) In addition to the indemnification obligations pursuant to
Section 8.3(a) hereof and notwithstanding anything contained herein to the
contrary, Parent and Sub jointly and severally agree to indemnify, hold
harmless, pay and reimburse Indemnified Company Parties for all Damages, without
regard to any of the limitations set forth in Sections 8.1 or 8.6, that are
caused by (i) fraud and/or Intentional Misrepresentation by Parent or Sub of
their representations and warranties contained in this Merger Agreement, the
Parent Disclosure Letter or any of the Related Documents, and (ii) knowing,
intentional or willful breaches by Parent or Sub of their covenants or
agreements contained in this Merger Agreement or any of the Related Documents to
which they are parties; provided, however, that Parent and Sub shall be liable
under this Section 8.3(b) only for Damages in an amount not to exceed
$50,000,000. For purposes of this Merger Agreement, "INTENTIONAL
MISREPRESENTATION" by Parent or Sub shall mean a willful and intentional
misrepresentation of any facts, information or other matters that are the
subject of their representations and warranties or disclosures contained in this
Merger Agreement, the Parent Disclosure Letter or any of the Related Documents
or that are the subject of the covenants or agreements of Parent or Sub
contained in this Merger Agreement or any of the Related Documents to which they
are parties.
(c) Each of Parent and Sub agrees to notify the Company of any
liabilities, claims or misrepresentations, breaches or other matters covered by
this Article VIII upon discovery or receipt of notice thereof (other than from
the Company), whether before or after the Closing.
8.4 Damages. The term "Damages" as used in Section 8.2 and 8.3 is not
limited to matters asserted by third parties against any Indemnified Party, but
includes Damages incurred or sustained by an Indemnified Party in the absence of
third party claims. Payments by any Indemnified Party of amounts for which such
Indemnified Party is indemnified hereunder shall not be a condition precedent to
recovery. Subject to Section 8.6(a), 8.6(b) and 8.6(d), the rights and remedies
provided in this Article VIII shall be exclusive as to any Damages incurred by a
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party under this Merger Agreement and the Related Documents; provided, however,
that nothing herein shall preclude a party from exercising its rights under this
Merger Agreement, the Related Documents and applicable law to such equitable
remedies as may be available, including without limitation, specific performance
and injunctions.
8.5 Procedure
(a) Cooperation. The Indemnified Party shall cooperate in all
reasonable respects with the indemnifying party and its representatives
(including, without limitation, its attorneys) in the investigation, trial and
defense of such lawsuit or action and any appeal arising therefrom; provided,
however, that the Indemnified Party may at its own cost participate in
negotiations, arbitration and the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom. The parties shall cooperate
with each other in any notifications to insurers.
(b) Defense of Claim. If a claim for Damages (a "CLAIM") is to be
made by an Indemnified Party against the indemnifying party, the Indemnified
Party shall give written notice (a "CLAIM NOTICE") to the indemnifying party as
soon as practicable after the Indemnified Party becomes aware of any fact,
condition or event which may give rise to Damages for which indemnification may
be sought under this Article VIII. If any lawsuit or enforcement action is filed
against any party entitled to the benefit of indemnity hereunder, written notice
thereof shall be given to the indemnifying party as promptly as practicable (and
in any event within five (5) Business Days after the service of the citation or
summons). The failure of any Indemnified Party to give timely notice hereunder
for any purpose shall not affect rights to indemnification hereunder, except to
the extent that the indemnifying party has been materially damaged by such
failure. After such notice, except as provided in the following sentence, if the
indemnifying party shall acknowledge in writing to the Indemnified Party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects at its own cost, risk and expense, (i) to
take control of the defense and investigation of such lawsuit or action, (ii) to
employ and engage attorneys of its own choice but, in any event, reasonably
acceptable to the Indemnified Party, to handle and defend the same unless the
named parties to such action or proceedings (including any impleaded parties)
include both the indemnifying party and the Indemnified Party and the
Indemnified Party has been advised in writing by counsel that there may be one
or more legal defenses available to such Indemnified Party that are different
from or additional to those available to the indemnifying party, in which event
the Indemnified Party shall be entitled, at the indemnifying party's cost, risk
and expense, to separate counsel of its own choosing and (iii) to compromise or
settle such lawsuit or action, which compromise or settlement shall be made only
with the written consent of the Indemnified Party. The Company Stockholders may
assume the defense of a lawsuit or action as described in the preceding sentence
only if the Company Stockholders agree to be responsible for all Claims for
Damages related to such lawsuit or action or if there are sufficient moneys
available held pursuant to the Escrow Agreement to cover all such Claims for
Damages.
If the indemnifying party fails to assume the defense of such lawsuit
or action within five (5) Business Days after receipt of the Claim Notice, the
Indemnified Party against which such lawsuit or action has been asserted shall
(upon delivering notice to such effect to the indemnifying party) have the right
to undertake, at the indemnifying party's cost and expense,
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the defense, compromise or settlement of such lawsuit or action on behalf of and
for the account and risk of the indemnifying party. In the event the Indemnified
Party assumes the defense of the lawsuit or action, the Indemnified Party shall
keep the indemnifying party reasonably informed of the progress of any such
defense, compromise or settlement. The indemnifying party shall be liable for
any settlement of any action effected pursuant to and in accordance with this
Article VIII and for any final judgment (subject to any right of appeal) and the
indemnifying party agrees to indemnify and hold harmless an Indemnified Party
from and against any Damages by reason of such settlement or judgment.
8.6 Limitation on Indemnification After the Effective Time.
(a) The Indemnified Parent Parties may not recover Damages after
the Effective Time from the Company and the Company Stockholders pursuant to
Section 8.2(a) until their aggregate Damages exceed $1,000,000 (the
"THRESHOLD"); provided, however, that if the aggregate amount of Damages for
which such parties are seeking indemnification pursuant to Section 8.2(a)
exceeds the Threshold then such Indemnified Parent Parties may recover only the
amount of such Damages that exceeds the Threshold. Notwithstanding the
foregoing, (i) the maximum, aggregate amount of Damages for which the Company
and the Company Stockholders shall be liable pursuant to Section 8.2(a) shall be
$15,000,000 (the "MAXIMUM INDEMNIFICATION AMOUNT"); provided, however, that the
Maximum Indemnification Amount shall not limit the amount of Damages for which
the Company and the Company Stockholders shall be liable pursuant to Section
8.2(b); and (ii) with respect to indemnification of any Claim pursuant to
Section 8.2(a), each Company Stockholder shall only be responsible for his
Pro-Rata Share of any Damages arising from each Claim limited to, in the
aggregate for all such Claims, such Company Stockholder's Pro-Rata Share of the
Maximum Indemnification Amount. Amounts due as a result of indemnification
herein shall, in the sole discretion of the Stockholder Representative, be paid
by (i) selling shares of Parent Common Stock and distributing the net proceeds
thereof to Parent in connection with the payment of any Claim, (ii) paying any
such Claim from the Cash Merger Consideration deposited in the Escrow, or (iii)
returning to Parent shares of Parent Common Stock (collectively, "PAYMENT
ALTERNATIVES"). Stockholder Representative shall be entitled to elect any or all
of the Payment Alternatives in connection with the payment of a Claim from the
Escrow Amount, provided, however, in no event shall Stockholder Representative
be entitled to pay more than 50% of any Claim by the delivery to Parent of
shares of Parent Common Stock. Any shares of Parent Common Stock that are
returned to Parent as partial payment of a Claim shall be valued at their
average daily closing price as reported on the Nasdaq during the ten (10)
trading days ending on the day immediately preceding the date such shares are
distributed to Parent by the Escrow Agent. Nothing contained herein, however,
shall (i) preclude Parent from bringing an action for specific performance or
other available equitable remedy for a breach of any covenant or agreement under
Section 8.2, or (ii) constitute a waiver by Parent or a limitation of its rights
or remedies against the Company or the Company Stockholders based on fraud or
Intentional Misrepresentation. Notwithstanding anything to the contrary
contained herein, the indemnification obligations of the Company and the Company
Stockholders under Section 8.2(a) and the $5 million of Merger Consideration
returnable to Parent under the circumstances described in Section 3.3 of the
Agreement shall be satisfied only from the funds held in the Escrow Account;
provided, however, that after the termination of the Escrow Account, any Damages
arising from any Claim brought pursuant to
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Section 8.2(a) due to a breach of Section 4.1(m) or 4.1(r) shall be paid,
subject to the Threshold, by the Company Stockholders in accordance with each
Company Stockholder's Pro Rata Share.
(b) Indemnified Parties shall have the right to make a Claim
hereunder prior to the time at which the Threshold that is applicable to such
Claim has been surpassed for the purposes of asserting such Claim within the
relevant survival period of the applicable indemnification obligation and any
such Claim made within such period shall, to the extent such Threshold
ultimately is met, survive until its final resolution.
(c) The Company Stockholders agree that, at the Closing, Parent
shall deliver the Escrow Amount to the Escrow Agent for deposit in the Escrow
Account. Parent shall deposit such funds and Parent Common Stock with the Escrow
Agent. The funds shall be held, invested and disbursed in accordance with the
terms of the Escrow Agreement. The Company Stockholders and Parent agree to give
promptly any necessary instructions through the Stockholder Representative to
the Escrow Agent to cause such funds and Parent Common Stock to be placed in the
Escrow Account. Subject to the conditions in Section 3.3 of this Merger
Agreement, at the expiration of the twelve (12)-month Escrow Account term set
forth in Section 4 of the Escrow Agreement, any amounts of cash or Parent Common
Stock not subject to Claims made by Indemnified Parent Parties shall be
distributed in accordance with the terms of the Escrow Agreement.
(d) An Indemnified Company Party may not recover Damages from
Parent pursuant to Section 8.3(a) until the aggregate amount of Damages relating
to such Claims for which such Indemnified Company Party, in the aggregate, is
seeking indemnification under Section 8.3(a) exceeds the Threshold; provided,
however, that if the aggregate amount of Damages for which such Indemnified
Company Party is seeking indemnification pursuant to Section 8.3(a) exceeds the
Threshold, such Indemnified Company Party may recover only the amount of all
such Damages that exceeds the Threshold. Notwithstanding the foregoing, the
maximum amount of Damages for which Parent shall be liable pursuant to Section
8.3(a) shall be the Maximum Indemnification Amount. Nothing contained herein,
however, shall (i) preclude any Company Stockholder from bringing an action for
specific performance or other available equitable remedy for a breach of any
covenant or agreement under Section 8.3 or (ii) constitute a waiver by any
Company Stockholder or a limitation of the rights or remedies of any Company
Stockholder against Parent or Sub based on fraud or Intentional
Misrepresentation.
(e) Neither (i) the termination of the representations or
warranties contained herein, nor (ii) the expiration of the indemnification
obligations described above, shall affect the rights of an Indemnified Party in
respect of any Claim made by such party received by the indemnifying party prior
to the expiration of the applicable survival period provided herein.
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ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after the Company Stockholder Approval:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent if the average per share
daily closing price of Parent Common Stock as reported on Nasdaq during the 5
consecutive trading days ending on the day immediately prior to the Closing Date
is greater than 125% or less than 75% of the Average Price of Parent Common
Stock.
(c) by either the Company or Parent if (A) the Merger shall not
have been consummated within the later of (i) 60 days after the signing of this
Merger Agreement by the parties (provided that the right to terminate this
Merger Agreement under this clause (i) shall not be available to any party whose
breach of any representation or warranty or failure to fulfill any covenant or
agreement under this Merger Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date); or (ii) the date that
all filings and approvals required pursuant to Section 7.1(a) have been
completed or obtained, but in no event later than one hundred twenty (120) days
after the signing of this Merger Agreement by the parties; or (B) any court of
competent jurisdiction, or some other Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable (the "TERMINATION DATE");
(d) by Parent if (i) the Company shall have failed to comply in
any material respect with any of the covenants or agreements contained in this
Merger Agreement to be complied with or performed by the Company at or prior to
such date of termination (provided such breach has not been cured within 30 days
following receipt by the Company of notice of such breach and is existing at the
time of termination of this Merger Agreement); or (ii) any of the
representations and warranties of the Company or the Management Stockholders
contained in this Merger Agreement shall not have been true and correct in any
material respect when made (provided such breach has not been cured within 30
days following receipt by the Company of notice of such breach and is existing
at the time of termination of this Merger Agreement) or on and as of the Closing
Date as if made on and as of the Effective Time (except to the extent it relates
to a particular date); or
(e) by the Company if (i) Parent or Sub shall have failed to
comply in any material respect with any of the covenants or agreements contained
in this Merger Agreement to be complied with or performed by it at or prior to
such date of termination (provided such breach has not been cured within 30 days
following receipt by Parent of notice of such breach and is existing at the time
of termination of this Merger Agreement); or (ii) any representations and
warranties of Parent or Sub contained in this Merger Agreement shall not have
been true and correct in any material respect when made (provided such breach
has not been cured within 30
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days following receipt by Parent of notice of such breach and is existing at
the time of termination of this Merger Agreement) or on and as of the Effective
Time as if made on and as of the Closing Date (except to the extent it relates
to a particular date).
9.2 Effect of Termination. Each party's right of termination under
Section 9.1(d) or Section 9.1(e), respectively, is in addition to any other
rights it may have under this Merger Agreement or otherwise, and the exercise of
such right of termination will not be an election of remedies. If this Merger
Agreement is terminated pursuant to Section 9.l, all obligations of the parties
under this Merger Agreement shall terminate, except that the obligations of the
parties in the last sentence of Section 6.1, Section 9.2 and Section 10.1 will
survive, provided, however, that if this Merger Agreement is terminated by
Parent pursuant to Section 9.1(d), the Company pursuant to Section 9.1(e), or
because one or more of the terminating party's obligations under this Merger
Agreement is not satisfied as a result of the party's failure to comply with its
obligations under this Merger Agreement, the terminating party's right to pursue
all legal remedies shall survive such termination unimpaired.
9.3 Amendment. This Merger Agreement may be amended by the parties
hereto by action taken or authorized by their respective Boards of Directors at
any time before the Effective Time. This Merger Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Payment of Expenses. Each party hereto shall pay its own expenses
incident to preparing for entering into and carrying out this Merger Agreement,
and the consummation of the transactions contemplated hereby, whether or not the
Merger shall be consummated.
10.2 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Merger Agreement or in any
instrument delivered pursuant to this Merger Agreement shall survive the
Effective Time pursuant to the terms of Article VIII. The Confidentiality
Agreement shall survive the execution and delivery of this Merger Agreement, and
the provisions of the Confidentiality Agreement shall apply to all information
and material delivered hereunder.
10.3 Notices. Any notice or communication required or permitted
hereunder shall be in writing and shall be deemed given if delivered personally
or by facsimile or sent by overnight
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courier to the parties at the following address or facsimile number, or to such
other address or addresses or facsimile number or numbers, as such person may
subsequently designate by notice given hereunder:
(a) if to Parent or Sub, to:
On Assignment, Inc.
00000 Xxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxx Xxxxxxxx, President and
Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 X. Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
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and
(b) if to the Company, to:
Health Personnel Options Corporation
0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Attention: J. Xxxxxxx XxXxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxxx & Xxxxxxx, P.L.L.
1400 Provident Tower
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
and to:
Xxxxx Xxxxx Xxxx LLC
2200 PNC Center
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000-0000
Attention: Xxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
(c) If to Xxxxxxx:
Xxxxxxx X. Xxxxxxx
0000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
with a copy to:
Porter, Wright, Xxxxxx & Xxxxxx, LLP
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
Attention: K. Xxxxxxx Xxxxxx, Esq.
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(d) If to DeVille:
Xxxxxxx XxXxxxx
000 Xxxxxxxxx Xx.
Xxxxxxxx, Xxxx 00000
with a copy to:
Xxxxx & Xxxxxxxxx LLP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.
(e) Parent also agrees to provide notice to:
MLK, Inc.*
00 Xxxxx Xxxxxx Xxx. Xx.
Xxxxxx Xxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Sell
Fax: (000) 000-0000
* MLK, Inc. is not a signatory to this Merger Agreement.
10.4 Interpretation. When a reference is made in this Merger Agreement
to Sections, such reference shall be to a Section of this Merger Agreement
unless otherwise indicated. The table of contents, definitions and headings
contained in this Merger Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Merger Agreement.
Whenever the word "include," "includes" or "including" is used in this Merger
Agreement, it shall be deemed to be followed by the words "without limitation."
The phrase "made available" in this Merger Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
10.5 Counterparts. This Merger Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
10.6 Entire Agreement; No Third-Party Beneficiaries. This Merger
Agreement (together with the Related Documents and any other documents and
instruments referred to
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herein) (a) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereto and (b) except as provided in Article VIII, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
10.7 Governing Law. This Merger Agreement shall be governed and
construed in accordance with the laws of the State of California, without giving
effect to the principles of conflicts of law thereof, except to the extent the
DGCL or the Ohio Law mandatorily applies to the mechanics of the Merger.
10.8 No Remedy in Certain Circumstances. Each party agrees that, should
any court or other competent authority hold any provision of this Merger
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take an action consistent
herewith or required hereby, the validity, legality and enforceability of the
remaining provisions and obligations contained or set forth herein shall not in
any way be affected or impaired thereby, unless the foregoing inconsistent
action or the failure to take an action constitutes a material breach of this
Merger Agreement or makes the Merger Agreement impossible to perform, in which
case this Merger Agreement may be terminated by any party pursuant to Article IX
hereof. Except as otherwise contemplated by this Merger Agreement, to the extent
that a party hereto took an action inconsistent herewith or failed to take
action consistent herewith or required hereby pursuant to an order or judgment
of a court or other competent authority, such party shall not incur any
liability or obligation unless such party breached its obligations under Section
6.6 hereof or did not in good faith seek to resist or object to the imposition
or entering of such order or judgment.
10.9 Assignment. Neither this Merger Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Merger
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
10.10 Enforcement of the Merger Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Merger Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Merger
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States located in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal or state court sitting in Delaware in the
event any dispute between the parties hereto arises out of this Merger Agreement
solely in connection with such a suit between the parties, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Merger Agreement in any court other than a federal or
state court sitting in Delaware.
10.11 Performance by Sub. Parent hereby agrees to cause Sub to comply
with the obligations under this Merger Agreement.
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10.12 Severability. If any one or more of the provisions contained in
this Merger Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close to possible to that of the invalid, illegal or
unenforceable provisions.
10.13 Titles and Section Headings. The titles and section headings of
this Merger Agreement are for convenience of reference only and do not form a
part hereof and do not in any way modify, interpret or construe the intentions
of the parties hereto.
10.14 Further Assurances. The parties hereto agree to furnish upon
request to each other such further information, to execute and deliver to each
other such other documents and to do such other acts and things, all as the
other party may reasonably request, for the purpose of carrying out the intent
of this Agreement and the documents referred to in this Agreement.
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IN WITNESS WHEREOF, each party has caused this Merger Agreement to be
signed by its officers thereunto duly authorized, all as of the date first
written above.
HEALTH PERSONNEL OPTIONS CORPORATION
By: ____________________________________
J. Xxxxxxx XxXxxxx
Executive Vice President and Secretary
ON ASSIGNMENT, INC.
By: ____________________________________
Xx. Xxx Xxxxxxxx
Chief Executive Officer
ON ASSIGNMENT ACQUISITION CORP.
By: ____________________________________
Xx. Xxx Xxxxxxxx
Chief Executive Officer
MANAGEMENT STOCKHOLDERS
________________________________________
Xxxxxxx X. Xxxxxxx
________________________________________
J. Xxxxxxx XxXxxxx
SOLELY FOR PURPOSES OF SECTIONS 3.3,
6.5, 6.10 AND ARTICLE VIII:
VENTURE STOCKHOLDERS
RIVER CITIES CAPITAL FUND LIMITED
PARTNERSHIP
By: ____________________________________
R. Xxxx Xxxxxxxx, Vice President of
Xxxxxx, Inc., the General Partner of
River Cities Management Limited
Partnership, the General Partner of
River Cities Capital Fund Limited
Partnership
RIVER CITIES CAPITAL FUND II LIMITED
PARTNERSHIP
By: ____________________________________
R. Xxxx Xxxxxxxx, Vice President of
Xxxxxx, Inc., the General Partner of
River Cities Capital Fund II Limited
Partnership
XXXXXXXXXX MANAGEMENT COMPANY LIMITED
PARTNERSHIP
By: ____________________________________
Xxxxxxxxxxx X. Xxxxxx, Secretary of
Xxxxxx X. Xxxxxxxxxx Holding Company,
Inc., the General Partner of Xxxxxxxxxx
Management Company Limited Partnership
EXHIBIT A
NON-MANAGEMENT STOCKHOLDERS(1)
1. River Cities Capital Fund Limited Partnership
2. River Cities Capital Fund II Limited Partnership
3. Xxxxxxxxxx Management Company Limited Partnership
4. MLK, Inc.
5. R. Xxxxxxx Xxxxxxx
6. Xxxxxxx X. Xxxx
--------
(1) This list identifies only the current non-management stockholders of the
Company, specifically excluding all those holders of Company stock options who
are not currently Company Common Stockholders and who will receive shares of
Company Common Stock upon exercise of their options.
EXHIBIT B
FORM OF NONCOMPETITION AND NONSOLICITATION AGREEMENT
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT D
FORM OF LOCK-UP AGREEMENT
EXHIBIT E
KEY EMPLOYEES
1. J. Xxxxxxx XxXxxxx
2. Xxxxxxx Xxxx
EXHIBIT F
FORM OF EMPLOYMENT AGREEMENT
EXHIBIT G
STOCKHOLDERS EXECUTING VOTING AGREEMENTS
1. River Cities Capital Fund Limited Partnership
2. River Cities Capital Fund II Limited Partnership
3. Xxxxxxxxxx Management Company Limited Partnership
4. MLK, Inc.
5. Xxxxxxx X. Xxxxxxx
6. J. Xxxxxxx XxXxxxx
7. X.X. Xxxxxxx & Sons, custodian for Xxxxxxx X. Xxxxxxx
8. X.X. Xxxxxxx & Sons, custodian for J. Xxxxxxx XxXxxxx
EXHIBIT H
FORM OF ESCROW AGREEMENT
