AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of May 30, 2002 among Matria Healthcare, Inc., a Delaware corporation
("Parent"), MRDC Acquisition Corp., a Georgia corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), and XxxxxxXxxx.xxx, Inc., a Georgia
corporation (the "Company").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Georgia Business Corporation Code (the "GBCC"), Parent and
the Company desire to enter into a transaction pursuant to which Merger Sub will
merge with and into the Company (the "Merger").
B. The parties intend for the Merger to be a tax-free reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"), and for this Agreement to constitute a plan of reorganization under
such Section.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and subject to
and upon the terms and conditions of this Agreement and the applicable
provisions of the GBCC, Merger Sub shall be merged with and into the Company,
the separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement, the
parties hereto shall cause the Merger to be consummated by filing a Certificate
of Merger (the "Certificate of Merger") with the Secretary of State of Georgia
in accordance with the relevant provisions of the GBCC (the time of such filing
(or such later time as may be agreed in writing by the parties and specified in
the Certificate of Merger) being the "Effective Time") as soon as practicable on
or after the Closing Date (as herein defined). The closing of the Merger (the
"Closing") shall take place in Marietta, Georgia, at the offices of Parent, at a
time and date to be specified by the parties, which shall be no later than the
third business day after the satisfaction or waiver of the conditions set forth
in Article VI (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall
be as provided in this Agreement and the applicable provisions of the GBCC.
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 Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Organization of Surviving Corporation.
(a) At the Effective Time, the Articles of Incorporation of the Company shall be
amended and restated in their entirety to be identical to the Articles of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, which shall be the Articles of Incorporation of the Surviving Corporation
until thereafter amended; provided, however, that Article I of the Articles of
Incorporation shall be amended to read as follows: The name of the corporation
is XxxxxxXxxx.xxx, Inc.
(b) The Bylaws of Merger Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until thereafter amended.
(c) The initial directors of the Surviving Corporation shall be the directors of
Merger Sub immediately prior to the Effective Time, each to hold office until
their respective successors are duly elected or appointed and qualified. The
initial officers of the Surviving Corporation shall be the officers of Merger
Sub immediately prior to the Effective Time, each to hold office until their
respective successors are duly appointed.
1.5 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, the Company or the holders of any of the following
securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common Stock, no par
value, of the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company Common
Stock to be canceled pursuant to Section 1.5(b)) will be canceled and
extinguished and automatically converted (subject to Sections 1.5(e) and (f))
into the right to receive a number of shares of Common Stock, par value $0.01
per share, of Parent (the "Parent Common Stock") equal to the Exchange Ratio (as
herein defined) upon surrender of the certificate representing such share of
Company Common Stock (or in the case of a lost, stolen or destroyed certificate,
upon delivery of an affidavit and indemnity agreement) and otherwise in the
manner provided in and subject to the terms and conditions of Section 1.7 and
subject to Parent's right of set-off pursuant to Section 8.4. The "Exchange
Ratio" shall be a number equal to the quotient obtained by dividing (i) 310,000,
increased by the amount of any positive Share Adjustment (as herein defined) or
reduced by the amount of any negative Share Adjustment, by (ii) the total number
of shares of Company Common Stock issued and outstanding and reserved for
issuance upon exercise of the Company Warrant and all Company Options (as such
terms are defined in Section 1.5(c)) immediately prior to the Effective Time.
For purposes of the preceding formula, the "Share Adjustment" shall be a number
equal to the quotient obtained by dividing (x) the Adjustment Amount (as defined
in Section 1.11(a)), by (y) the average per share closing price of the Parent
Common Stock during the five (5) consecutive trading days immediately preceding
the Closing Date, as reported on the Nasdaq National Market System ("Nasdaq")
(such average closing price being hereinafter referred to as the "Closing Stock
Price").
(b) Cancellation of Parent-Owned Stock. Each share of Company Common Stock held
in the treasury of the Company or owned by Merger Sub, Parent or any direct or
indirect wholly-owned subsidiary of the Company or of Parent immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Stock Options; Warrants. At the Effective Time, all options to purchase
Company Common Stock ("Company Options") then outstanding under the Company's
1999 Stock Option and Stock Appreciation Rights Plan (the "Company Stock Option
Plan"), shall be assumed by Parent in accordance with Section 5.11 hereof. At
the Effective Time, in accordance with the terms of the Substitute Warrant (as
defined in Section 1.10(a)(vii)), all rights to purchase shares of Company
Common Stock under the Warrant for the Purchase of Shares of Common Stock,
Warrant No. 2000-1, issued by the Company to Xxxxxx Xxxxxxx (the "Warrant
Holder") on April 23, 2001 (the "Company Warrant") shall be cancelled and
extinguished without any conversion thereof.
(d) Capital Stock of Merger Sub. Each share of Common Stock, $0.01 par value per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of Common Stock, $0.01 par value, of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend recapitalization or similar event with respect to Parent Common Stock
or Company Common Stock occurring on or after the date hereof and prior to the
Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common Stock will be
issued by virtue of the Merger, but in lieu thereof each record holder of shares
of Company Common Stock immediately prior to the Effective Time (each, a
"Shareholder," and, collectively, "Shareholders") who would otherwise be
entitled to a fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock to be received by such holder) shall be
entitled to receive from Parent an amount of cash (rounded to the nearest whole
cent), without interest, equal to the product of (i) such fraction, multiplied
by (ii) the Closing Stock Price.
(g) Maximum Number of Shares. Notwithstanding any provision of this
Agreement to the contrary, the maximum number of shares of Parent Common Stock
to be issued pursuant to the Merger and upon exercise of the Company Options
and/or the Substitute Warrant shall in no event exceed, in the aggregate, a
number of shares equal to 310,000, increased by any positive Share Adjustment or
reduced by any negative Share Adjustment, subject to appropriate adjustment for
any stock split, reverse stock split, stock dividend, recapitalization or
similar event.
1.6 Dissenting Shares and Appraisal Rights.
(a) Notwithstanding anything contained herein to the contrary, any holder of
Company Common Stock who has not voted in favor of the Merger or otherwise
consented thereto in writing and who has the right to demand, and properly
demands, an appraisal of such holder's shares of Company Common Stock in
accordance with Article 13 of the GBCC or any successor provision (the
"Dissenters' Provisions") (such holder being referred to herein as a "Dissenting
Shareholder" and such shares being referred to herein as "Dissenting Shares")
shall not be entitled to receive any consideration pursuant to Sections 1.5 and
1.7 hereof, unless and until such Dissenting Shareholder fails to perfect or
otherwise loses or withdraws any such right to appraisal. With respect to any
Dissenting Shares, the rights of a Dissenting Shareholder who complies with the
provisions of Article 13 of the GBCC shall be limited exclusively to the
appraisal rights provided under such Article 13. Dissenting Shareholders who
fail to comply with the provisions of Article 13 of the GBCC shall have the
rights set forth below in Section 1.6(b).
(b) If any holder of shares of Company Common Stock who demands payment of the
fair value of its shares of Company Common Stock pursuant to the Dissenters'
Provisions shall effectively withdraw or lose (through failure to perfect or
otherwise) its right to such payment at any time, such shares of Company Common
Stock shall not thereafter be Dissenting Shares hereunder and the shares of
Company Common Stock of such holder shall be converted into a right to receive,
without any interest thereon, the consideration set forth herein in exchange for
such shares of Company Common Stock.
(c) The Company shall give prompt notice to Parent of each demand received by
the Company for appraisal of shares of Company Common Stock, attempted
withdrawals of such demands and any other instruments and documents received or
delivered in connection therewith pursuant to the GBCC. Parent shall have the
right to participate in negotiations and proceedings regarding each such demand.
The Company shall not, except with the prior written consent of Parent, settle
or make any payment regarding any such demand. The parties acknowledge, for
purposes of this Section 1.6, the condition to the obligations of Parent and
Merger Sub to consummate the transactions contemplated by this Agreement set
forth in Section 6.3(j) of this Agreement, which may be waived by Parent in its
sole discretion.
1.7 Payment; Surrender of Certificates.
(a) Parent Common Stock. Subject to Section 1.7(c), Parent shall issue and
deliver to each Shareholder within twenty (20) business days following the
Effective Time a certificate representing that number of shares of Parent Common
Stock equal to the number of shares of Parent Common Stock into which the shares
of Company Common Stock owned of record by such Shareholder are to be exchanged
or converted in accordance with Section 1.5 (as determined by applying the
Estimated Adjustment Amount (as defined in Section 1.11(c)) as the Adjustment
Amount), less such Shareholder's pro rata portion (as calculated in accordance
with Exhibit A) of the Holdback Shares (as defined in Section 8.4) to be
withheld by Parent in accordance with Section 8.4.
(b) Fractional Shares. Subject to Section 1.7(c), within twenty (20)
business days following the Effective Time, Parent shall pay to each
Shareholder, where applicable, the cash amount which such Shareholder is
entitled to receive pursuant to Section 1.5(f).
(c) Certificates. Notwithstanding anything herein to the contrary, no
payment shall be made to any Shareholder who does not present certificates for
cancellation representing all of such Shareholder's shares of Company Common
Stock, or, in the alternative, an affidavit and indemnity, in form and substance
reasonably satisfactory to Parent, stating that any of such certificates are
lost, stolen or destroyed and that such Shareholder will indemnify and hold
Parent and its officers, directors and agents, harmless from any costs, expenses
and damages that may be incurred if such certificates are later produced. If a
Shareholder does not deliver at the Closing all of the certificates representing
such Shareholder's shares of Common Stock, and/or an affidavit and indemnity as
described in this Section 1.7, the portion of the consideration that such
Shareholder is entitled to receive pursuant to this Section 1.7 shall be
retained until such time as such Shareholder makes delivery of the certificates
and/or affidavit.
1.8 No Further Ownership Rights in Company Common Stock and Preferred
Stock. All shares of Parent Common Stock issued in accordance with the terms
hereof (including any cash paid in respect thereof pursuant to Section 1.5(f))
shall be deemed to have been issued in full satisfaction of all rights
pertaining to all applicable shares of Company Common Stock, and there shall be
no further registration of transfers on the records of the Surviving Corporation
of shares of Company Common Stock which were outstanding immediately prior to
the Effective Time.
1.9 Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of such Section.
1.10 Closing Deliveries.
(a) By the Company. At the Closing, the Company shall deliver to Parent and
Merger Sub the following:
(i) a certificate, dated as of the Closing Date, signed by the chief
executive officer of the Company certifying that (i) all conditions specified in
Sections 6.1(a) and 6.3 (other than subsections (c), (e) and (h)) have been
fulfilled; and (ii) all authorizations, consents, approvals and waivers or other
action required to be obtained or taken by the Company in connection with the
execution, delivery and performance of this Agreement and the consummation of
all agreements and transactions contemplated by this Agreement have been
obtained or taken;
(ii) an opinion of Thrasher, Whitley, Hampton & Xxxxxx, P.C., counsel for
the Company, dated the Closing Date, in form and substance reasonably
satisfactory to Parent;
(iii) a copy of the text of all resolutions adopted by the board of
directors (and any committee thereof) and shareholders of the Company with
respect to the execution, delivery and performance of this Agreement and the
Merger, along with a certificate executed by the Secretary of the Company
certifying (i) that such copy is a true, correct and complete copy of such
resolutions, and (ii) that such resolutions were duly adopted and have not been
amended or rescinded, and constitute all corporate action on the part of the
Company's board of directors and shareholders required to authorize the
execution and delivery of this Agreement by the Company and the consummation of
the Merger;
(iv) a lockup agreement, executed by Xxxxxx X. Xxxxxx, Xx., substantially
in the form of Exhibit B attached hereto (the "Xxxxxx Lockup Agreement");
(v) non-competition agreements, executed by each of Xxxxxx X. Xxxxxx, Xx.
and Xxxxxxx X. Xxxxxx, substantially in the form of Exhibit C attached hereto
(the "Non-Competition Agreements");
(vi) investor letters executed by each shareholder of the Company (other
than those Shareholders listed in Schedule 2.32 hereto) and the Warrant Holder,
substantially in the form of Exhibit D attached hereto (to the extent not
delivered to Parent prior to the Closing) (the "Investor Letters");
(vii) a warrant, executed by the Warrant Holder, substantially in the form
of Exhibit E attached hereto (the "Substitute Warrant"), and all originals of
the Company Warrant, marked to reflect the cancellation and termination thereof;
provided, however, that the Company shall not be obligated to deliver the
Substitute Warrant in the event the Company Warrant has been exercised in full
prior to the Closing; and
(viii) all other documents, instruments, certificates and opinions required
to be delivered by the Company pursuant to this Agreement.
(b) By Parent. At the Closing, Parent shall deliver or cause to be
delivered to the Company the following:
(i) a certificate executed by the chief executive officer of Parent, dated
as of the Closing Date, certifying to the fulfillment of the conditions
specified in Section 6.2 hereof;
(ii) an opinion of Xxxxxxxx Xxxxxxx LLP, counsel for Parent, dated the
Closing Date, in form and substance reasonably satisfactory to the Company;
(iii) the Substitute Warrant, executed by Parent; provided, however, that
Parent shall not be obligated to deliver the Substitute Warrant in the event the
Company Warrant has been exercised in full prior to the Closing; and
(iv) all other documents, instruments, and certificates required to be
delivered by Parent pursuant to this Agreement.
1.11 Adjustment Amount.
(a) For purposes of this Agreement, the following terms shall have the
following respective meanings:
(i) The "Adjustment Amount" means the amount obtained by subtracting (A)
the Closing Adjusted Working Capital, minus (B) the Year End Adjusted Working
Capital.
(ii) The "Closing Adjusted Working Capital" means an amount equal to (A)
the current assets of the Company as of the Closing, minus (B) all liabilities
and outstanding Preferred Stock, if any, of the Company as of the Closing, minus
(C) $100,000, plus (D) the aggregate exercise price of all In the Money Options.
(iii) The "Year End Adjusted Working Capital" means an amount equal to (A)
the current assets of the Company as of March 31, 2002, minus (B) all
liabilities and $250,000 in outstanding Preferred Stock of the Company as of
March 31, 2002, in each case as determined on the basis of the Company's March
31, 2002 audited financial statements; provided, however, that the Year End
Adjusted Working Capital, for all purposes hereunder (including determination of
the Adjustment Amount), shall in no event be less than an amount equal to the
Year End Adjusted Working Capital determined on the basis of the unaudited March
31, 2002 financial statements of the Company (set forth on Schedule 2.9 hereto)
minus $100,000.
(iv) "In the Money Options" shall include only those Company Options having
an aggregate exercise price, immediately prior to the Effective Time, which is
lower than the product of (A) the Closing Stock Price, multiplied by (B) the
number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time, multiplied by (C) the Exchange Ratio.
(b) Notwithstanding any provision in this Agreement to the contrary, the
Closing Balance Sheet (as defined in Section 1.11(c)) and all items included in
the calculation of Closing Adjusted Working Capital and Year End Adjusted
Working Capital shall be prepared in accordance with generally accepted
accounting principles, as in effect from time to time ("GAAP"), including
appropriate closing adjustments, as if the Closing Date were a fiscal year end,
consistently applied, subject to the terms and conditions of this Agreement.
(c) The Adjustment Amount, if positive, shall result in an increase, and,
if negative, shall result in a decrease, in the number of shares of Parent
Common Stock to be issued pursuant to the Merger and upon exercise of the
Company Options and the Substitute Warrant following the Effective Time,
consistent with Section 1.5(a) and this Section 1.11. Not less than three (3)
days prior to the Closing, the Company shall prepare and deliver to Parent (i) a
good faith estimate of the Adjustment Amount, if any (the "Estimated Adjustment
Amount"), setting forth, in reasonable detail, its calculation of the Year End
Adjusted Working Capital and the estimated Closing Adjusted Working Capital, and
(ii) an estimated balance sheet for the Company as of the Closing (the
"Estimated Balance Sheet"), prepared in good faith consistent with Section
1.11(b), and (iii) a certificate of a duly authorized officer of the Company
certifying that the foregoing have been prepared in accordance with this
Agreement.
(d) Within ninety (90) days following the Closing Date, Parent shall
prepare and deliver to the Company Agent (as defined in Section 8.3) (i) a
balance sheet of the Company as of the Closing (the "Closing Balance Sheet"),
(ii) its calculation of the Year End Adjusted Working Capital and the Closing
Adjusted Working Capital, (iii) its calculation of the Adjustment Amount, and
(iv) a certificate of a duly authorized officer of Parent certifying that the
foregoing have been prepared in accordance with this Agreement. Each party shall
have the right to review all books and records and supporting work papers
(including schedules, memoranda and other documents) related to the preparation
of the March 31, 2002 financial statements, the Closing Balance Sheet and the
calculation of the Adjustment Amount. The Company Agent shall have a period of
forty-five (45) days (the "Objection Period") after delivery of the Closing
Balance Sheet in which to provide written notice to Parent of any objections
thereto (the "Objection Notice"), setting forth the specific item of the
calculation of the Adjustment Amount to which each such objection relates and
the specific basis for each such objection. The Closing Balance Sheet and the
resulting Adjustment Amount shall be deemed to be accepted by the Company Agent
and shall become final and binding on the later of the expiration of the
Objection Period or the date on which all objections have been resolved by the
parties. If the Company Agent gives any such Objection Notice, such dispute
shall be resolved by the parties in accordance with the procedures set forth in
Section 8.6(b).
(e) Promptly after the Closing Balance Sheet and the Adjustment Amount
calculated with reference thereto become final and binding under this Agreement,
the Adjustment Amount shall be recalculated by giving effect to such final and
binding determination. If the final Adjustment Amount is greater than the
Estimated Adjustment Amount, Matria shall add to the number of Holdback Shares
held in escrow for delivery to the Shareholders (or reserved for future
issuance) pursuant to Section 8.4 a number of shares of Matria Common Stock
equal to the quotient obtained by dividing (i) the amount by which the final
Adjustment Amount exceeds the Estimated Adjustment Amount, by (ii) the Closing
Stock Price. If the final Adjustment Amount is less than the Estimated
Adjustment Amount, Parent shall be entitled to recover the amount by which the
Estimated Adjustment Amount exceeds the final Adjustment Amount by exercising
its right of set-off against the Holdback Shares pursuant to Section 8.4.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub,
notwithstanding any independent investigations or verifications under taken by
Parent, Merger Sub or their representatives, subject to the exceptions
specifically disclosed in writing in the disclosure Schedules executed and
delivered by the Company to Parent simultaneously with the execution and
delivery of this Agreement (the "Company Schedules"), that the following
representations and warranties are true and correct as of the date hereof and,
except for any representations and warranties made as of a specific date (other
than the date hereof), shall be true and correct as of the Closing:
2.1 Organization of the Company.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the law of the State of Georgia. The Company has the
corporate power and authority to own, lease and operate its assets and property
and to carry on its business as now being conducted and as proposed to be
conducted, and is duly qualified to do business and in good standing as foreign
corporation in each jurisdiction in which the failure to be so qualified could
have a Material Adverse Effect (as defined in Section 9.2(c)) on the Company.
(b) The Company has delivered or made available to Parent a true and
correct copy of the Articles of Incorporation and Bylaws of the Company, as
amended to date, and each such instrument is in full force and effect. The
Company is not in violation of any of the provisions of its Articles of
Incorporation or Bylaws.
2.2 Title to Common Stock. Each Shareholder is the sole record and
beneficial owner of the number of shares of Company Common Stock and Preferred
Stock set forth in Schedule 2.2, and each such Shareholder holds title to all
such shares free and clear of all liens, pledges, hypothecations, charges,
encumbrances, security interests, claims and restrictions (collectively,
"Liens").
2.3 Corporate Records. All minute books of the Company have been made
available to Parent. Such minute books in all material respects contain complete
and accurate records of all resolutions adopted and other actions taken by the
Company's Board of Directors, all committees of its Board of Directors, and its
shareholders from the date of its incorporation to the date of this Agreement.
2.4 The Company Capital Structure. The authorized capital stock of the
Company consists of 40,000,000 shares of Common Stock, no par value, of which
13,155,137 shares are issued and outstanding, and 5,000,000 shares of Preferred
Stock, no par value, of which 500 shares are designated Series A Convertible
Preferred Stock (the "Company Preferred Stock"), of which 250 shares are issued
and outstanding. All outstanding shares of Company Common Stock and Preferred
Stock are duly authorized, validly issued, fully paid and nonassessable and are
not subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of the Company or any agreement or document to which the
Company is a party or by which it is bound. The Company has reserved an
aggregate of 2,000,000 shares of Company Common Stock, net of exercises, for
issuance pursuant to the Company Stock Option Plan, under which Company Options
are outstanding for an aggregate of 1,696,042 shares and under which 303,958
shares are available for grant. The Company has reserved for issuance a total of
5,000 shares of Company Common Stock for issuance upon exercise of the Company
Warrant. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. Schedule 2.4 lists each outstanding option and warrant to
acquire shares of Company Common Stock and the vesting status thereof, the name
of the holder of such option or warrant, the number of shares subject to such
option or warrant and the exercise price of such option or warrant.
2.5 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.4, there are no equity securities or similar ownership interests of
any class of the Company, or any securities exchangeable or convertible into or
exercisable for such shares of capital stock, equity securities or similar
ownership interests issued, reserved for issuance or outstanding. Except as set
forth in Section 2.4, there are no options, warrants, equity securities or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company is a party or by
which it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or
cause the repurchase, redemption or acquisition, of any shares of capital stock
of the Company or obligating the Company to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, partnership
interest or similar ownership interest, call, right, commitment or agreement.
Except as set forth in Schedule 2.5, there are no registration rights and, to
the Knowledge (as defined in Section 9.2(b)) of the Company, there are no voting
trusts or agreements, proxies or other agreements or understandings with respect
to any equity security of any class of the Company.
2.6 Authority.
(a) The Company has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval and
adoption of this Agreement and the Merger by the shareholders of the Company and
the filing and recordation of the Certificate of Merger pursuant to the GBCC.
The votes of the holders of at least a majority of the outstanding shares of
Company Common Stock and Company Preferred Stock, voting together as a single
voting group on an as-converted basis, and the holders of at least a majority of
the outstanding shares of Preferred Stock, voting as a separate class, are the
only votes required for the Company's shareholders to approve and adopt this
Agreement and the Merger. This Agreement has been duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
Parent and Merger Sub, constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy and other similar laws and general principles of
equity. The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i) conflict with
or violate the Articles of Incorporation or Bylaws of the Company, (ii) subject
to obtaining the approval and adoption of this Agreement and the Merger by the
Company's shareholders, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or by which its properties
are bound or affected, or (iii) result in any breach of, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or impair the Company's rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or its properties are bound or affected.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality (each, a "Governmental Entity")
is required by or with respect to the Company in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby or thereby.
2.7 Subsidiaries, etc. The Company does not own or control any equity
interest in any corporation, partnership, joint venture or other legal entity.
2.8 Officers and Directors. Schedule 2.8 contains a complete and correct
list of the names of all officers and directors of the Company.
2.9 Financial Data. Schedule 2.9 contains the unaudited balance sheet of
the Company as of March 31, 2002 (the "Balance Sheet"), the unaudited balance
sheet of the Company as of March 31, 2001 and the audited balance sheet of the
Company as of March 31, 2000, together with the related unaudited statements of
profit and loss and cash flow of the Company for each of the twelve month
periods ended March 31, 2002 and March 31, 2001 and the audited statements of
profit and loss and cash flow of the Company for the twelve month period ended
March 31, 2000 (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP, consistently applied, and
fairly present, in all material respects, the financial position of the Company
as of their respective dates and the results of the Company's operations for the
periods then ended. The Company has delivered to each of its shareholders, in
connection with delivery of notice of the Company's 2002 annual meeting of
shareholders, a copy of the Financial Statements as of and for the twelve month
period ended March 31, 2002.
2.10 Balance Sheet Items.
(a) All notes receivable, accounts receivable, and other obligations due and
payable to the Company as of March 31, 2002, are reflected in the Balance Sheet.
Except to the extent such receivables or other obligations have been paid in the
ordinary course of the Business since the date of the Balance Sheet, all notes
receivable, accounts receivable and other obligations and receivables shown on
the Balance Sheet or arising between the date of the Balance Sheet and the
Closing Date (collectively, the "Receivables") represent and constitute genuine,
legal, valid and collectible obligations of and bona fide claims against the
respective makers thereof or debtors thereon for sales made, services performed
or other charges arising on or before the date hereof, and all of the goods
delivered and services performed that gave rise to such Receivables were
delivered or performed in all material respects in accordance with the
applicable orders, contracts, or client requirements therefore. None of such
Receivables are subject to any defenses, counterclaims or rights of off-set.
(b) The Company has not written off any Receivables since the date of the
Balance Sheet, except nonmaterial write-offs in the ordinary course of the
Business consistent with past practice. The reserves relating to all Receivables
set forth on the books and records of the Company are (or will be) adequate, as
of the respective dates thereof, to cover all uncollectible amounts in respect
of such Receivables. None of the Receivables that is the subject of a pledge or
assignment to secure debt, is subject to any Lien, or has been placed for
collection with any attorney or collection agency or similar individual or firm.
2.11 Liabilities. Except as set forth on Schedule 2.11, (a) the Company has
no indebtedness for borrowed money or capital lease obligations, and (b) the
company has no other debt, liability, or obligation of any kind, whether
accrued, absolute, known or unknown, contingent or otherwise, whether due or to
become due, and regardless of when asserted, except (i) those reflected on the
Balance Sheet, and (ii) liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Balance Sheet (none of which
individually or in the aggregate has had, or will have a Material Adverse Effect
on the Company). The Company has no liability or obligation (absolute or
contingent) to provide funds on behalf of, or to guarantee or assume any debt,
liability or obligation of any corporation, partnership, association, joint
venture, individual or other person or entity.
2.12 Ordinary Course of Business and Absence of Changes. Except as set
forth in Schedule 2.12, the Company has operated its business in the ordinary
course consistent with past practices since March 31, 2002. Without limiting the
generality of the foregoing, and except as set forth in Schedule 2.12, since
March 31, 2002:
(a) there has been no material adverse change in the business, assets,
liabilities, results of operation, cash flow or financial condition of the
Company;
(b) there has been no damage, destruction, casualty or loss to the business,
assets, or properties of the Company;
(c) the properties and assets of the Company have been maintained in good order,
repair and condition, ordinary wear and tear excepted;
(d) the books, accounts and records of the Company have been maintained in the
usual, regular and ordinary manner on a basis consistent with prior years;
(e) the Company has not issued any capital stock, equity securities or any
notes, bonds, debt securities or any other securities convertible, exchangeable
or exercisable into capital stock of the Company;
(f) there has been no declaration, setting aside or payment of any dividend or
other distribution on or in respect of the capital stock of the Company nor has
there been any direct or indirect redemption, retirement, purchase or other
acquisition by the Company of any of the capital stock of the Company;
(g) there has been no split, combination or reclassification of the Company's
capital stock;
(h) except for annual salary increases made in the ordinary course of business
consistent with past practices, there has been (i) no increase in the
compensation or in the rate of compensation or commissions payable or to become
payable to any director, officer, employee, or agent of the Company, (ii) no
director, officer, or employee of the Company hired at a salary in excess of
$50,000 per annum, and (iii) no increase in any payment of or commitment to pay
any bonus, profit sharing or other extraordinary compensation to any employee of
the Company;
(i) there has been no labor dispute, organizational effort by any union, unfair
labor practice charge or employment discrimination charge, nor institution or
threatened institution of any effort, complaint or other proceeding in
connection therewith, involving the Company or affecting the operations of the
Company or its business operations;
(j) there has been no Lien (other than for current Taxes (as defined in Section
2.13(a) not yet due and payable) created on or in (including without limitation,
any deposit for security consisting of) any of the assets of the Company or
assumed by the Company with respect to any such asset;
(k) there has been no indebtedness for borrowed money incurred by the Company
and there has been no other indebtedness or other liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred which would be
required to be reflected on a balance sheet of the Company as of the date
hereof, prepared in accordance with GAAP, consistently applied, except such as
have been incurred in the ordinary course of business consistent with past
practice, none of which individually or in the aggregate has had or could result
in a Material Adverse Effect on the Company;
(l) no obligation or liability which would be required to be reflected on a
balance sheet of the Company as of the date hereof, prepared in accordance with
GAAP, consistently applied, has been discharged or satisfied, other than current
liabilities reflected on the Balance Sheet and current liabilities incurred
since the date thereof in the ordinary course of business consistent with past
practice;
(m) there has been no sale, transfer or other disposition of assets of the
Company with a fair market value in excess of $10,000 in the aggregate;
(n) there has been no amendment, termination or waiver of any right of the
Company under any contract or agreement or governmental license, permit or
permission which, individually or in the aggregate, has had or could result in a
Material Adverse Effect on the Company;
(o) there has been no creation of, amendment to or contribution, grant, payment
or accrual for or to the credit of any employee of the Company with respect to
any bonus, incentive compensation, deferred compensation, profit sharing,
retirement, pension, group insurance or other benefit plan, or any union,
employment or consulting agreement or arrangement; and
(p) the Company has not entered into any agreement, whether in writing or
otherwise, to take any action described in this Section 2.12.
2.13 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or "Taxes"
refers to any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities relating to
taxes, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts including any liabilities arising as a result of being or
ceasing to be a member of an affiliated, consolidated, combined or unitary group
for any period (including, without limitation, any liability under Treas. Reg.
Section 1.1502-6 or any comparable provision of foreign, state or local law) and
any obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) Tax Returns and Audits.
(i) The Company has timely filed all federal, state, local and foreign
returns, estimates, information statements and reports ("Returns") relating to
Taxes required to be filed by the Company with any Tax authority, except such
Returns which are not material to the Company. All such Returns were correct and
complete in all material respects and have been completed in accordance with
applicable law. The Company has paid all Taxes shown to be due on such Returns.
(ii) The Company, as of the Effective Time, will have withheld with respect
to its employees all applicable Taxes pursuant to the Federal Insurance
Contribution Act, Taxes pursuant to the Federal Unemployment Tax Act and other
Taxes required to be withheld, except such Taxes which are not material to the
Company.
(iii) The Company does not have any material Tax deficiency outstanding,
proposed or assessed against the Company, nor has the Company executed any
unexpired waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the Company by any Tax
authority is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by the Company has been
proposed in writing formally or informally by any Tax authority to the Company
or any representative thereof.
(vi) The Company does not have any liability for any material unpaid Taxes
which has not been accrued for or reserved on the books of the Company in
accordance with GAAP, whether asserted or unasserted, contingent or otherwise.
(vii) Except as set forth in Schedule 2.13, there is no contract,
agreement, plan or arrangement to which the Company is a party as of the date of
this Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company that, individually or
collectively, would reasonably be expected to give rise to the payment of any
amount that would not be deductible pursuant to Sections 162(m), 280G or 404 of
the Code. There is no contract, agreement, plan or arrangement to which the
Company is a party or by which it is bound to compensate any individual for
excise taxes paid pursuant to Section 4999 of the Code.
(viii) The Company has not filed any consent agreement under Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by the Company.
(ix) The Company (A) has never been a member of an affiliated group filing
a consolidated federal income Tax Return, (B) is not a party to any Tax sharing
or Tax allocation agreement, arrangement or understanding, (C) to the Company's
Knowledge, is not liable for the Taxes of any other 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 and (D) is not a party to any
joint venture, partnership or other arrangement that could be treated as a
partnership for income Tax purposes.
(x) None of the Company's assets are tax exempt use property within the
meaning of Section 168(h) of the Code.
(xi) The Company has not constituted either a "distributing corporation" or
a "controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (A) in the two years prior to the date
of this Agreement or (B) in a distribution which could otherwise constitute part
of a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with the Merger.
2.14 Litigation and Proceedings. Except as set forth on Schedule 2.14,
there are no actions, decrees, suits, counterclaims, claims, proceedings or
governmental or other investigations pending or threatened against, by or
potentially affecting the Company, in any court or before any arbitrator or
Governmental Entity, and no judgment, award, order or decree of any nature has
been rendered which could potentially affect the Company, by any agency,
arbitrator, court, commission or other authority which has not been paid or
discharged. To the Knowledge of the Company, there are no pending or threatened
claims against any of the officers, directors or employees of the Company.
2.15 Permits and Compliance with Laws.
(a) The Company and its employees have obtained and maintain all permits,
licenses, certifications, franchises and authorizations from Governmental
Entities or other parties necessary or required to conduct the Company's
business in the manner in which such business has been and is being conducted
(collectively, "Permits"), which Permits are set forth in Schedule 2.15.
(b) On the Closing Date, all Permits shall be in full force and effect. There
has been no default on the part of the Company with respect to, and no event has
occurred which, with the giving of notice or the lapse of time, or both, and
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, would constitute a breach of, any condition to
the issuance, maintenance, renewal and/or continuance of, any Permit or result
in any other impairment of the rights of the holder thereof. The Company has
made no assignment of any Permits to any third party, and the Permits are free
and clear of all Liens.
(c) The Company has at all times complied and is in compliance with all federal,
foreign, state and local laws, rules, regulations and ordinances. No present or
past violation of any such law, rule, regulation or ordinance, whether known or
unknown, has occurred which could or would materially impair the value of the
Company or its business or the right or ability of the Company or its
successors, affiliates, officers, directors, employees or agents to conduct
their respective activities.
2.16 Environmental.
(a) The Company has at all times complied and is currently in compliance with,
and the Real Property (as defined in Section 2.22) has at all times been
occupied and operated and is currently in compliance with, all Environmental
Laws. The Company has obtained and maintains all permits, approvals,
authorizations and licenses required under any Environmental Law which are
necessary to own and operate its business or to occupy any of the Real Property.
For purposes of this Agreement, the term "Environmental Laws" refers to the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601, et seq.), 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 Federal Clean Water Act (33 U.S.C. Section 1251 et
seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. Section 2601 et seq.) and the Occupational Safety and
Health Act (29 U.S.C. Section 651 et seq.), as such laws may be amended or
otherwise modified from time to time, and any other applicable and present or
future federal, state, local or foreign statute, ordinance, rule, regulation,
order, judgment, decree, policy, guideline, permit, license or other binding
determination of any governmental authority imposing liability or establishing
standards of conduct for protection of the environment or health and safety.
(b) The Company has no liability (whether known or unknown, absolute or
contingent) arising under any Environmental Law and there has been and is no
event, condition, circumstance, activity, omission, practice, incident, action
or plan (including, without limitation, any intentional or unintentional release
into the environment of any Hazardous Material) which may interfere with or
affect the Company or its assets, prevent continued compliance by the Company
with all Environmental Laws, or otherwise give rise to any liability of the
Company or any party owning or operating its business or the Real Property or
serve as the basis for any claim, action, suit, proceeding, hearing or
investigation against the Company or any party owning or operating its assets or
the Real Property under any Environmental Law. The Company has not received any
notice alleging that the Company or its assets or the Real Property is in
violation of any Environmental Law or that the Company has any liability
thereunder. For purposes of this Agreement, the term "Hazardous Material" refers
to (i) any element, compound or chemical that is defined, listed or otherwise
classified or regulated as a contaminant, pollutant, toxic pollutant, toxic
substance, hazardous substance, extremely hazardous substance or chemical waste,
hazardous waste, special waste, or solid waste under any Environmental Laws;
(ii) petroleum and its refined products; (iii) polychlorinated biphenyls; (iv)
any substance exhibiting a hazardous waste characteristic, including, without
limitation, corrosivity, ignitability, toxicity or reactivity as well as any
radioactive or explosive materials; and (v) any raw materials, building
components (including, without limitation, asbestos-containing materials) and
manufactured products containing hazardous substances listed or classified as
such under Environmental Laws.
(c) Neither the Company nor any of the Real Property is subject to any
applicable Environmental Law requiring the performance of site assessments, the
removal or remediation of Hazardous Materials, the giving of notice to any
governmental agency or the recording or delivery of an environmental disclosure
document or statement by virtue of the transactions contemplated by this
Agreement. As of the Effective Time, no expenditure will be required in order
for Parent or the Surviving Corporation to comply with any Environmental Law in
connection with the operation of the business or assets of the Company or the
Real Property in a manner consistent with the current operation thereof.
2.17 Insurance. Schedule 2.17 contains a complete list and description
(including the expiration date, premium amount and coverage thereunder) of all
policies of insurance and bonds presently maintained by, or providing coverage
for the Company or its officers, directors or employees, all of which will be
maintained through the Closing Date in full force and effect. Schedule 2.17 also
contains a complete list of (i) all pending claims under any of such policies or
bonds, (ii) all claims made within the last three (3) years under any of such
policies or bonds, and (iii) any denial of coverage or reservation of rights to
contest any such claim asserted by any insurer. All material terms, obligations
and provisions of each of such policies and bonds have been complied with; all
premiums due thereon have been paid; and no notice of cancellation with respect
thereto has been received. Such policies and bonds provide adequate coverage to
insure the properties and business of the Company and the activities of its
officers, directors and employees against such risks, and in such amounts as are
prudent and customary. The Company will not, as of the Closing Date, have any
liability for premiums or for retrospective premium adjustments for any period
prior to or after the Closing.
2.18 Powers of Attorney. Schedule 2.18 contains a complete and accurate
list setting forth the names and addresses of all persons holding a power of
attorney on behalf of the Company.
2.19 Contracts.
(a) Schedule 2.19 includes a true, correct and complete list of all contracts,
agreements, arrangements or understandings, written or oral, to which the
Company is a party or by which it is bound (collectively, the "Contracts"),
including, without limitation, any of the following contracts, agreements,
arrangements or understandings:
(i) any joint venture or partnership agreement;
(ii) all confidentiality agreements which could reasonably be expected to
result in a restriction on the operation of the business of the Company;
(iii) any agreement relating to the voting of shares of the capital stock
of the Company;
(iv) any agreement or indenture relating to the borrowing of money or
placing a Lien on any of the assets of the Company;
(v) any agreement for the purchase or sale of products or services;
(vi) any contract which prohibits the Company from freely engaging in any
business, or which prohibits the Company from soliciting customers or any other
business, anywhere in the world;
(vii) all employment, severance or non-competition agreements to which any
of the officers or employees of the Company is a party (other than oral or
written offers of at-will employment not containing any arrangements with
respect to severance or other extraordinary compensation);
(viii) any contract or commitment for capital expenditures; and
(ix) any contract under which the rights of the Company may be adversely
affected as a result of the Merger.
(b) Except as set forth in Schedule 2.19:
(i) Each Contract is in full force and effect and constitutes a binding
obligation of all parties thereto, enforceable against the other party or
parties to such Contracts in accordance with its terms; no such Contract has
been canceled or otherwise terminated, and to the Knowledge the Company, no such
cancellation or termination has been threatened; and
(ii) The Company has performed all obligations required to be performed by
it under the Contracts; there are no existing breaches, defaults or events of
default, real or claimed, or events which with notice or lapse of time or both
would constitute defaults under any of the Contracts, and the Company has not
received notice of any such breach or default.
2.20 Licenses; Intellectual Property.
(a) Schedule 2.20 lists (i) all rights in patents, patent applications,
trademarks (whether registered or not), trademark applications, software,
service xxxx registrations and service xxxx applications, trade names, Internet
domain name registrations, Internet domain name applications, corporate names,
copyright applications, registered copyrighted works and commercially
significant unregistered copyrightable works (including proprietary software,
books, written materials, prerecorded video or audio tapes, and other
copyrightable works) (all such listed categories of intellectual property,
together with uniform resource locators, trade dress, logos, slogans, tag lines,
technology, software, trade secrets, know-how, technical documentation,
specifications, designs and other intellectual property and proprietary rights,
collectively referred to as, the "Intellectual Property") owned or developed by
or licensed to the Company or used in, developed for use in, or necessary to the
conduct of the business of the Company as now conducted or planned to be
conducted, and (ii) all license agreements pursuant to which any such
Intellectual Property has been licensed to or from third parties, including the
name of the licensee or licensor, as the case may be, and the date of each such
agreement.
(b) Except for any rights of Parent therein, the Company owns, free and clear of
all Liens (and without restriction as to use or disclosure), all right, title
and interest to, or has the right to use pursuant to a valid, enforceable
written license (as disclosed in Schedule 2.20), all Intellectual Property set
forth in Schedule 2.20, developed or created by the Company, or necessary for
the operation of the business of the Company as presently conducted or proposed
to be conducted. The Company has taken all reasonably necessary action to
protect the secrecy, confidentiality and value of and its rights in and to such
Intellectual Property.
(c) All personnel, including employees, agents, consultants and contractors, who
have contributed to or participated in the conception or development, or both,
of Intellectual Property on behalf of the Company, and all officers and
technical employees of the Company, either (i) have been a party to
"work-for-hire" arrangements or agreements in accordance with applicable
national and state law that has accorded full, effective, exclusive and original
ownership of all tangible and intangible property thereby arising to the
Company, or (ii) have executed appropriate instruments of assignment in favor of
the Company, as assignee, that have conveyed to the Company, effective and
exclusive ownership of all tangible and intangible property arising thereby.
(d) Neither the development, maintenance, operation or use of any of the
Intellectual Property of the Company nor the conduct of its business has
infringed, misappropriated or conflicted with or infringes, misappropriates or
conflicts with any Intellectual Property of any third party, nor would any
future conduct with respect to the Intellectual Property or business of the
Company as presently contemplated infringe, misappropriate or conflict with any
Intellectual Property of any third party. To the Knowledge of the Company, the
Intellectual Property listed in Schedule 2.20 has not been infringed,
misappropriated or conflicted by any third party. No claim by any third party
contesting the validity of any such Intellectual Property has been made, is
currently outstanding or, to the Knowledge of the Company, is threatened. The
Company has not (i) received any notice of any infringement, misappropriation or
violation by the Company of any Intellectual Property listed in Schedule 2.20 by
any third party or (ii) infringed, misappropriated or otherwise violated any
Intellectual Property of any third party.
(e) Except as set forth in Schedule 2.20: (i) the Company, or, in the case of
Company Data (as defined herein) owned by Parent, Parent is the exclusive owner
of all data, data lists, information, systems, documentation, processes, and
other items compiled, processed, created or developed through any function
performed by any program or system administered by the Company (collectively,
the "Company Data"); (ii) the Company or, in the case of Company Data owned by
Parent, Parent has the exclusive right to use and protect all such Company Data,
and no third party (except for Parent) has any rights in or has filed any
copyright registration with respect to the Company Data; (iii) the Company has
not violated or infringed any patent, copyright, trademark, service xxxx or
other intellectual property rights of any other person or entity in or to the
Company Data, and there are no claims pending or, to the Knowledge of the
Company, threatened against the Company asserting that the use of any Company
Data by the Company infringes the rights of any other person or entity; (iv) the
Company has not made or asserted any claim of violation or infringement of any
Company Data against any other person or entity, and the Company has no
Knowledge of any such violation or infringement; (v) the Company has not granted
any outstanding licenses or other rights to any such Company Data, to any other
person or entity (except for any such rights granted to Parent), and the Company
has maintained and caused all of its employees, agents and independent
contractors to maintain the confidentiality of such Company Data.
2.21 Personal Property. Schedule 2.21 contains a list of all tangible
personal property and assets owned and leased by the Company as of the date
hereof. Except as otherwise noted in Schedule 2.21, the Company has good and
marketable title to all such tangible personal property and assets owned by the
Company (the "Owned Assets") and all tangible personal property and assets
reflected on the Balance Sheet (except to the extent disposed of in the ordinary
course of business since the date thereof), free and clear of all Liens, and the
Owned Assets (together with the Leased Assets (as defined below), Real Property,
Intellectual Property, Permits and Contracts) constitute and include all of the
property and assets related to, required, used, or useful by the Company in the
conduct of its business as now conducted or proposed to be conducted. The
Company has the right to use all of the leased items of tangible personal
property and assets used in connection with the operation of its business
(collectively, the "Leased Assets") pursuant to valid and enforceable lease
agreements. All of the tangible personal property and assets reflected in
Schedule 2.21 is in good operating condition and repair (ordinary wear and tear
excepted).
2.22 Real Property and Leases.
(a) The Company owns no real property.
(b) Schedule 2.22 lists all of the leases (the "Facility Leases") of any real
property leased by the Company in or used in connection with the operation of
its business (the "Real Property"). Each Facility Lease is valid, in full force
and effect, and enforceable in accordance with its terms and constitutes a legal
and binding obligation of each party thereto. The Company has a valid leasehold
interest under each Facility Lease. The Company has not given or received any
notice of default, termination or partial termination under any Facility Lease,
and there is no existing or continuing default by the Company or, to the
Knowledge or the Company, any other party in the performance or payment of any
obligation under any Facility Lease. The Company has complied in all material
respects with the provisions of each Facility Lease.
(c) The Company has not received notice that any zoning or similar land use
restrictions are presently in effect or proposed by any Governmental Entity
which would impair the use or occupancy of any of the Real Property for the
purposes for which such Real Property is currently being used, and the use of
the Real Property by the Company is in compliance with all applicable building,
zoning and land use laws and regulations. To the Knowledge of the Company, no
condemnation by taking or eminent domain of any Leased Real Property is pending
or threatened.
(d) The interest of the Company in and under each of the Facility Leases is
unencumbered and subject to no present claim, contest, dispute, action or
threatened action at law or in equity, and none of the Facility Leases is
subject to any written, oral or implied sublease.
(e) There are no contractual obligations, agreements in principle or present
plans for the Company to enter into new leases of real property or with respect
to the renewal or amendment of existing Facility Leases prior to the Closing
Date.
(f) No covenants, easements, restrictions, servitudes, rights of way or
regulations applicable to the Real Property have had or are likely to have a
Material Adverse Effect on the Company.
2.23 Employees.
(a) Schedule 2.23 sets forth a true, correct and complete listing of all
employees of the Company, including each applicable name and job title or
function, as well as a true, correct and complete listing of the current salary
or wage, incentive pay and bonuses, accrued vacation, and the current status (as
to leave or disability pay status, leave eligibility status, full time or part
time, exempt or nonexempt, temporary or permanent status) of such employees.
Except as set forth in Schedule 2.23, the Company has not paid or promised to
pay any bonuses to such employees.
(b) To the Knowledge of the Company, no officer or employee of the Company or
group thereof, has any plans to terminate his or her or employment, or would
refuse to continue his or her employment following the Closing.
(c) The Company has no employment-related complaints or charges pending or, to
the Knowledge of Seller and the Company, threatened against the Company with the
Equal Employment Opportunity Commission, Department of Labor, or any other
comparable state or local agency.
(d) The Company is not a party to any collective bargaining agreement or other
labor union contract. There are currently no strikes, concerted slowdowns,
concerted work stoppages, lockouts or, to the Knowledge the Company, any threats
thereof, existing by or with respect to any employees of the Company.
(e) There are no workers' compensation claims pending or, to the Knowledge of
the Company, threatened against the Company except to the extent any such claim
or claims are covered by workers' compensation insurance.
2.24 Independent Contractors. Schedule 2.24 contains a true, correct and
complete list of the names and compensation arrangements of each independent
contractor performing services for the Company. No such independent contractor
has informed the Company (nor does the Company have Knowledge) that any such
independent contractor does not intend to continue to provide such services
after the date hereof or will voluntarily terminate his or her applicable
engagement or contract as a result of the transactions contemplated hereby.
Section 2.24 of the Company Schedules sets forth a true, correct and complete
list of all written and oral agreements currently in effect with any such
independent contractors.
2.25 Employee Benefits.
(a) Schedule 2.25 lists all "pension plans" (as such term is defined in
Section 3 of ERISA), "welfare benefit plans" (as such term is defined in
Section 3 of ERISA), bonus, stock option, stock purchase, restricted stock,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements to which
the Company is a party or which are maintained, contributed to or sponsored by
the Company for the benefit of any current or former employee, officer or
director of the Company or any Affiliate (as defined in subsection (f)) of the
Company (all such plans are sometimes referred to herein collectively as the
"Plans" and individually as a "Plan").
(b) True and complete copies of all the Plans and Plan trusts, Summary Plan
Descriptions, Actuarial Reports (if any) and Annual Reports on Form 5500 for the
most recent three years with respect to the Plans, Internal Revenue Service
determination letters, audit reports (if any) and any other related documents
have been provided to Parent.
(c) With respect to each Plan, (i) no litigation or administrative or other
investigation or proceeding is pending or threatened; and (ii) the Plan has been
administered in compliance with, and has been restated or amended so as to
comply with, all applicable requirements of law including all applicable
requirements of ERISA, the Code and regulations promulgated thereunder by the
Internal Revenue Service and the United States Department of Labor, as well as
the terms of such Plan. No Plan nor any trustee, administrator or fiduciary
thereof has at any time been involved in any transaction relating to such Plan
which was or is a breach of fiduciary duty under ERISA or a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code.
(d) No Plan which is subject to Title IV of ERISA or Section 412 of the Code,
and no "multiemployer plan" (as defined by ERISA), has been maintained,
contributed to or sponsored by or on behalf of the Company or any of its
Affiliates. As of the date hereof, no contribution to any profit sharing plan
maintained by the Company or its Affiliates has been authorized which has not
been fully paid, and neither the Company nor any of its Affiliates is subject to
any liability or penalty under Sections 4971-4980F of the Code or Title I of
ERISA.
(e) Except for obligations under the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA"), the Company has no obligation to provide, or liability
for, health care, life insurance or other benefits after termination of
employment for former or present employees. The Company has cured any known
violations or deficiencies under applicable statutes, orders and regulations
relating to the Plans or their administration thereof and provided adequate
reserves, or insurance or qualified trust funds, for all claims incurred through
the date hereof with respect to participants who are current or former employees
of the Company, and their respective beneficiaries.
(f) No fact or circumstance exists which could constitute grounds in the future
for the Pension Benefit Guaranty Corporation ("PBGC") (or any successor to the
PBGC) to take any action whatsoever under Section 4042 of ERISA in connection
with any plan which the Company or an Affiliate of the Company maintains within
the meaning of Section 4062 or 4064 of ERISA, and, in either case, the PBGC has
not previously taken any such action which has resulted in, or reasonably might
result in, any liability of the Company to the PBGC. The term "Affiliate" for
purposes of this Section means any trade or business (whether incorporated or
unincorporated) which is a member of a group described in Section 414 of the
Code of which the Company is also a member.
(g) Except as set forth in Schedule 2.25, neither the execution and delivery of
this Agreement nor the consummation of any of the transactions contemplated
hereby will (i) give rise to the payment of any amount which would constitute an
"excess parachute payment" (within the meaning of Section 280G of the Code)
under any contract, agreement, or other arrangement of the Company; (ii)
increase any of the benefits payable under the Plans or (ii) result in the
acceleration of the time of payment for or the vesting of any such benefits.
2.26 Brokers' and Finders' Fees. The Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any other charges payable to any brokers, finders or
financial advisors in connection with this Agreement or any transaction
contemplated hereby.
2.27 Board Approval. The Board of Directors of the Company has in
accordance with the GBCC and the Company's Articles of Incorporation and Bylaws
(i) determined that the Merger is advisable and in the best interests of the
Company and its shareholders, (ii) determined to recommend that the shareholders
of the Company approve and adopt this Agreement and the Merger and (iii) duly
approved and adopted the Merger, this Agreement and all transactions
contemplated hereby. Effective directors' action respecting the Merger, this
Agreement, and all transactions contemplated hereby has been taken by the
Company in compliance with Section 14-2-862 of the GBCC. All amendments and
other actions with respect to the Company Stock Option Plan and the Company
Options contemplated by this Agreement (including Section 5.12) have been duly
approved and authorized in accordance with the applicable provisions of the
Company Stock Option Plan.
2.28 Insolvency Proceedings. No insolvency proceedings of any kind or
nature, including, without limitation, bankruptcy, receivership, reorganization
or other arrangements with creditors, voluntary or involuntary, with respect to
the Company are pending or threatened.
2.29 Bank Accounts. Schedule 2.29 sets forth the names and locations of all
banks, trust companies, brokerage firms or other financial institutions at which
the Company maintains accounts and the name of each person authorized to draw
thereon or make withdrawals therefrom.
2.30 Approvals and Consents. Schedule 2.30 lists all consents or other
approvals necessary or beneficial to the consummation of the transactions
contemplated hereby or that are required pursuant to the terms of any Contract,
Facility Lease or Permit in connection with such transactions or in order to
preserve any right, license, Permit or franchise held or owned by the Company,
including but not limited to all governmental and other regulatory approvals and
consents of lenders, lessors, landlords and other third parties (collectively,
"Third Party Consents").
2.31 Offering Materials. None of the information supplied or to be supplied
by the Company for inclusion in the Offering Materials (as defined in Section
5.1(a)) will, at the time the Offering Materials are first mailed to any of the
Company's shareholders, at the time any such shareholders vote on or execute
proxies or written consents to the approval and adoption of this Agreement and
the Merger, or at the Closing, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of consents or proxies from the Company's shareholders which
has become false or misleading. Notwithstanding the foregoing, the Company makes
no representation or warranty with respect to any information supplied by
Parent, including the adequacy or accuracy thereof, that is contained in any of
the foregoing documents. The Company undertakes no obligation, and shall not be
obligated to Parent, to provide information to the Company's Shareholders (other
than the Offering Materials provided by Parent) with regard to the Parent Common
Stock or its suitability for investment therein by any Shareholder pursuant to
this Agreement.
2.32 Investment.
(a) The Company acknowledges and agrees that the shares of Parent Common Stock
to be issued to the Shareholders pursuant to the Merger and to the Warrant
Holder upon exercise of the Substitute Warrant have not been and will not be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any other federal or state securities laws and are being issued in reliance
upon the exemption provided by Section 4(2) of the Securities Act and Rule 506
of Regulation D promulgated thereunder ("Regulation D") and other exemptions
under state securities laws. The Company acknowledges and agrees that such
shares of Parent Common Stock will constitute "restricted securities" under the
federal securities laws and that under such laws and applicable regulations such
securities may not be resold without an effective registration statement
covering such shares under the Securities Act, or pursuant to an applicable
exemption from registration. It is understood that the certificates evidencing
such shares of Parent Common Stock shall bear a legend substantially in the form
set forth in the Investor Letters.
(b) The Company acknowledges and agrees that each Shareholder (other than the
Shareholders listed in Schedule 2.32) and the Warrant Holder has, in connection
with the acquisition of shares of Company Common Stock or the Company Warrant,
represented to the Company that it is a sophisticated investor with knowledge
and experience in financial and business matters, is able to bear the economic
risk and lack of liquidity inherent in holding the Parent Common Stock and is an
"accredited investor" within the meaning of Regulation D.
2.33 Representations and Warranties. Without limiting the effect of any
representation or warranty set forth herein, the Company further represents and
warrants that no representation or warranty or contained in this Article II or
Company Schedules contains or shall contain any untrue statement of material
fact, nor shall such representations and warranties taken as a whole omit any
statement of material fact necessary in order to make any statement therein not
misleading. There is no fact known to the Company, which materially adversely
affects the business, operations, or assets or the condition, financial or
otherwise, of the Company in any respect which has not been disclosed in this
Agreement or in the Company Schedules. The Company has furnished to Parent a
true, correct and complete copy of any and all Contracts, Facility Leases,
Plans, Permits, correspondence, notices and other documents reflected in the
Company Schedules, as any of the same have been amended and are in effect on the
date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, notwithstanding
any independent investigations or verifications undertaken by the Company or its
representatives, that the following representations and warranties are true and
correct on the date hereof and, except for any representations and warranties
made as of a specific date (other than the date hereof), shall be true and
correct as of the Closing:
3.1 Organization of Parent. Parent and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; has the corporate power and authority
to own, lease and operate its assets and property and to carry on its business
as now being conducted and as proposed to be conducted; and is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would have a Material Adverse Effect on
Parent.
3.2 Parent Capital Structure. The authorized capital stock of Parent
consists of 25,000,000 shares of Common Stock, par value $0.01 per share, of
which 8,991,862 shares were issued and outstanding as of May 24, 2002, and
50,000,000 shares of Preferred Stock, $0.01 par value, of which no shares are
issued or outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, par value $0.01 per share, all of which, as of the
date hereof, are issued and outstanding and are held by Parent.
3.3 Parent Common Stock. The Parent Common Stock to be issued pursuant to
the Merger has been duly authorized and will, when issued in accordance with
this Agreement, be validly issued, fully paid, and nonassessable.
3.4 Authority.
(a) Each of Parent and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of Parent and Merger Sub,
subject only to the filing and recordation of the Certificate of Merger pursuant
to the GBCC. This Agreement has been duly executed and delivered by each of
Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes the valid and binding obligations of each
of Parent and Merger Sub enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by each of
Parent and Merger Sub does not, and the performance of this Agreement by each of
Parent and Merger Sub will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of Parent or the equivalent organizational documents of
any of its subsidiaries, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected or (iii) result in any breach of, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair Parent's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Parent or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or any of
its subsidiaries is a party or by which Parent or any of its subsidiaries or its
or any of their respective properties are bound or affected (except for Parent's
Credit Facility (as defined in Section 6.3(c), unless the consents contemplated
by Section 6.3(c) are obtained), except to the extent such conflict, violation,
breach, default, impairment or other effect would not, in the case of clause
(ii) or (iii), individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Parent.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Parent or Merger Sub in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby or
thereby, except for the filing of the Certificate of Merger with the Secretary
of State of Georgia and the filing of a Form D with the Securities and Exchange
Commission (the "SEC") in connection with the issuance of Parent Common Stock
pursuant to the Merger and upon exercise of the Substitute Warrant.
3.5 SEC Filings.
(a) Parent has filed all forms, reports and documents required to be filed with
the SEC since December 31, 2001, and has made available to the Company such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that Parent may file subsequent to
the date hereof) are referred to herein as the "Parent SEC Reports." As of their
respective dates, the Parent SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent SEC Reports, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Parent's subsidiaries is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case, any
related notes thereto) contained in the Parent SEC Reports, including any Parent
SEC Reports filed after the date hereof until the Closing, (i) complied as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto, (ii) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and
(iii) fairly presented the consolidated financial position of Parent and its
subsidiaries at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments.
3.6 Offering Materials. None of the information supplied or to be supplied
by Parent for inclusion or incorporation by reference in the Offering Materials
(as defined in Section 5.1) will, at the time the Offering Materials are first
mailed to any of the shareholders of the Company, at the time any such
shareholders vote on or execute proxies or written consents with respect to the
approval and adoption of this Agreement and the Merger, or at the Closing,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
consents or proxies from the shareholders of the Company which has become false
or misleading. Notwithstanding the foregoing, Parent makes no representation or
warranty with respect to any information supplied by the Company that is
contained in any of the foregoing documents.
3.7 Board Approval. The Board of Directors of Parent has (i) determined
that the Merger is advisable and in the best interests of Parent and its
stockholders, and (ii) duly approved the Merger, this Agreement and the
transactions contemplated hereby, and (iii) authorized the Merger, this
Agreement and all transactions contemplated hereby in good faith by the
affirmative vote of a majority of disinterested directors of Parent after
requisite disclosure in compliance with Section 144(a)(1) of the Delaware
General Corporation Law.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
Except as otherwise expressly provided herein, the Company covenants and
agrees that, without the prior written consent of Parent in each instance,
between the date hereof and the Closing Date:
4.1 Conduct of Business. The Company shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and preserve intact its present business organization and
use reasonable efforts to keep available the services of its present officers,
employees and agents and to preserve the goodwill of its business and
relationships with customers, suppliers and others having business dealings with
the Company.
4.2 Maintenance of Properties. The Company will maintain its properties and
assets in good operating condition, ordinary wear and tear excepted.
4.3 Insurance. The Company will maintain and keep in full force and effect
all of the insurance policies and bonds referred to in Section 2.17 hereof or
other insurance equivalent thereto.
4.4 Issuance of Securities. Other than pursuant to the repurchase of the
Non-Accredited Investor Shares or the redemption of the Company Preferred Stock
pursuant to Section 5.2 of this Agreement or the exercise of Company Options
outstanding on the date of this Agreement and/or the Company Warrant, the
Company will not sell, issue, grant, authorize or propose the sale or issuance
of, or purchase or propose the purchase of, any shares of capital stock of the
Company, or any securities convertible into, or rights, warrants or options to
acquire, any such shares or other convertible securities of the Company or enter
into any agreement with respect to any of the foregoing.
4.5 Dividends. No stock split, reverse stock split, dividend, distribution
or payment (of cash, securities or property) will be declared or made on or in
respect of the capital stock of the Company, and the Company will not directly
or indirectly, redeem, purchase or otherwise acquire any of its capital stock or
enter into any agreement with respect to any of the foregoing.
4.6 Amendment of Charter. The Company will not amend or cause to be amended
its Articles of Incorporation, Bylaws or other organizational documents.
4.7 No Acquisitions. The Company will not acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets or
stock of, or by any other manner, any business or any corporation, partnership,
association or other entity or division thereof or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
Company or enter into any agreement with respect to any of the foregoing.
4.8 Disposition of Assets. The Company will not adopt, propose or implement
any plan of liquidation or dissolution, sell, mortgage, lease, buy or otherwise
acquire, transfer or dispose of any real property or interest therein or sell or
transfer, or subject to any Lien, any tangible or intangible asset of the
Company or enter into any agreement with respect to any of the foregoing.
4.9 Compensation. Except for annual salary increases made in the ordinary
course of business consistent with the past practices of the Company, no
increase will be made in the compensation payable or to become payable to any
director, or officer or employee of the Company, no general increase will be
made in the compensation payable or to become payable to any hourly or salaried
employees of the Company; no increase will be made in any payment of or
commitment to pay any bonus, profit sharing, severance pay or other
extraordinary compensation to any director, officer or employee of the Company;
and the Company will not enter into any agreement or understanding with respect
to the foregoing.
4.10 Banking Arrangements. No change will be made in the banking and safe
deposit arrangements referred to in Section 2.31 hereof, except in the ordinary
course of business, consistent with past practice, and then only after first
notifying Parent of such change.
4.11 Indebtedness. The Company will not incur any indebtedness for borrowed
money, purchase money indebtedness or capital lease obligations, or guarantee
any such indebtedness or issue or sell any of its debt securities or guarantee
any debt securities of others or enter into any agreement with respect to the
foregoing.
4.12 Payment of Debt. The Company will not pay any obligation or liability
or enter into any agreement with respect to the foregoing other than in the
ordinary course of business or as required by the terms of any instrument
evidencing or governing the same.
4.13 Benefit Plans. The Company will not enter into or amend, or make or
authorize the making of any contributions to, any bonus, incentive compensation,
deferred compensation, severance, profit sharing (including, without limitation,
the adoption of any resolution or taking of any other action for or with respect
to the contribution of any sum pursuant to the terms of any existing profit
sharing or similar plan), retirement, pension, group insurance or other benefit
plan, or any union, employment or consulting agreement or arrangement, except as
and only to the extent required by law or regulation.
4.14 Contracts. The Company will not enter into any Contract, except in the
ordinary course of business consistent with past practice, or amend any Contract
(including, without limitation, the Company Warrant, the Company Stock Option
Plan and the Company Options).
4.15 Books and Records. The books and records of the Company will be
maintained in the usual, regular and ordinary course of business consistent with
past practice.
4.16 Other Actions. The Company will not take any action that would or
could reasonably be expected to result in any of the representations and
warranties of the Company set forth in this Agreement becoming untrue in any
material respect at any time on or prior to the Closing Date or the date this
Agreement terminates.
4.17 Changes. The Company shall promptly advise Parent in writing of any
change or event having, or which can reasonably be foreseen to have, a Material
Adverse Effect on the Company.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Securities Matters.
(a) As promptly as practicable after the execution of this Agreement, Parent
may, in its discretion, prepare a package of disclosure documents to be
distributed to the shareholders entitled to vote on the approval and adoption of
this Agreement and the Merger and the Warrant Holder (the "Offering Materials").
The Company will provide to Parent all information reasonably requested in
connection with the preparation of the Offering Materials, and will cause the
Offering Materials to be mailed to each of its shareholders and the Warrant
Holder at the earliest practicable time. Whenever any event occurs which is
required, in Parent's reasonable determination, to be set forth in an amendment
or supplement to the Offering Materials, the Company will cooperate with Parent
by promptly mailing to its shareholders and the Warrant Holder such amendment or
supplement.
(b) The Company will deliver or cause to be delivered to Parent as promptly as
practicable on or following the date hereof from each shareholder of the Company
(other than those individuals set forth in Schedule 2.32) and the Warrant Holder
an executed Investor Letter, each of which will be in full force and effect as
of the Effective Time.
(c) The Company shall take any and all actions reasonably requested by Parent to
cause the offer and issuance of the Parent Common Stock to the Shareholders of
the Company and the Warrant Holder to satisfy all applicable requirements of
Regulation D and all other applicable federal and state securities laws.
5.2 Non-Accredited Investor Shares. Prior to the Closing, the Company shall
repurchase (i) from each shareholder of the Company that is not an "accredited
investor" (as such term is defined in Regulation D) or has not executed and
delivered to Parent an Investor Letter (collectively, the "Non-Accredited
Investors") all of the shares of capital stock of the Company owned by such
Non-Accredited Investors (the "Non-Accredited Investor Shares") at a price not
to exceed $500,000 in the aggregate for all Non-Accredited Investor Shares, and
(ii) all issued and outstanding shares of the Series A Convertible Preferred
Stock, no par value, of the Company (the "Company Preferred Stock") at a price
not to exceed $1,000 per share (plus any accrued and unpaid dividends thereon).
All Non-Accredited Investor Shares and shares of the Company Preferred Stock
shall be redeemed, canceled and terminated upon such repurchase by the Company.
5.3 Shareholder Approval.
(a) The Company will as promptly as practicable after the date hereof, in
accordance with the GBCC and its Articles of Incorporation and Bylaws obtain the
unanimous written consent of its shareholders to, and/or convene a shareholders'
meeting for the purpose of voting upon the adoption and approval of this
Agreement and the Merger. The Company will use its best efforts and take all
action necessary or advisable to secure the vote or consent of its shareholders
required by the GBCC and all other applicable legal requirements with respect to
the approval and adoption of this Agreement and the Merger.
(b) The Board of Directors of the Company shall recommend that the Company's
shareholders vote in favor of and adopt and approve this Agreement and the
Merger, and neither the Board of Directors of the Company, nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify in a manner adverse to the other party, the recommendation of
the Board of Directors of the Company or the Company's shareholders vote in
favor of and adopt and approve this Agreement and the Merger.
5.4 Access to Information; Confidentiality.
(a) During the period from the date of this Agreement to the Closing, the
Company agrees to permit Parent and its representatives, agents, counsel and
accountants to have full access at all reasonable times to the premises,
business, properties, assets, financial statements, contracts, books, employment
and other records and working papers of, and other relevant information
pertaining to the Company, and to cause its officers and employees to furnish to
Parent and its representatives, agents, counsel and accountants such financial
and operating data and other information with respect to the business,
properties and assets of the Company, as Parent may reasonably request; and the
Company agrees to cause its officers and employees to cooperate with Parent and
its representatives, agents, counsel and accountants in order to enable Parent
to become fully informed with respect to the business, earnings, financial
condition, prospects, properties, assets, liabilities and obligations of the
Company.
(b) Each party hereto will hold, and will use its reasonable efforts to cause
its respective affiliates, officers, directors, employees and agents to hold, in
strict confidence from any person, and not to disclose, except to the extent,
and only to the extent (i) compelled to disclose by judicial or administrative
process (including, without limitation, in connection with obtaining the
necessary approvals of this Agreement and the transactions contemplated hereby
of governmental authorities or by other requirements of law) (provided the party
compelled to disclose provides the other party with prior notice thereof so that
such other party may seek a protective order or other appropriate remedy to
prevent or limit such disclosure) or (ii) disclosed in an action or proceeding
brought by a party hereto in pursuit of its rights or in the exercise of its
remedies hereunder, all documents and information concerning the other party or
any of its affiliates furnished to it by any other party or such other party's
affiliates, officers, directors, employees and agents pursuant to or in
connection with this Agreement or the transactions contemplated hereby, except
to the extent that such documents or information can be shown to have been
(A) previously known by the party receiving such documents or information,
(B) in the public domain (either prior to or after the furnishing of such
documents or information hereunder) through no fault of such receiving party, or
(C) later acquired by the receiving party from another source if the receiving
party is not aware that such source is under an obligation to another party
hereto to keep such documents and information confidential; provided, however,
that following the Closing the foregoing restrictions shall have no further
force or effect. In the event this Agreement is terminated, upon the request of
the other party, each party hereto will, and will cause its affiliates, promptly
(and in no event later than five (5) days after such request) to redeliver or
cause to be redelivered all copies of documents and information furnished by the
other party in connection with this Agreement or the transactions contemplated
hereby and destroy or cause to be destroyed all notes, memoranda, summaries,
analyses, compilations and other writings related thereto or based thereon
prepared by the party that furnished such documents and information or its
officers, directors and agents.
5.5 No Solicitation.
(a) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VII, the Company will not, nor
will it authorize or permit any of its officers, directors, affiliates or
employees or any investment banker, attorney or other advisor or representative
retained by any of them to, directly or indirectly (i) solicit, initiate,
encourage or induce the making, submission or announcement of any Company
Acquisition Proposal (as defined below), (ii) participate in any discussions or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes or may reasonably be expected to lead to, any
Company Acquisition Proposal, (iii) engage in discussions with any person with
respect to any Company Acquisition Proposal, except as to the existence of these
provisions, (iv) approve, endorse or recommend any Company Acquisition Proposal
or (v) enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any Company
Acquisition Transaction (as defined below);
(b) For purposes of this Agreement, "Company Acquisition Proposal" shall mean
any offer or proposal (other than an offer or proposal by Parent) relating to
any Company Acquisition Transaction. For the purposes of this Agreement,
"Company Acquisition Transaction" shall mean any transaction or series of
related transactions other than the transactions contemplated by this Agreement
involving: (i) any acquisition or purchase by any person of any voting or other
equity securities of the Company (other than pursuant to the exercise of Company
Options outstanding on the date of this Agreement and/or the Company Warrant);
(B) any sale, lease, exchange, transfer, license, acquisition or disposition of
a significant or material portion of the assets of the Company; or (C) any
liquidation or dissolution of the Company.
(c) In addition to the obligations of the Company set forth in paragraphs (a)
and (b) of this Section 5.5, the Company as promptly as practicable, shall
advise Parent of any request received by the Company for non-public information
which the Company reasonably believes would lead to a Company Acquisition
Proposal or of any Company Acquisition Proposal, the material terms and
conditions of such request, Company Acquisition Proposal or inquiry, and the
identity of the person or group making any such request, Company Acquisition
Proposal or inquiry.
5.6 Public Disclosure. The Company will not issue any press release or make
any public statement without the prior consent of Parent (not to be unreasonably
withheld).
5.7 Legal Requirements. Each of Parent, Merger Sub and the Company will
take all reasonable actions necessary or desirable to comply promptly with all
legal requirements which may be imposed on them with respect to the consummation
of the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement.
5.8 Third Party Consents. As soon as practicable following the date hereof,
the Company will use its commercially reasonable efforts to obtain all consents,
waivers and approvals of all Governmental Entities and third parties under any
of the Facility Leases, Contracts, Permits or otherwise required to be obtained
in connection with the consummation of the transactions contemplated hereby.
5.9 Schedules; Supplements. Each party hereto shall promptly provide the
other parties with written notification (each a "Supplement") of any event or
occurrence or other information of any kind whatsoever necessary to maintain
this Agreement, such party's representations and warranties contained herein and
all other documents and writings furnished by such party pursuant to this
Agreement as true, correct and complete in all material respects at all times
prior to and including the Closing Date; provided, however, that no such
Supplement shall cure any breach of any representation or warranty set forth
herein or otherwise limit any rights or remedies available to the other parties
hereto.
5.10 Further Assurances. Subject to the respective rights and obligations
of Parent and the Company under this Agreement, each of the parties to this
Agreement will use its commercially reasonable efforts to effectuate the Merger
and the other transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement. Each party hereto, at
the reasonable request of another party hereto, will execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
5.11 Stock Options. At the Effective Time, Parent shall assume the Company
Stock Option Plan and each outstanding Company Option and any reference to the
Company in any such Company Stock Option Plan or Company Option shall mean
Parent. Each Company Option so assumed by Parent under this Agreement will
continue to have, and be subject to, the same terms and conditions of such
options as are in effect immediately prior to the Effective Time, except that
from and after the Effective Time (i) each assumed Company Option will be
exercisable pursuant to its terms for that number of whole shares of Parent
Common Stock that the holder of such Company Option (each, an "Option Holder")
would have been entitled to receive pursuant to the Merger had such Company
Option been exercised immediately prior to the Effective Time (giving full
effect to Section 8.4), as calculated in accordance with Exhibit A, and (ii) the
per share exercise price for the shares of Parent Common Stock issuable upon
exercise of each assumed Company Option shall be adjusted so that the aggregate
exercise price for all shares of Parent Common Stock issuable upon exercise of
such Company Option is equal to the aggregate exercise price for all shares of
Company Common Stock issuable upon exercise of such Company Option immediately
prior to the Effective Time (subject to further adjustment, as appropriate and
consistent with the foregoing, upon any release of the Holdback Shares). All
Company Options held by Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx shall be cancelled
and terminated prior to the Closing. Parent agrees to file a registration
statement on Form S-8 for the shares of Parent Common Stock issuable with
respect to assumed Company Options as soon as is reasonably practicable after
the Effective Time.
5.12 Tax-Free Reorganization. Parent and the Company will each use its
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368 of the Code.
5.13 Nasdaq Qualification. Parent agrees to cause the shares of Parent
Common Stock issuable, and those required to be reserved for issuance, in
connection with this Agreement and the Merger to be authorized for trading on
the Nasdaq, upon official notice of issuance.
5.14 Employees. The Company shall use all reasonable business efforts to
retain the services of its employees through the Effective Date. Prior to or at
the Effective Date, Parent, in its sole discretion, may offer or cause the
Surviving Corporation to offer employment to any or all of such employees upon
such compensation and other terms and conditions as shall be determined by
Parent in its sole discretion. With respect to any Company employee (a
"Transferred Employee") offered employment by Parent or the Surviving
Corporation following the Merger, the Transferred Employees (i) shall be
entitled to participate in the employee benefit plans of Parent and its
subsidiaries upon substantially the same terms and conditions as other similarly
situated employees, subject to such limitations as may be provided by applicable
law or by the terms of such benefit plans, and (ii) shall be given credit for
time worked for the Company for purposes of determining their participation and
vesting under the applicable employee benefit plans and programs. In connection
with the foregoing, Parent or the Surviving Corporation, as applicable, may use
different benefits providers, establish new benefit plans, or use its existing
plans in respect of the Transferred Employees.
5.15 Personal Guaranties. Following the Effective Time, Parent shall
indemnify Xxxxxx X. Xxxxxx, Xx. and Xxxxxxx X. Xxxxxx for any amounts becoming
payable by either such individual after the Effective Time as a result of the
existence of any guaranty of Xx. Xxxxxx or Xx. Xxxxxx with respect to the
obligations of the Company, to the extent the existence of any such guaranty is
disclosed in the Company Schedules.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been approved
and adopted by the requisite vote under applicable law by the shareholders of
the Company.
(b) No Order. No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(c) Governmental Approvals. The parties shall have received from any and
all Governmental Entities having jurisdiction over the transactions contemplated
by this Agreement such consents, authorizations and approvals as are necessary
for the consummation thereof and all applicable waiting or similar periods
required by law shall have expired.
6.2 Additional Conditions to Obligations of the Company. The obligation of
the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement and shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as if made on the Closing Date, except for those
representations and warranties which address matters only as of a particular
date other than the date hereof (which representations shall have been true and
correct as of such particular date).
(b) Agreements and Covenants. Parent and Merger Sub shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them at or prior to the
Closing (including all deliveries required under Section 1.10(b)).
(c) Nasdaq Qualification. The shares of Parent Common Stock issuable
pursuant to the Merger and required to be reserved for issuance in connection
pursuant to this Agreement shall have been authorized for trading on the Nasdaq
upon official notice of issuance.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and shall be true and correct
in all material respects on and as of the Closing Date with the same force and
effect as if made on and as of the Closing Date, except for those
representations and warranties which address matters only as of a particular
date other than the date hereof (which representations shall have been true and
correct as of such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties for purposes of
this Section 6.3(a), any Supplements to the Company Schedules made or purported
to have been made after the date of this Agreement shall be disregarded).
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
(including all deliveries required under Section 1.10(a)).
(c) Lender's Consent. Parent shall have obtained all consents and waivers
to this Agreement and the transactions contemplated hereby required under that
First Amended and Restated Credit Agreement dated as of January 19, 1999 and
Amended and Restated as of July 9, 2001 among Parent and certain of its
subsidiaries, as Borrowers, the lenders named therein, First Union National
Bank, as Administrative Agent and UBS Warburg LLC, as Syndication Agent, and
arranged by First Union Securities, Inc. on terms satisfactory to Parent (the
"Credit Facility").
(d) Third Party Consents. All Third Party Consents shall have been duly
obtained, and such consents, authorizations or approvals shall be in form and
substance satisfactory to Parent and without condition, cost or expense to
Parent, the Company or the Surviving Corporation.
(e) Key Employees. Each of Xxxxxx X. Xxxxxx, Xx., Xxxxxxx X. Xxxxxx and
Xxxxx X. Xxxxxx shall have accepted employment with the Parent or Surviving
Corporation and agreed to the termination of any existing employment agreements
or arrangements covering such individuals, on written terms and conditions
reasonably satisfactory to Parent.
(f) Repurchase of Shares. The Company shall have repurchased the
Non-Accredited Investor Shares and the Company Preferred Stock in accordance
with Section 5.2 of this Agreement and otherwise on terms reasonably
satisfactory to Parent.
(g) Cancellation of Options. All Company Options held by Xxxxxx X. Xxxxx
and Xxxxxx X. Xxxxx shall have been surrendered, cancelled and terminated in all
respects.
(h) Issuance of Parent Common Stock. The issuance of the shares of Parent
Common Stock to be issued and delivered pursuant to the Merger shall, in the
reasonable judgment of Parent, be exempt from registration under the Securities
Act and all applicable state securities laws.
(i) No Material Adverse Change. From the date hereof through the Closing
Date, there shall have been no material adverse change in the assets or the
liabilities, the business or condition (financial or otherwise), operations or
prospects of the Company.
(j) Dissenters' Rights. No Shareholder of the Company shall have demanded
or perfected the right to an appraisal under the Dissenters' Provisions.
(k) Other. On or prior to Closing Date, the Company shall have delivered
such other documents, agreements and certificates required to be delivered by
the Company hereunder or as may have been reasonably requested by Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Closing, whether before or after approval of the Merger by the shareholders of
the Company:
(a) by mutual written consent duly authorized by the Boards of Directors of
Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have been
consummated by June 30, 2002; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose breach of any representation, warranty, covenant or agreement set forth
herein has been a principal cause of or resulted in the failure of the Merger to
occur on or before such date;
(c) by either the Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree or ruling is final and nonappealable;
(d) by the Company, upon a breach of any representation, warranty, covenant
or agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either case
such that the conditions set forth in Section 6.2(a) or 6.2(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided, that if such inaccuracy in Parent's
representations and warranties or breach by Parent is curable by Parent through
the exercise of its commercially reasonable efforts, then the Company may not
terminate this Agreement under this Section 7.1(d) for fifteen (15) days after
delivery of written notice from the Company to Parent of such breach, provided
Parent continues to exercise commercially reasonable efforts to cure such breach
(it being understood that the Company may not terminate this Agreement pursuant
to this paragraph (d) if such breach by Parent is cured during such fifteen
(15)-day period);
(e) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or 6.3(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided, that if such inaccuracy in the
Company's representations and warranties or breach by the Company is curable by
the Company through the exercise of its commercially reasonable efforts, then
Parent may not terminate this Agreement under this Section 7.1(e) for fifteen
(15) days after delivery of written notice from Parent to the Company of such
breach, provided the Company continues to exercise commercially reasonable
efforts to cure such breach (it being understood that Parent may not terminate
this Agreement pursuant to this paragraph (e) if such breach by the Company is
cured during such fifteen (15)-day period); or
(f) by Parent if the Company shall have breached the provisions of Section
5.5(a) of this Agreement.
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) for the
provisions of Section 5.4(b), this Section 7.2, Section 7.3 and Article IX, each
of which shall survive the termination of this Agreement, and (ii) nothing
herein shall relieve any party from liability for any material breach of this
Agreement.
7.3 Fees and Expenses. Except as set forth in this Section 7.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto 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 made to such
party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party 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 an instrument
in writing signed on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
ARTICLE VIII
RECOVERY OF LOSSES
8.1 Survival of Representations.
(a) The representations and warranties set forth in Article II of this
Agreement and Parent's right of recovery with respect thereto shall survive the
Closing until the date that is one year after the Effective Time.
(b) The representations and warranties set forth in Article III of this
Agreement shall terminate upon and shall not survive the Closing.
(c) The expiration of any representation or warranty in accordance with the
provisions of Section 8.1(a) shall not affect Parent's right to pursue a claim
for recovery based upon a breach of such representation or warranty made prior
to such expiration or any claim based upon fraud in connection with this
Agreement or the transactions contemplated thereby.
8.2 Right of Recovery. Subject to the terms and conditions of this Article
VIII, after the Closing Parent may recover, by exercising its right of set-off
pursuant to Section 8.4, the amount of any and all direct or indirect claims,
losses, liabilities, Taxes, damages (including, without limitation, special and
consequential damages), costs (including court costs) and expenses (including,
without limitation, all reasonable attorneys' and accountants' fees and
expenses) (collectively "Losses") suffered or incurred by Parent and/or its
affiliates, officers, directors, stockholders, employees, representatives,
successors and assigns, arising out of or in connection with:
(a) any breach, inaccuracy or untruth of any representation or warranty
made by the Company contained in this Agreement or in any certificate delivered
by the Company in connection with this Agreement (without giving effect to any
Supplements or any qualifications as to materiality contained in such
representations and warranties), whether such breach, inaccuracy or untruth
exists or is made on the date of this Agreement or as of the Closing;
(b) any breach of or noncompliance with any covenant or agreement of the
Company contained in this Agreement; and/or
(c) any action, decree, suit, claim, counterclaim proceeding or
investigation before any court, governmental or regulatory agency, mediator or
arbitrator directly or indirectly involving the Company, to the extent arising
out of actions taken or facts existing before the Closing or arising out of or
related to the transactions contemplated by this Agreement.
8.3 Company Agent.
(a) The Company agrees that Xxxxxx X. Xxxxxx, Xx. shall be and hereby is
constituted and appointed as agent and attorney-in-fact (the "Company Agent")
for and on behalf of the Company (and to represent the interests of the
Shareholders) from and after the Closing (i) to give and receive notices and
communications, (ii) to receive notifications of the number of Holdback Shares
which shall be retained by Parent and forfeited by the Shareholders in
satisfaction of claims by Parent for Losses or in respect of the Adjustment
Amount, (iii) to object to such notifications, (iv) to agree to, negotiate,
enter into settlements and compromises of, and demand arbitration and comply
with orders of courts and awards of arbitrators with respect to such claims, and
(v) to take all actions necessary or appropriate in the judgment of the Company
Agent for the accomplishment of the foregoing. Such agency may be changed by the
Shareholders entitled to receive a majority of the Holdback Shares from time to
time upon not less than ten (10) days' prior written notice to Parent. No bond
shall be required of the Company Agent, and the Company Agent shall receive no
compensation for his services. Notices or communications to or from the Company
Agent shall constitute notice to or from the Company and each of the
Shareholders.
(b) A decision, act, consent or instruction of the Company Agent shall be
final, binding and conclusive upon the Company and the Shareholders, and Parent
may rely upon any decision, act, consent or instruction of the Company Agent
pursuant to this Section 8.3 as being the decision, act, consent or instruction
of the Company and all Shareholders. Parent is hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Company Agent.
8.4 Holdback Shares.
(a) The parties hereby agree that 31,000 shares of the Parent Common Stock
(the "Holdback Shares"), out of the total number of shares of Parent Common
Stock to be issued to the holders of Company Common Stock pursuant to the Merger
and upon exercise of the Company Options and the Substitute Warrant following
the Effective Time, shall be held in escrow by Parent and available for use to
satisfy claims for recovery by Parent under this Article VIII and Section
1.11(e). In the event Parent is entitled to recover any amount in respect of the
Adjustment Amount pursuant to Section 1.11(e) or any Losses pursuant to Section
8.2, Parent may set off such amount against the Holdback Shares. In each such
event, the number of Holdback Shares deliverable by Parent to the Shareholders
hereunder shall be reduced by an amount equal to the quotient obtained by
dividing (i) the amount of the applicable set-off, by (ii) the Closing Stock
Price. Any Holdback Shares which are so applied to Parent's rights of recovery
shall be retained by Parent and cancelled and shall not be delivered to the
Shareholders or reserved for issuance upon exercise of any assumed Company
Options or the Substitute Warrant. The number of Holdback Shares to be applied
against any recovery claim and/or released to the Shareholders pursuant to this
Section 8.4 shall be subject to appropriate adjustments for any stock split,
reverse stock split, stock dividend, recapitalization or similar event.
(b) Notwithstanding the foregoing, Parent shall not be entitled to exercise
any right of recovery or set-off arising under Section 8.2(a) until the
aggregate amount of Losses for which Parent would otherwise be entitled to
recovery under Section 8.2(a) exceeds or is reasonably expected to exceed
$50,000 (the "Basket"), at which point Parent shall be entitled to recovery of
all such Losses, including all Losses included in reaching the Basket. The
foregoing limitation shall not apply to (i) any Losses arising out of fraud on
the part of the Company or any Shareholder, (ii) any Losses arising out of any
breach of any of the representations and warranties set forth in Sections 2.2,
2.4, 2.5 or 2.26 of this Agreement, or (iii) any right of recovery arising under
Section 1.11(e), 8.2(b) or 8.2(c) of this Agreement.
(c) Any remaining Holdback Shares, after application of all set-offs and
deductions provided for in this Section 8.4, less the number of Holdback Shares
which may be required to satisfy any then pending claims by Parent for recovery
pursuant to this Article VIII or Section 1.11(e) ("Recoverable Claims") which
have not been finally resolved in accordance with the terms of this Agreement or
with respect to which Parent has not yet received full recovery, plus any
additional Holdback Shares to which the Shareholders are entitled pursuant to
Section 1.11(e), shall be released by Parent and delivered to the Shareholders
(or, as appropriate, reserved for future issuance upon exercise of then
outstanding assumed Company Options and the Substitute Warrant) (pro rata in
accordance with Exhibit A), subject to Section 1.5(f), within twenty (20)
business days following the first anniversary of the Effective Time (the
"Release Date").
(d) The amount that may be required to satisfy Recoverable Claims pending
on the Release Date shall be reasonably determined by Parent in good faith. Any
Holdback Shares so retained by Parent shall, after application of all set-offs
and deductions provided for herein, be released by Parent and delivered to the
Shareholders (or, as appropriate, reserved for future issuance upon exercise of
then outstanding assumed Company Options and the Substitute Warrant) (pro rata
in accordance with Exhibit A), subject to Section 1.5(f), promptly following
resolution of all Recoverable Claims.
8.5 Sole Remedy. From and after the Closing, this Article VIII sets forth,
and Parent's right of set-off against the Holdback Shares shall be, the sole and
exclusive remedy and recourse of Parent arising from any Losses or any other
claim, cause of action or right of any nature against the Company or any
Shareholder in connection with this Agreement, except for Losses arising from
fraud on the part of the Company or any Shareholder or, with respect to any
Shareholder, any inaccuracy in any of the representations and warranties set
forth in Section 2.2.
8.6 Procedures.
(a) Whenever Parent is entitled to recovery under this Article VIII, Parent
shall promptly notify the Company Agent of the claim and, when known, the facts
constituting the basis for such claim. Any failure to provide such notice shall
not affect Parent's right to recovery hereunder, unless, and only to the extent
that, such failure has materially and adversely affected the Company Agent's
ability to defend a Third Party Claim (as defined below).
(b) Upon receipt by the Company Agent of the notice of claim and the facts
constituting the basis for such claim as provided in subparagraph (a) of this
Section 8.6, Parent and the Company Agent shall negotiate in good faith to reach
an agreement as to the validity and amount of such claim. If such an agreement
has not been reached within thirty (30) days of the aforesaid notice, Parent and
the Company Agent shall submit the claim to be settled by arbitration in the
City of Atlanta, State of Georgia, pursuant to the commercial arbitration rules
then in effect of the American Arbitration Association (or at any time or at any
other place or under any other form of arbitration mutually acceptable to the
parties so involved). Any award rendered shall be final and conclusive upon the
parties, and a judgment thereon may be entered in the highest court of the
forum, state or federal, having jurisdiction. Any award may include the expenses
of arbitration as well as the cost of counsel and experts. The provisions of
this Section 8.6(b) shall in all respects be governed by the Federal Arbitration
Act.
(c) The Company Agent shall not settle or compromise or voluntarily enter
into any binding agreement to settle or compromise, or consent to entry of any
judgment arising from, any claim or proceeding by a person who is not a party to
this Agreement with respect to which Parent is entitled to recovery under this
Article VIII (a "Third Party Claim") except with the prior written consent of
Parent, which will not be unreasonably withheld. With respect to any Third Party
Claim, the Company Agent may at the expense of the Shareholders undertake the
defense thereof by representatives of its own choosing reasonably satisfactory
to Parent. Parent shall cooperate in the defense of any Third Party Claim, to
the extent reasonably requested by the Company Agent, and any expenses incurred
by Parent as a result thereof shall constitute recoverable Losses hereunder.
Parent shall have the right to participate in any such defense of a Third Party
Claim with advisory counsel of its own choosing. Such participation shall be at
the expense of Parent, unless Parent reasonably determines that, because of a
conflict of interest or otherwise, the Company Agent is not adequately
representing or may not adequately represent its interests, in which case the
reasonable costs of such participation by Parent shall constitute recoverable
Losses hereunder. In the event the Company Agent, does not notify Parent of its
intent to defend a Third Party Claim within ten (10) days of receipt of notice
thereof or, after half of the period for the presentation of a defense against
any such Third Party Claim, fails to begin to diligently defend it (or at any
time thereafter ceases to diligently defend it), Parent will have the right to
undertake and control the defense, compromise or settlement of such Third Party
Claim, and any expenses incurred by Parent resulting therefrom shall constitute
recoverable Losses hereunder.
8.7 No Limitation. Nothing contained herein shall prevent Parent from
making a claim for a Loss hereunder notwithstanding its Knowledge of the Loss or
possibility of the Loss on, prior to, or after the Closing Date, or any waiver
by any party with respect thereto.
8.8 Option and Warrant Holders. Solely for purposes of this Article VIII
(and no other provisions of this Agreement), a reference to the "Shareholders"
shall include any and all Option Holders and/or the Warrant Holder, as
applicable, that exercises any Company Options or the Substitute Warrant after
the Effective Time.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if and when delivered personally or by
commercial overnight delivery service, or sent via facsimile (receipt confirmed)
to the parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):
(a) if to the Company, to:
XxxxxxXxxx.xxx, Inc.
000 Xxxxx Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
Fax No.: (000) 000-0000
with copies to:
Thrasher, Whitley, Hampton & Xxxxxx
Five Concourse Parkway, Suite 2150
Xxxxxxx, XX 00000
Attention: H. Xxxxx Xxxxxxxx, XX
Fax No.: (000) 000-0000
(b) if to the Company Agent, to:
Xxxxxx X. Xxxxxx, Xx.
______________________________
______________________________
______________________________
______________________________
with copies to:
Thrasher, Whitley, Hampton & Xxxxxx
Five Concourse Parkway, Suite 2150
Xxxxxxx, XX 00000
Attention: H. Xxxxx Xxxxxxxx, XX
Fax No.: (000) 000-0000
(c) if to the Parent or Merger Sub, to:
Matria Healthcare, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attention: General Counsel
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxxx LLP
0000 XxxxxxxXxxx Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, III
Fax No.: (000) 000-0000
9.2 Interpretation; Knowledge; Material Adverse Effect.
(a) When a reference is made in this Agreement to Exhibits or Schedules,
such reference shall be to an Exhibit or Schedule to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "the business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity.
(b) For purposes of this Agreement, the matters as to which a party has
"Knowledge" shall be deemed to include all matters of which the applicable
party, through the officers and directors of such party, actually knew or should
have known after reasonable inquiry.
(c) For purposes of this Agreement, the term "Material Adverse Effect" when
used in connection with a party means any change, event, violation, inaccuracy,
circumstance or effect that is or is reasonably likely to be materially adverse
to the business, assets, capitalization, financial condition, prospects or
results of operations of such entity and its subsidiaries taken as a whole; or
to the ability of such party to execute and deliver this Agreement or perform
its obligations hereunder.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement. This Agreement and the documents and instruments and
other agreements among the parties hereto as contemplated by or referred to
herein, including the Exhibits and the Company Schedules, constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
9.5 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.6 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this 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 Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties hereto; provided, however, that Parent may assign its
rights under this Agreement as collateral security to any lender. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed by their duly authorized respective officers, as of the
date first written above.
MATRIA HEALTHCARE, INC.
By:
Name:
Title:
MRDC ACQUISITION CORP.
By:
Name:
Title:
XXXXXXXXXX.XXX, INC.
By:
Name:
Title:
