AGREEMENT AND PLAN OF MERGER
among
DYNAMIC ASSOCIATES, INC.
"Dynamic"
DYNAMIC ACQUISITION CORPORATION
"DAC"
ACS2, INC.
"ACS2"
and
ADVANCED CLINICAL SYSTEMS, INC.
"Advanced"
2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered
into as of March 30, 1999, by and among DYNAMIC ASSOCIATES, INC., a
Nevada corporation ("Dynamic"), DYNAMIC ACQUISITION CORPORATION, a
Nevada corporation ("DAC"), ACS2, INC., a Delaware corporation
("ACS2") and ADVANCED CLINICAL SYSTEMS, INC., a Delaware
corporation ("Advanced").
R E C I T A L S:
WHEREAS, the parties believe that a business combination
between ACS2 and the DAC is in the best interest of the parties to
this Agreement and their respective stockholders; and
WHEREAS, the parties hereto have entered into that certain
Capital Contribution Agreement of even date herewith (the
"Contribution Agreement") pursuant to which ACS2 and Dynamic
contributed on a tax-free basis under Section 721 of the Internal
Revenue Code of 1986, as amended (the "Code"), their respective
subsidiaries to Advanced-Dynamic, LLC (the "Contribution"); and
WHEREAS, the respective Boards of Directors and shareholders
of the parties have approved, or will meet to consider and approve,
the merger of ACS2 with and into DAC, upon the terms and conditions
set forth in this Agreement and Plan of Merger and in accordance
with the Delaware General Corporation Law and Chapter 78 "Private
Corporations" and Chapter 92A "Mergers and Exchanges of Interest"
of the Nevada Revised Statutes; and
WHEREAS, each party hereto wishes to adopt this Agreement and
Plan of Merger, together with the forms of Certificates of Merger
attached hereto as Exhibit A (the "Certificates of Merger") as a
"plan of reorganization" within the meaning of Section 368(a) of
the Code, and to cause the Merger to qualify as a reorganization
under the provision of Section 368(a)(1)(A) of the Code, whereby
each share of capital stock of ACS2 (the "ACS2 Common Stock") will
be canceled and whereby DAC will be the surviving entity of a
merger with ACS2.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound hereby,
agree as follows:
ARTICLE I. THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.3 hereof) and subject to and upon the terms and conditions of
this Agreement, ACS2 will be merged with and into DAC (the
"Merger"). Following the Merger, DAC will continue as the
surviving
3
entity under the name "Dynamic Acquisition Corporation"
and the separate corporate existence of ACS2 will cease. (DAC and
ACS2 are sometimes referred to collectively herein as the
"Constituent Companies").
1.2 Effects of the Merger. At the Effective Time, DAC will
be a wholly owned subsidiary of Dynamic. At the Effective Time,
DAC will, without any other action, possess all the rights,
privileges, powers and franchises, of a public as well as of a
private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Companies; and
all rights, privileges, powers and franchises of each of the
Constituent Companies, and all property, real, personal and mixed,
and all debts due to either of the Constituent Companies on
whatever account, will be vested in DAC; and all property, rights,
privileges, powers and franchises, and all and every other interest
will be thereafter as effectually the property of DAC as they were
of the Constituent Companies, and the title to any real estate
vested by deed or otherwise in the Constituent Companies will not
revert or be in any way impaired by reason of the Merger; but all
rights of creditors and all liens upon any property of either of
the Constituent Companies will be preserved unimpaired, and all
debts, liabilities and duties of either of the Constituent
Companies will thenceforth attach to DAC, and may be enforced
against it to the same extent as if said debts, liabilities and
duties had been incurred or contracted by it.
1.3 Closing; Effective Time and Transaction Effective Date.
The closing of the Merger (the "Closing") will take place on a
date to be specified by the parties, but in no event more than ten
(10) business days following approval of the Merger by the
shareholders of Dynamic (the "Closing Date"), subject to
satisfaction or waiver of the conditions set forth in this
Agreement, at the offices of Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner,
P.C., Nashville, Tennessee. The Merger will become effective at
the time of the filing of the Certificates of Merger with the
offices of the Secretaries of State of the States of Delaware and
Nevada in accordance with the provisions of applicable law, which
Certificates of Merger will be so filed as soon as practicable
after the Closing. The date and time when the Merger will become
effective shall be at such time as the Certificates of Merger are
duly filed with the Delaware and Nevada Secretaries of State or
such later date as mutually agreeable to the Constituent Companies
and specified in the Certificates of Merger (the "Effective Time").
1.4 Certificate of Incorporation. The Articles of
Organization and Bylaws of DAC in effect immediately prior to the
Effective Time will remain the Articles of Organization and Bylaws
of DAC until amended in accordance with the provisions of the
applicable corporate law.
1.5 Directors and Officers. The officers and directors of
DAC immediately prior to the Effective Time will, after the
Effective Time, continue to be the officers and directors of DAC
without change, until their successors have been duly elected and
qualified in accordance with the Articles of Incorporation and
Bylaws of DAC.
4
ARTICLE II. STATUS AND CONVERSION OF SECURITIES;
MERGER CONSIDERATION
2.1 Conversion of Securities. At the Effective Time, each
share of ACS2 Common Stock issued and outstanding immediately prior
to the Effective Time will, by virtue of the Merger and without any
action on the part of the holders thereof, automatically be
canceled, retired and extinguished, and each outstanding share of
ACS2 Common Stock will be converted into the right to receive an
aliquot portion of the Merger Consideration (as defined in Section
2.2 hereof) as described below.
2.2 Merger Consideration.
(a) As of the Effective Time, each issued and outstanding
share of ACS2 Common Stock held by the Stockholders of ACS2
(collectively, the "Original ACS2 Stockholders"), comprising all
of the issued and outstanding shares of ACS2 Common Stock as of the
Effective Time, will be converted into a right to receive a pro-
rata portion of the "Merger Consideration", which is defined as 22,
473, 413 shares of the Common Stock of Dynamic plus a number of
shares of Dynamic Common Stock equal to 55% of the number of shares
of Dynamic Common Stock held by or issuable to Genesis (defined
below) pursuant to Section 2.2(b). Each Original ACS2 Stockholder
will be entitled to receive a percentage of the Merger
Consideration equal to the number of shares of ACS2 Common Stock
owned by such holder prior to Closing of the Merger divided by the
total number of shares of ACS2 Common Stock issued and outstanding
at such Closing. Since as of the Effective Time all shares of the
ACS2 Common Stock will no longer be outstanding, will automatically
be cancelled and retired, and will cease to exist, each holder of
shares of ACS2 Common Stock will cease to have any rights with
respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Dynamic
Common Stock to be issued or paid in consideration therefor upon
surrender of such certificate in accordance with Section 2.3. The
parties intend and agree that upon Closing, the Merger
Consideration due to the Original ACS2 Stockholders will
constitute, in the aggregate, a number of shares of Dynamic Common
Stock equal to fifty-five percent (55%) of the total Dynamic Common
Stock issued and outstanding immediately after the Effective Time
plus 55% of any Dynamic Stock issued to Genesis or to which Genesis
may be entitled pursuant to Section 2.2(b).
(b) Dynamic is a party to that certain May 19, 1998 letter
agreement with Genesis Merchant Group Securities LLC ("GMGS")
pursuant to which Dynamic may owe GMGS a fee upon consummation of
the transactions contemplated by the Contribution Agreement and
this Agreement. Dynamic has issued a Warrant for the Purchase of
Shares of Common Stock to GMGS covering 250,000 shares of Dynamic
Common Stock and subject to adjustment (the "Genesis Warrant").
Dynamic is party to that certain July 13, 1998 letter agreement
with JWGenesis Capital Markets ("JWG") pursuant to which Dynamic
may owe JWG a fee upon consummation of the transactions
contemplated by the Contribution Agreement and this Agreement.
GMGS, JWG and their affiliates are collectively referred to in this
Agreement as "Genesis". Dynamic shall, in consultation with ACS2,
attempt to settle its obligations to Genesis prior to Closing on
terms and conditions acceptable to Dynamic and ACS2. The parties
anticipate that such settlement will include the payment
5
of a fee to Genesis and the cancellation of the Genesis Warrant and
any other obligation to issue securities of Dynamic to Genesis. Any
fee payable to Genesis shall be payable by Dynamic and shall not
affect the Merger Consideration. In the event the Genesis Warrant
is not canceled or Genesis is or becomes entitled to any Dynamic
Common Stock, the Merger Consideration shall be increased by that
number of shares of Dynamic Common Stock equal to 55% of the number
of shares of Dynamic Common Stock to which Genesis is or becomes
entitled.
2.3 Delivery of Merger Consideration. Dynamic shall deliver
the Merger Consideration to each holder of ACS2 Common Stock within
five (5) business days of Closing or within five (5) business days
after surrender of certificates (the "Certificates") representing
all shares of ACS2 Common Stock owned by such individual, whichever
is later. By accepting delivery of the Merger Consideration, each
such holder will be deemed to have represented to Dynamic that such
stockholder has no present intention of selling or otherwise
disposing of any of its interest in the Dynamic Common Stock
received as part of the Merger Consideration, except as
contemplated under that certain Registration Rights Agreement
referenced in Section 2.8.
(1) Certificates. The Certificates shall forthwith be
canceled upon surrender. Until surrendered as contemplated by this
Section 2.3, each such Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive
upon such surrender that pro rata portion of the Merger
Consideration applicable thereto. No interest will be paid or will
accrue on any portion of the Merger Consideration. In the event
any such Certificate is not duly surrendered within six (6) months
of Closing, the holder thereof will automatically forfeit all
rights therein, including the right to receive any Merger
Consideration, and any obligation of Dynamic or either Constituent
Company with respect to such Certificate will be rendered null and
void.
(2) No Further Ownership Rights in ACS2 Common Stock.
All shares of Dynamic Common Stock issued upon the surrender for
exchange of the Certificates in accordance with the terms of this
Article II shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to ACS2 Common Stock
theretofore represented by such Certificates, and there shall be no
further registration or transfer of the shares of ACS2 Common Stock
after the Effective Time.
(3) No Fractional Shares. No certificates or scrip
representing fractional shares of Dynamic Common Stock shall be
issued upon the surrender of certificates of ACS2 Common Stock for
exchange, and such fractional share interests will not entitle the
owner thereof to vote or to any rights as a stockholder of Dynamic.
Notwithstanding any other provision of this Agreement, each holder
of ACS2 Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of
Dynamic Common Stock (after taking into account all Certificates
delivered by such holder) will promptly receive, in lieu thereof,
cash (without interest) in an amount equal to such fractional part
of a share of Dynamic Common Stock multiplied by the per share
closing price of such Dynamic Common Stock as reported on the
Nasdaq Over-The-Counter Bulletin Board on the date of the Effective
Time.
6
(4) Lost Certificates. In the event any Certificates
have been lost, stolen or destroyed, upon the making of an
affidavit of that fact, in form and substance reasonably
satisfactory to Dynamic, by the person claiming such certificate to
be lost, stolen or destroyed, Dynamic will issue in exchange for
such lost, stolen or destroyed Certificate the shares of Dynamic
Common Stock and cash in lieu of fractional shares, deliverable in
respect thereof pursuant to this Agreement.
2.4 Escrow. Notwithstanding anything to the contrary
contained in this Article II, 4,086,073 shares of Dynamic Common
Stock (the "Escrow Stock") will not be distributed to the Original
ACS2 Stockholders, but will, instead, be placed in escrow subject
to the terms of that certain escrow agreement to be entered into at
Closing among Dynamic, the Original ACS2 Stockholders, ACS2 and, as
escrow agent, Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C., the form
of which is attached hereto as Exhibit 2.4 (the "Escrow
Agreement").
2.5 [Omitted]
2.6 Cancellation of Treasury Shares. Any authorized but
unissued shares of ACS2 Common Stock as of the Effective Time shall
automatically be canceled and retired and shall cease to exist, and
no Dynamic Common Stock, cash or other consideration will be
delivered in exchange therefor.
2.7 Securities Exemptions. Dynamic hereby represents,
warrants and covenants that all the shares of Dynamic Common Stock
comprising the Merger Consideration (including but not limited to
the Escrow Stock) will be issued pursuant to an exemption from
registration provided by Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act"). Each share certificate
representing the Dynamic Common Stock so issued will be endorsed
with a legend stating that the shares have been issued pursuant to
an exemption from registration provided by the Securities Act and
may not be sold without an exemption from registration or an
effective registration statement.
2.8 Registration Rights. One-half (1/2) of the shares of
Dynamic Common Stock comprising the Merger Consideration will be
subject to a Registration Rights Agreement in favor of the Original
ACS2 Stockholders, the form of which is attached hereto as Exhibit
2.8.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF ADVANCED
As an inducement to the other parties hereto to enter into
this Agreement and to consummate the Merger, Advanced represents
and warrants to each such party, which representations will be true
and correct at Closing, as follows. Any representation, warranty
or covenant of or relating to Advanced is hereby deemed to also be
a representation, warranty or covenant of or relating to any and
all of the Advanced Subsidiaries (as defined in Section 3.1), as
applicable, but not of ACS2.
7
3.1 Organization, Qualification and Authority. Advanced
is a corporation duly organized, validly existing and in good
standing in the State of Delaware, and is not required to be
qualified to do business as a foreign corporation in any other
jurisdiction. Advanced does not own stock or equity interests in
and does not control, directly or indirectly, any corporation,
partnership, joint venture, association or business organization
other than those entities listed on Exhibit 3.1 (collectively, the
"Advanced Subsidiaries"). Except as set forth on Exhibit 3.1, all
outstanding shares of capital stock of the entities listed on
Exhibit 3.1 are owned by Advanced, free and clear of all liens,
charges, encumbrances, claims and options of any nature. Each
Advanced Subsidiary is a corporation duly organized, validly
existing, in good standing and duly qualified as a foreign
corporation in the respective jurisdictions set forth in Exhibit
3.1 attached hereto. Since the date of its organization and
incorporation, Advanced has consistently observed and operated
within the corporate formalities of the jurisdiction in which it is
incorporated and/or conducts its business, and has consistently
observed and complied with the general corporation law of such
jurisdiction. Advanced has the full corporate power and authority
to own, lease and operate its properties and assets as presently
owned, leased and operated and to carry on its business as it is
now being conducted. Subject to obtaining certain third party
consents, Advanced has the full right, power and authority to
execute, deliver and carry out the terms of this Agreement and all
documents and agreements necessary to give effect to the provisions
of this Agreement. Subject to obtaining certain third party
consents, the execution, delivery and consummation of this
Agreement and all other agreements and documents executed in
connection herewith by Advanced have been duly authorized by all
necessary corporate action on the part of Advanced and no other
action on the part of Advanced or any other person or entity is
necessary to authorize the execution, delivery and consummation of
this Agreement and all other documents and agreements executed in
connection herewith. This Agreement and all other agreements and
documents executed in connection herewith by Advanced, upon due
execution and delivery thereof, will constitute the valid and
binding obligations of Advanced, enforceable in accordance with
their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity.
3.2 Capitalization and Stock Ownership
(1) Common Stock. The authorized capital stock of
Advanced consists of ten million (10,000,000) shares, $0.01 par
value, of common stock. Assuming each former Advanced Stockholder
converts their shares into ACS2 Common Stock and assuming each
holder of an Advanced Option, Warrant or SAR converts such interest
as contemplated by the Contribution Agreement, ACS2 will hold
1,625,000 shares of Advanced Stock which based on such assumptions,
constitutes all issued and outstanding securities of Advanced, and
is duly authorized, validly issued, fully paid and nonassessable.
The Advanced Stock is not subject to preemptive or comparable
rights. The Advanced Stock has been issued in accordance with all
applicable federal and state securities laws.
(2) Related Agreements. There are no voting trusts,
voting agreements, shareholders' agreements or other comparable
commitments or understandings to which
8
Advanced is a party or by which Advanced is bound with respect to
the voting of any Advanced Stock or capital stock of any other
ACS2 Subsidiary.
3.3 Absence of Default. Except as set forth on Exhibit
3.3, the execution, delivery and consummation of this Agreement,
and all other agreements and documents executed in connection
herewith, by Advanced will not constitute a violation of, be in
conflict with, or, with or without the giving of notice or the
passage of time, or both, result in a breach of, constitute a
default under, or create (or cause the acceleration of the maturity
of) any debt, indenture, obligation or liability or result in the
creation or imposition of any security interest, lien, charge or
other encumbrance upon any of the assets of Advanced under: (a)
any term or provision of the Certificate of Incorporation or Bylaws
of Advanced; (b) any material contract, lease, purchase order,
agreement, document or other commitment, oral or written, to which
Advanced is a party or by which Advanced is bound (collectively,
the "Advanced Contracts") (for purposes of categorizing contracts,
"material" being defined to exclude any contract, lease purchase
order, agreement, document or commitment which both (y) in terms of
payments, costs, services or other measure does not exceed
$10,000.00 in the aggregate, and (z) is terminable without penalty
upon ninety (90) days' written notice or less); (c) any judgment,
decree, order, writ, injunction or rule of any court or regulatory
authority; or (d) to the knowledge of Advanced, any law, statute,
rule or regulation to which Advanced is subject.
3.4 Other Representations. Except as modified by
consummation of the transactions contemplated under the
Contribution Agreement, those representations and warranties
contained in paragraphs 3.4 through 3.21 of the Contribution
Agreement, along with the corresponding exhibits thereto, are
incorporated herein by reference and deemed to be made again herein
by Advanced as if restated herein in their entirety.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ACS2
As an inducement to the other parties hereto to enter into
this Agreement and to consummate the Merger, ACS2 hereby represents
and warrants to each such party, which representations and
warranties will be true and correct at Closing, as follows:
4.1 Organization and Authority. ACS2 is a corporation duly
organized, validly existing and in good standing in the State of
Delaware, and is not required to be duly qualified to do business
as foreign corporation in any other jurisdiction. Since the date
of its organization and incorporation, ACS2 has consistently
observed and operated within the corporate formalities of the
jurisdiction in which it is incorporated, and has consistently
observed and complied with the general corporation law of such
jurisdiction. Subject to obtaining certain third party consents,
ACS2 has the full right, power and authority to execute, deliver
and carry out the terms of this Agreement and all documents and
agreements necessary to give effect to the provisions of this
Agreement. This Agreement and all other such agreements and
documents executed in connection herewith by ACS2, upon due
execution and delivery thereof, will constitute the valid and
binding obligations of ACS2, enforceable in accordance with their
respective terms, except as enforcement
9
may be limited by bankruptcy, insolvency, reorganization or
similar laws effecting creditors' rights generally and by general
principles of equity. ACS2 has taken all necessary actions as a
Member of the LLC to authorize the LLC to enter into and perform
the transactions contemplated by this Agreement. The authorized
capital stock of ACS2 consists of 10,000,000 shares of $0.01 par
value common stock. Assuming each former Advanced Stockholder
converts their shares into ACS2 common stock and assuming each
Holder of an Advanced Option, Warrant or SAR converts such
interest as contemplated by the Contribution Agreement, there
will be ___________ shares of issued and outstanding ACS2 Common
Stock which constitutes all issued and outstanding ACS2 securities
and is duly authorized, validly issued, fully paid and
non-assessable.
4.2 Absence of Default. Subject to obtaining certain third
party consents, the execution, delivery and consummation of this
Agreement, and all other agreements and documents executed in
connection herewith by ACS2 will not constitute a violation of, be
in conflict with, or, with or without the giving of notice or the
passage of time, or both, result in a breach of, constitute a
default under, or create (or cause the acceleration of the maturity
of) any debt, indenture, obligation or liability or result in the
creation or imposition of any security interest, lien, charge or
other encumbrance upon any of the assets of ACS2 under: (a) any
term or provision of the Certificate of Incorporation or Bylaws of
ACS2; (b) any contract, lease, purchase order, agreement, document
or other commitment, oral or written, to which ACS2 is a party or
by which ACS2 is bound; (c) any judgment, decree, order, writ,
injunction or rule of any court or regulatory authority; or (d), to
the knowledge of ACS2, any law, statute, rule or regulation to
which ACS2 is subject.
4.3 Broker's or Finder's Fee. ACS2 has not employed, and is
not liable for the payment of any fee to, any finder, broker or
similar person in connection with the transactions contemplated
under this Agreement.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF DYNAMIC
AND LLC
As an inducement to the other parties hereto to enter into
this Agreement and to consummate the Merger, and as an inducement
to the Original ACS2 Stockholders to approve of and consummate the
Contribution and Merger, Dynamic hereby represents and warrants to
each such party, which representations and warranties will be true
and correct at Closing, as follows. Any representation, warranty
or covenant of or relating to Dynamic is hereby deemed to also be
a representation, warranty or covenant of or relating to any and
all of the Dynamic Subsidiaries (as defined in Section 5.1).
5.1 Organization, Qualification and Authority. Dynamic is a
corporation duly organized, validly existing and in good standing
in the State of Nevada, and is not required to be qualified to do
business as a foreign corporation in any other jurisdiction.
Dynamic does not own stock or equity interest in and does not
control, directly or indirectly, any corporation, partnership,
joint venture, association or business organization other than the
LLC and the entities set forth on Exhibit 5.1 attached hereto
(collectively, the "Dynamic Subsidiaries"). Since the date of its
organization and incorporation or formation, Dynamic
10
has consistently observed and operated within the corporate
formalities of the jurisdictions in which it is organized and/or
conducts its business, has consistently observed and complied with
the general corporation law of such jurisdictions and has been duly
qualified to do business as a foreign corporation in all relevant
jurisdictions. All outstanding shares of capital stock of the
Dynamic Subsidiaries consist solely of common stock and have been
validly issued in accordance with all applicable federal and state
securities laws and are owned by Dynamic free and clear of all
liens, charges, encumbrances, claims and options of any nature.
Dynamic has the full right, power and authority to own, lease and
operate its properties and assets as presently owned, leased and
operated and to carry on its business as it is now being conducted.
Subject to obtaining requisite approval of the shareholders of
Dynamic, Dynamic has the full right, power and authority to
execute, deliver and carry out the terms of this Agreement and all
documents and agreements necessary to give effect to the provisions
of this Agreement, to consummate the transactions contemplated on
the part of Dynamic hereby, and to take all actions necessary to
permit or approve the actions Dynamic take in connection with this
Agreement. Subject to obtaining requisite approval of the
shareholders of Dynamic, the execution, delivery and consummation
of this Agreement and all other agreements and documents executed
in connection herewith by Dynamic have been duly authorized by all
necessary corporate action on the part of Dynamic. No other action
on the part of Dynamic, or any other person or entity is necessary
to authorize the execution, delivery and consummation of this
Agreement and all other agreements and documents executed in
connection herewith, other than such shareholder approval. This
Agreement and all other agreements and documents executed in
connection herewith by Dynamic, upon due execution and delivery
thereof, will constitute the valid and binding obligations of
Dynamic as the case may be, enforceable in accordance with their
respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity.
Dynamic has taken all necessary actions as a member of the LLC to
authorize the LLC to enter into and perform the transactions
contemplated by this Agreement.
5.2 Capitalization and Stock Ownership.
(1) Common Stock. The authorized capital stock of
Dynamic (the "Dynamic Common Stock") consists of 100,000,000
shares, $0.001 par value, of common stock, of which 18,386,929
shares are issued and outstanding as of the date hereof. The
Dynamic Common Stock, along with the securities referenced in
clause (2) below and the replacement convertible notes referenced
in the Contribution Agreement, constitutes all current issued and
outstanding securities of Dynamic, and are duly authorized, validly
issued, fully paid and nonassessable. The original convertible
notes issued by Dynamic constitute all past securities of Dynamic
not currently outstanding, were duly authorized and validly issued,
and no party has any rights or claims with respect thereto. The
Dynamic Common Stock is not subject to preemptive or comparable
rights. The Dynamic Common Stock and all other currently or
previously outstanding securities of Dynamic have been issued in
accordance with all applicable federal, state and foreign
securities laws.
(2) Other Securities. As of the date hereof, 8,575,000
shares of Dynamic Common Stock are reserved for issuance upon the
exercise of outstanding warrants (the
11
"Dynamic Warrants"), 117,500 shares of Dynamic Common Stock are
reserved for issuance upon exercise of outstanding options (the
"Dynamic Options"), all of which have been granted under the 1997
Stock Option Plan, 8,325,000 shares of Dynamic Common Stock are
reserved for issuance upon conversion of those certain replacement
7.5% convertible subordinated notes referenced in the Contribution
Agreement (the "Dynamic Secured Notes"), and no other shares of
Dynamic Common Stock are or needed to be reserved for any other
Purpose other than as Merger Consideration. Dynamic has issued the
Dynamic Secured Notes in the aggregate principal amount of
$8,325,000 which Notes are convertible into that number of shares
of Dynamic Common Stock equal to the principal amount of such notes
divided by $1.00. The redemption of the original Notes and the
issuance of the Dynamic Secured Notes in replacement thereof was
effected in full compliance with law. True and correct fully
executed copies of all documents regarding the redemption and
issuance of the convertible Notes by Dynamic have been provided
to ACS2 and Advanced. Except for the Dynamic Warrants, the Dynamic
Options and the Dynamic Secured Notes referenced in this clause (2)
there are not any existing options, warrants, calls, subscriptions,
stock appreciation rights or other rights or agreements or
commitments obligating Dynamic to issue, transfer or sell any
capital stock or other security of it or any Dynamic Subsidiary, or
any other security convertible into or evidencing the right to
subscribe for any such security.
(3) Related Agreements. Other than the Operating
Agreement of the LLC as currently in effect, there are no voting
trusts, voting agreements, shareholders' or other comparable
commitments or understandings, oral or written, to which Dynamic or
any holder of Dynamic securities is a party or by which Dynamic or
any such holder is bound with respect to the voting of any Dynamic
Common Stock or the capital stock or securities of any Dynamic
Subsidiary, either before or after Closing of the Merger.
(4) Dynamic Common Stock. On the Closing Date, Dynamic
will have a sufficient number of authorized but unissued and/or
treasury shares of Dynamic Common Stock available for issuance to
the Original ACS2 Stockholders in accordance with the provisions
of this Agreement. The Dynamic Common Stock to be issued as Merger
Consideration pursuant to the Agreement will, when so delivered, be
duly and validly issued in accordance with all applicable federal
and state securities laws, will be exempt from registration
requirements of the 1933 Act and state "blue sky" laws, will be
fully paid and nonassessable, and will be free and clear of
preemptive or comparable rights.
5.3 Convertible Unsecured Debt; Refinancing. The Dynamic
Secured Notes and the convertible notes they replaced were offered,
sold and issued in compliance with law, including but not limited
to applicable federal, state and foreign securities laws. The
Trust Indenture Act of 1939, as amended, did not apply to the
offer, sale, issuance or ownership of either the Dynamic Secured
Notes or the convertible notes they replaced.
5.4 Absence of Default. The execution, delivery and
consummation of this Agreement, and all other agreements and
documents executed in connection herewith by Dynamic will not
constitute a violation of, be in conflict with, or, with or without
the giving of notice or the passage of time, or both, result in a
breach of, constitute a default under, or create (or cause the
acceleration of the maturity of) any debt, indenture, obligation or
12
liability or result in the creation or imposition of any security
interest, lien, charge or other encumbrance upon any of the assets
of Dynamic under: (a) any term or provision of the Charter or
Bylaws of Dynamic; (b) any material contract, lease, purchase
order, agreement, document or other commitment, oral or written, to
which Dynamic is a party or by which Dynamic is bound (collectively
the "Dynamic Contracts") (for purposes of categorizing contracts,
"material" being defined to exclude any contract, lease, purchase
order, agreement, document or commitment which both (y) in terms of
payments, costs, services or other measure does not exceed
$10,000.00 in the aggregate and (z) is terminable without penalty
upon ninety (90) days' written notice or less); (c) any judgment,
decree, order, writ, injunction or rule of any court or regulatory
authority; or (d), to the knowledge of Dynamic, any law, statute,
rule or regulation to which Dynamic is subject.
5.5 Other Representations. Except as modified by
consummation of the transactions contemplated under the
Contribution Agreement, those representations and warranties
contained in paragraphs 5.4 through 5.22 of the Contribution
Agreement, along with the corresponding exhibits thereto, are
incorporated herein by reference and deemed to be made again herein
by each of Dynamic and the Dynamic Subsidiaries as if restated
herein in their entirety.
ARTICLE VI. COVENANTS OF PARTIES
6.1 Preservation of Business and Assets. From the date
hereof until the Closing, except as contemplated under the
Contribution Agreement, each party will use its best efforts and
will do or cause to be done all such acts and things as may be
necessary to preserve, protect and maintain intact the operation of
its respective business and assets as a going concern consistent
with prior practice and not other than in the ordinary course of
business, including preserving, protecting and maintaining the
goodwill of the suppliers, employees, clientele, patients and
others having business relations with such party. Each party will
use its best efforts to retain its employees in their current
positions up to Closing. Through Closing, other than pursuant to
the Contribution Agreement, no party will acquire or sell or agree
to acquire or sell by merging or consolidating with, or by
purchasing or selling a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof. Except as expressly set
forth in this Agreement or any related Agreement, the execution,
delivery and consummation of this Agreement and the transactions
contemplated hereunder will not give rise to any obligation of any
party hereto, or any right of any holder of any security of any
party hereto to require such party, to purchase, offer to purchase,
redeem or otherwise prepay or repay any capital stock or other
security, or deposit any funds to affect the same. All parties
will use their best efforts to facilitate the consummation of the
Merger as contemplated hereunder, including obtaining requisite
approval of stockholders and third parties. Through Closing,
except as expressly set forth in this Agreement or related
Agreements (such as the cancellation agreements referenced in
Section 1.7 of the Contribution Agreement) and except for exercise
of any outstanding Dynamic Warrants, Dynamic Options of conversion
of Dynamic Secured Notes, no party will issue, deliver or sell, or
authorize or propose to issue, deliver or sell, any shares of its
capital stock of any class, any voting securities or any securities
13
convertible into, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible securities.
Through Closing, no party will split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or repurchase, redeem or otherwise
acquire any shares of its capital stock. From the date hereof
until the Closing, no party will pay any dividend or distribution
to its stockholders as such, and no party will sell, discard or
dispose of any of its assets.
6.2 Retention of Assets of LLC. Dynamic does not intend
or plan to dispose of, or to cause the LLC to dispose of, a
significant part of any assets of the LLC or its subsidiaries, now
or hereafter owned or used, within five (5) years after the
Effective Time, other than dispositions in the ordinary course of
business.
6.3 Absence of Material Change. From the date hereof until
the Closing, no party will make any change in its business or in
the utilization of its assets and will not enter into any contract
or commitment or any other transaction with respect to its business
or its assets which is contrary to its representations, warranties
and obligations as set forth in this Agreement.
6.4 Material Transactions. Except as contemplated by this
Agreement, prior to the Effective Time, each party hereto,
including its respective subsidiaries, if any, will not, without
first obtaining the written consent of the other parties hereto:
(1) dispose of or encumber any asset or enter into any
transaction or make any contract commitment relating to the
properties, assets and business of such entity, other than in the
ordinary course of business or as otherwise disclosed herein;
(2) enter into any employment contract which is not at
will or terminable upon notice of thirty (30) days or less, without
penalty;
(3) enter into any contract or agreement (i) which
cannot be performed within three months or less, or (ii) which
involves the expenditure of over $10,000.00;
(4) except as stipulated in Section 6.1, issue or sell,
or agree to issue or sell, any shares of capital stock or other
securities of such entity;
(5) make any payment or distribution under any bonus,
pension, profit-sharing or retirement plan or incur any obligation
to make any such payment or contribution which is not in accordance
with such entities usual past practice, or make any payment or
contributions or incur any obligation pursuant to or in respect of
any other plan or contract or arrangement of providing for bonuses,
executive incentive compensation, pensions, deferred compensation,
retirement payments, profit-sharing or the like, establish or enter
into any such plan, contract or arrangement, or terminate any plan;
(6) extend credit to anyone except in the ordinary course of
business consistent with prior practice;
14
(7) guarantee the obligation of any person, firm or
corporation;
(8) amend its operating agreement, charter or bylaws, or
applicable organizational documents;
(9) set aside or pay any cash dividend or any other
distribution on or in respect of its capital stock or any
redemption, retirement or purchase with respect to its capital
stock or issue any additional shares of its capital stock; or
engage in any stock split, recapitalization, reorganization or
comparable transaction;
(10) discharge or satisfy any lien, charge, encumbrance
or indebtedness outside the ordinary course of business;
(11) institute, settle or agree to settle any litigation,
action or proceeding before any court or governmental body;
(12) authorize any compensation increase of any kind
whatsoever for any employee, consultant or other representative; or
(13) engage in any extraordinary transaction.
6.5 Preparation of the Proxy Statement; Stockholders
Meetings.
(1) As soon as practicable, but in no event more than
ten (10) business days following the consummation of the
Contribution Agreement, Dynamic shall prepare and file with the SEC
and any appropriate foreign governmental authorities a proxy
statement relating to the meeting of Dynamic's shareholders to be
held in connection with obtaining the approval of Dynamic's
shareholders (as the same may be amended or supplemented from time
to time, the "Proxy Statement"). Dynamic will cause the Proxy
Statement to be mailed to the holders of Dynamic Common Stock as
promptly as practicable thereafter. Dynamic shall also take any
action (other than qualifying to do business in any jurisdiction in
which it is not now so qualified or to file a general consent to
service of process) required to be taken under any applicable state
or foreign securities laws in connection with the issuance of the
Dynamic Common Stock in the Merger, and ACS2 shall furnish all
information concerning ACS2 and the Original ACS2 Stockholders as
may be reasonably requested in connection with any such action. No
filing of, or amendment or supplement to, the Proxy Statement will
be made by Dynamic without providing ACS2 and its counsel ample
opportunity to review and comment thereon. Dynamic will advise ACS2
of the time when the Proxy Statement is filed, the Proxy Statement
is mailed to shareholders, any supplement or amendment has been
filed or mailed, or comments thereon and responses thereto or
requests by governmental authorities for additional information. If
at any time prior to the Effective Time any information relating to
Dynamic or ACS2, or any of their respective affiliates, officers or
directors, should be discovered by Dynamic or ACS2 which should be
set forth in an amendment or supplement to the Proxy Statement so
that such document would not include any misstatement of a material
fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they
were made,
15
not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information
shall be promptly filed and, to the extent required by law,
disseminated to the stockholders of Dynamic.
(2) Dynamic shall, as promptly as reasonably practicable
after the date hereof give notice of, convene and hold a meeting of
its shareholders (the "Dynamic Shareholders Meeting") in accordance
with Chapter 78 "Private Corporations" and Chapter 92A "Mergers and
Exchanges of Interest" of the Nevada Revised Statutes
(collectively, the "Nevada Acts") and the requirements of the
Nasdaq Over-The-Counter Bulletin Board and any applicable foreign
authorities for the purpose of obtaining Dynamic's shareholder
approval of the Merger and shall, through its Board of Directors,
recommend to its shareholders that they approve of the Contribution
and Merger in all respects.
(3) As an integral part of its obligations under the
Registration Rights Agreement, Dynamic will comply with the
provisions of Rule 144(c) under the Securities Act in order that
affiliates of ACS2 may resell the Dynamic Common Stock they receive
pursuant to the Merger pursuant to Rule 145(d) under the Securities
Act, and agrees that the registration statements to be filed
pursuant to the Registration Rights Agreement will include such
information as may be requested by ACS2 to permit resales of such
Dynamic Common Stock by persons who may be deemed to be
underwriters of Dynamic Common Stock pursuant to Rule 145 under the
Securities Act.
6.6 Certain Tax Matters.
(1) During the period from the date hereof through the
Effective Time, no party will knowingly or negligently take or fail
to take any action that would jeopardize the treatment of the
Contribution as a tax-free contribution or the treatment of the
Merger as a "reorganization" within the meaning of Section
368(a)(1)(A) of the Code (and any comparable provisions of
applicable state law). Each party hereto shall report the Merger,
and the Exchange, as a reorganization under Section 368(a) of the
Code, and shall not take any position inconsistent with this
characterization except in the event of a contrary final
determination of the Internal Revenue Service. If any party
receives notice of any contrary position by the Internal Revenue
Service any party hereto may, at its option and sole expense,
contest such position, in which event the other parties hereto
shall cooperate with such contest as reasonably requested by the
contesting party.
(2) Each party hereto shall provide to the other
parties, at the expense of the requesting party, with such
assistance as may reasonably be requested by any of them in
connection with the preparation of any tax return, any audit or
other examination by any regulatory authority, or any judicial or
administrative proceedings relating to liability for taxes, and
each party will retain and provide the requesting party(ies) with
any records or information that may be relevant to any of the
foregoing.
6.7 Legal Conditions to Merger. Each party hereto will take
all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to the Merger
and will promptly cooperate with and furnish information
16
to each other party in connection with any such requirements
imposed upon either any of them in connection with the Merger.
6.8 Preserve Accuracy of Representations and Warranties.
Each party hereto will refrain from taking any action which would
render any of its representations and warranties contained in this
Agreement untrue, inaccurate or misleading as of Closing and the
Effective Time. Through Closing, each party will promptly notify
the other parties of any lawsuit, claim, audit, investigation,
administrative action or other proceeding asserted or commenced
against such party that may involve or relate in any way to
another party to this Agreement. Each party hereto will promptly
notify the other parties of any facts or circumstances that come to
its attention and that cause, or through the passage of time may
cause, any of a party's representations, warranties or covenants
to be untrue or misleading at any time from the date hereof through
Closing.
6.9 Notice of Subsequent Events. Each party hereto shall
notify the other parties of any changes, additions or events of
which it has knowledge which would cause any material change in or
material addition to the Contribution Agreement or this Agreement
(including but not limited to the Exhibits attached hereto and
thereto) promptly after occurrence of the same. If the effect of
such change or addition would, individually or in the aggregate
with the effect of changes or additions previously disclosed
pursuant to this Section, constitute a material adverse effect on
the notifying party, any non-notifying party may, within ten (10)
days after receipt of such notice, elect to terminate this
Agreement. If no non-notifying party gives written notice of such
termination with such 10-day period, the non-notifying parties
shall be deemed to have consented to such change or addition and
shall not be entitled to terminate this Agreement by reason
thereof.
6.10 Medicare and Medicaid Reporting. Through Closing,
the parties will timely file or cause to be filed all reports and
claims of every kind, nature or description, required by law or by
written or oral contract to be filed with respect to the purchase
of services by third party payors, including, but not limited to,
Medicare, Medicaid and Blue Cross.
6.11 Current Return Filing. Each party will be
responsible for the preparation and filing of all of such party's
own tax returns which were due on or before the Closing, and the
payment of all taxes due.
6.12 Maintain Books and Accounting Practices. From the
date hereof until the Closing, each party will maintain its books
of account in the usual, regular and ordinary manner on a basis
consistent with prior years and will make no change in its
accounting methods or practices.
6.13 Compliance with Laws and Regulatory Consents. From
the date hereof until the Closing, (a) each party will comply with
all applicable statutes, laws, ordinances and regulations, (b) each
party will keep, hold and maintain all Licenses, (c) each party will
use its reasonable efforts and will cooperate fully with the
other parties hereto to obtain all consents, stockholder and other
approvals, exemptions and authorizations of third parties, whether
governmental or private, necessary to consummate the Contribution
and Merger, and (d) each party will make and cause to be made all
filings and give and cause to be
17
given all notices which may be necessary or desirable on their part
under all applicable laws and under their respective contracts,
agreements and commitments in order to consummate the Contribution
and Merger.
6.14 Maintain Insurance Coverage. From the date hereof
until the Closing, each party will maintain and cause to be
maintained in full force and effect all its currently existing
insurance on such party's assets and the operations of such party's
business and will provide at Closing written evidence satisfactory
to each other parties that such insurance continues to be in
effect, that all premiums due have been paid.
6.15 Closing Deliveries. At Closing, the parties hereto
will deliver or cause to be delivered the following, fully executed
and in form and substance reasonably satisfactory to the receiving
party(ies):
(1) ACS2 will deliver to Dynamic stock certificates of
ACS2, duly endorsed by the original ACS2 Stockholders or with stock
powers attached, representing all of the issued and outstanding
shares of ACS2 Common Stock; provided, however, that a failure by
ACS2 to deliver the same will not be deemed a breach of this
Agreement.
(2) Dynamic will deliver to the Original ACS2
Stockholders' certificates representing the shares of Dynamic
Common Stock comprising the Merger Consideration set forth in
Article II, less the stock to be held subject to the Escrow
Agreement. Certificates evidencing stock to be held in escrow will
instead be delivered to the escrow agent pursuant to such Escrow
Agreement.
(3) Each will deliver to the other parties and the
Original ACS2 Stockholders a certificate of an officer, dated as of
Closing, certifying that (a) each covenant and obligation of the
delivering party has been complied with, and (b) each
representation, warranty and covenant of the delivering party is
true and correct at the Closing as if made on and as of the
Closing.
(4) Each party will deliver an opinion of its legal
counsel, in form and substance reasonably acceptable to the
receiving party(ies).
(5) Each party will deliver the Certificates of Merger
in form acceptable for filing with the applicable Secretaries of
State.
(6) Each party thereto will deliver to the other parties
thereto the Escrow Agreement and Registrations Rights Agreement.
(7) Dynamic will deliver to Xxxxx X. Xxx, the Employment
Agreement and Stock Option Agreement referenced in the Contribution
Agreement.
(8) Each party shall deliver such customary certificates
of its officers and such other customary closing documentation as
may be reasonably requested by the other parties, including without
limitation:
18
(i) Certificates of Existence and/or "Good
Standing" regarding the delivering party and its subsidiaries,
certified by the appropriate Secretary of State and dated
within (10) business days of Closing;
(ii) Incumbency Certificates certifying the
identity of the officers of the delivering party and its
subsidiaries; and
(iii) Charters, Operating Agreement or
Certificates of Incorporation, as certified by the appropriate
Secretary of State within ten (10) business days of Closing,
and Bylaws, as certified by an appropriate officer as of
Closing, of the delivering party and its subsidiaries.
ARTICLE VII. CONDITIONS TO CLOSING
7.1 Conditions to Each Party's Obligation to Effect the
Merger. The obligation of each party hereto to effect the Merger
shall be subject to the fulfillment at or prior to the Closing of
the following conditions:
(1) The Contribution will have been previously
consummated and all deliveries to be made and obligations to be
performed at closing of the Contribution shall, to the extent not
completed at such closing, have been subsequently completed.
(2) This Agreement and the transactions contemplated
hereunder shall have been approved by shareholders of Dynamic in
the manner required by the applicable laws of the State of Nevada
and the Charter and Bylaws of Dynamic. Further, the Original ACS2
Stockholders will have executed and delivered such documents and
performed such acts as reasonably required to effectuate the
Merger.
(3) Each party hereto shall have received from the other
parties copies of all resolutions and/or consent actions adopted by
or on behalf of the boards of directors and shareholders of such
other parties hereto, certified as of the date of Closing and
evidencing approval of this Agreement and the transactions
contemplated hereunder.
(4) No action or proceeding before a court or other
governmental body by any governmental agency or public authority
shall have been instituted or threatened to restrain or prohibit
the transactions contemplated under this Agreement or to obtain an
amount of damages or other material relief in connection with the
execution of this Agreement or any related agreements or the
consummation of the Merger; and no governmental agency shall have
given notice to any party hereto to the effect that consummation of
the transactions contemplated under this Agreement would constitute
a violation of any law or that it intends to commence proceedings
to restrain consummation of the Merger.
(5) All consents, authorizations, orders and approvals
of (or filings or registrations with) any governmental commission,
board or other regulatory body or any
19
other third party (including lenders and lessors) required in
connection with the execution, delivery and performance of this
Agreement shall have been obtained or made.
(6) NationsCredit shall have consented to the Merger or
have been paid and all obligations of Advanced to NationsCredit
satisfied in full.
(7) Dynamic shall have settled any outstanding claims,
liabilities, actions or lawsuits against or by former officers,
directors, stockholders or related parties of Dynamic or its
subsidiaries to the satisfaction of ACS2.
(8) Dynamic and each of Xxx Xxxxxxx and Xxxxx Xxxx shall
have entered into separation and release agreements in the form
attached hereto as Exhibit 7.1.
(9) The settlement described in Section 2.2(b) shall
have been completed to the satisfaction of Dynamic and ACS2.
(10) At the Effective Time the Board of Directors of
Dynamic shall be composed of persons acceptable to Dynamic and
ACS2.
(11) The capitalization of ACS2 and Advanced shall be as
reflected in Section 3.2((1) and Section 4.1 or arrangements
satisfactory to Dynamic, ACS2 and Advanced shall have been made
regarding such capitalization.
7.2 Further Conditions to Obligation of Dynamic and LLC
to Effect the Merger. The obligation of Dynamic and LLC to effect
the Merger shall also be subject to the fulfillment at or prior to
the Closing of the following conditions:
(1) ACS2 shall have performed its obligations contained
in this Agreement, including but not limited to the deliveries
stipulated in Section 6.15, required to be performed on or prior to
the Closing, and the representations and warranties of ACS2,
Advanced and the Advanced Subsidiaries contained in this Agreement
and in any document delivered in connection herewith shall be true
and correct as of the Closing.
(2) Dynamic and its representatives shall have had
reasonable access of inspection of the business of Advanced in
connection with Dynamic's due diligence review, and the results of
Dynamic's inspection and due diligence review shall be acceptable
to it. Further, should any such due diligence reveal a matter
reasonably related to any representation, warranty or covenant
herein or any exhibit hereto, Dynamic may require appropriate
amendment(s) to address such matter.
7.3 Further Conditions to Obligation of ACS2 to Effect
the Merger. The obligations of ACS2 to effect the Merger shall
also be subject to the fulfillment at or prior to the Closing of
the following conditions:
(1) Each of Dynamic and the LLC shall have performed its
obligations contained in this Agreement, including but not limited
to the deliveries stipulated in Section 6.15, required to be
performed on or prior to the Closing, and the representations and
20
warranties of Dynamic, the LLC and the Dynamic Subsidiaries
contained in this Agreement and in any document delivered in
connection herewith shall be true and correct as of the Closing.
(2) The Dynamic shareholders shall have properly
approved of the Contribution and Merger by December 1, 1999.
(3) The Dynamic shareholders shall have approved, and
Dynamic shall have implemented, an amendment to its 1997 Incentive
Stock Option Plan and 1997 Non-Statutory Stock Option Plan to
increase the pool of shares of Dynamic Common Stock available for
issuance upon exercise of plan options from 2,500,000 to 6,000,000.
(4) From the date of this Agreement until the Effective
Time, there shall not have occurred any material change in the
financial condition, business, operations or prospects of Dynamic
or the Constituent Companies, that would have or would be
reasonably likely to have a material adverse effect on the
operations of Dynamic or the LLC; provided, however, that for
purposes of determining whether there shall have been any such
material changes, any adverse change resulting from or relating to
general business or economic conditions shall be disregarded.
(5) Documentation, in form and substance reasonably
acceptable to ACS2 will have been executed and delivered electing
the directors and officers of Dynamic as stipulated in Exhibit
7.3(4) attached hereto.
(6) ACS2 and its representatives shall have had
reasonable access of inspection of the business of Dynamic in
connection with ACS2's due diligence review, and the results of
ACS2's inspection and due diligence review shall be acceptable to
it. Further, should any such due diligence reveal a matter
reasonably related to any representation, warranty or covenant
herein or any exhibit hereto, ACS2 may require appropriate
amendment(s) to address such matter.
ARTICLE VIII. TERMINATION; AMENDMENT; EXTENSION AND WAIVER
8.1 Termination by Mutual Consent. This Agreement may
be terminated and the Merger may be abandoned at any time prior to
the Effective Time, before or after the approval of this Agreement
by the shareholders of ACS2 and/or Dynamic, by the mutual consent
of the Boards of Directors of ACS2 and Dynamic.
8.2 Termination by Certain Parties. Any party hereto
may terminate this Agreement at any time pursuant to Section 6.9.
This Agreement may be terminated and the Merger may be abandoned
by action of the Board of Directors of ACS2 or Dynamic if (a) the
Merger shall not have been consummated by December 15, 1999, (b)
the Contribution shall not have been consummated by March 31, 1999,
(c) the approval of the Contribution and Merger by Dynamic's
shareholders shall not have been obtained by December 1, 1999 at a
meeting duly convened therefor or at any adjournment thereof, or
21
(d) a United States federal or state court of competent
jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued
an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided,
that the party seeking to terminate this Agreement pursuant to this
clause (d) shall have used all reasonable efforts to remove such
injunction, order or decree.
8.3 Termination by Dynamic. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, before or after the adoption and approval by the
shareholders of Dynamic, by action by the Board of Directors of
Dynamic, if (a) there has been a breach by ACS2, Advanced or the
Advanced Subsidiaries of any representation or warranty contained
in this Agreement which would have or would be reasonably likely to
have a material adverse effect on the operations of Advanced; or
(b) there has been a breach of any of the covenants or agreements
set forth in this Agreement on the part of ACS2 or Advanced, which
breach is not curable or, if curable, is not cured within thirty
(30) days after written notice of such breach is given by Dynamic
to ACS2.
8.4 Termination by ACS2. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, before or after adoption and approval of the
Original ACS2 Stockholders, by action of the Board of Directors of
ACS2, if (a) there has been a breach by Dynamic, the LLC or the
Dynamic Subsidiaries of any representation or warranty contained in
this Agreement which would have or would be reasonably likely to
have a material adverse effect on the operations of Dynamic or the
LLC, or (b) there has been a breach of any of the covenants or
agreements set forth in this Agreement on the part of Dynamic, the
LLC or the Dynamic Subsidiaries, which breach is not curable or, if
curable, is not cured within thirty (30) days after written notice
of such breach is given by ACS2 or Advanced to Dynamic.
8.5 Effect of Termination and Abandonment.
(1) With Respect to this Agreement. Upon termination of
this Agreement pursuant to Section 6.9 or this Article VIII, this
Agreement and all agreements and documents (including legal
opinions) related hereto shall be void and of no force or effect,
and there shall be no liability by reason of this Agreement or the
termination thereof on the part of any party hereto, or on the part
of the respective directors, officers, managers, employees, agents,
representatives or shareholders of any of them; provided that this
Section 8.5 will not relieve any party from liability for damages
incurred as a result of any willful breach by such party or by an
affiliate of such party of any of its respective representations,
warranties, covenants or obligations set forth in this Agreement.
(2) With Respect to the Contribution. The parties
acknowledge that if this Agreement is terminated pursuant to
Section 6.9 or this Article VIII, the Merger will not be
consummated. Consequently, either Dynamic or ACS2 may cause a
liquidation of the LLC to occur, as contemplated under Section 8.4
of the Contribution Agreement and Article XII of the LLC's
Operating Agreement, in order to reverse the transactions
consummated
22
pursuant to the terms of the Contribution Agreement and
to dissolve the LLC. To effectuate such liquidation and
dissolution, the LLC will immediately deliver to ACS2 certificates
evidencing all shares of common stock of Advanced pursuant to the
terms of the Contribution Agreement. ACS2 acknowledges that it
will forfeit 99 of its 100 Units in the LLC upon delivery of such
stock certificates. To further effectuate such liquidation and
dissolution, the LLC will immediately deliver to Dynamic
certificates evidencing all shares of common stock of the Dynamic
Subsidiaries contributed pursuant to the terms of the Contribution
Agreement. Dynamic acknowledges that it will forfeit 99 of its 100
Units in the LLC upon delivery of such stock certificates. All
certificates delivered by the LLC pursuant to this clause (2) shall
be duly endorsed or have stock powers attached. ACS2 and Dynamic
will then immediately undertake all necessary and appropriate
action to dissolve the LLC in accordance with the terms of the
Operating Agreement. Further, all agreement and documents relating
to the Contribution shall be void and of no force or effect,
including but not limited to any legal opinions. Further,
Advanced, on the one hand, and Dynamic, on the other hand, will
enter into an Indemnification Agreement, in form comparable to
Article IX hereof, pursuant to which each will indemnify the other
with regard to the operations of each and their respective
subsidiaries and actions or omissions taken on behalf of each and
their respective subsidiaries for any period prior to or following
termination and abandonment of the Merger. Notwithstanding
anything contained in clause (2) to the contrary, this Section 8.5
will not relieve any party from liability for damages incurred as
a result of any willful breach by such party or by any affiliate of
such party of its respective representations, warranties, covenants
or obligations set forth in this Agreement.
8.6 Amendment. This Agreement may be amended by the
parties at any time before or after any required approval of
matters presented in connection with the Merger by the Dynamic
shareholders or the Original ACS2 Stockholders; provided, that any
amendments requiring the approval of the Dynamic shareholders or
the Original ACS2 Stockholders will not become effective until the
amendment is approved by said holders. This Agreement may not be
amended except by an instrument in writing signed on behalf of all
the parties hereto.
8.7 Extension; Waiver. At any time prior to the
Effective Time, any party hereto, by action taken by its Board of
Directors evidenced in writing, may, to the extent legally allowed,
(a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant
hereto, and (c) 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.
ARTICLE IX. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
9.1 Survival. The covenants, obligations, representations
and warranties of each party contained in this Agreement, or in any
certificate or document delivered pursuant to
23
this Agreement, will be deemed to be material and to have been
relied upon by the other parties notwithstanding any investigation
prior to the Closing, will not be merged into any documents
delivered in connection with the Closing, and will terminate two
(2) years after Closing; provided however, that if a notice
claiming indemnity is properly delivered pursuant to Section 9.5,
the indemnification obligations will not expire with respect to
such claim(s) until the same are resolved as contemplated
hereunder.
9.2 Indemnification by Dynamic. Subject to the provisions of
Section 8.5 and Section 9.5, Dynamic shall indemnify, defend and
hold ACS2, Advanced and the Advanced Subsidiaries, their officers,
directors, employees, agents and representatives, and the Original
ACS2 Stockholders harmless against any and all losses, costs and
expenses (including reasonable cost of investigation, court costs
and legal fees actually incurred) and other damages resulting from
(a) any breach by Dynamic, the LLC or any Dynamic Subsidiary of any
of their covenants, obligations, representations or warranties or
breach or untruth of any representation, warranty, fact or
conclusion contained in this Agreement or any certificate or
document of Dynamic, the LLC or any Dynamic Subsidiary delivered
pursuant to this Agreement, and (b) any claim that is brought or
asserted by any third party(ies) against the Original ACS2
Stockholders arising out of the ownership, licensing, operation or
conduct of Dynamic, the LLC and the Dynamic Subsidiaries through
the Closing.
9.3 Indemnification by ACS2. Subject to the provisions of
Section 8.5 and Section 9.5, ACS2 shall indemnify, defend and hold
Dynamic and the Dynamic Subsidiaries, their respective officers,
directors, employees and representatives harmless against any and
all losses, costs and expenses (including reasonable cost of
investigation, court costs and legal fees actually incurred) and
other damages resulting from (a) any breach by ACS2 of any of its
covenants, obligations, representations or warranties or breach or
untruth of any representation, warranty, fact or conclusion
contained in this Agreement or any certificate or document of ACS2
delivered pursuant to this Agreement, and (b) any claim that is
brought or asserted by any third party(ies) arising out of the
ownership, licensing, operation or conduct of ACS2 through Closing.
9.4 Indemnification by Advanced. Subject to the provisions
of Section 8.5 and Section 9.5, Advanced shall indemnify, defend
and hold Dynamic, its officers, directors, employees and
representatives, and the Dynamic stockholders, harmless against any
and all losses, costs and expenses (including reasonable costs of
investigation, court costs and legal fees actually incurred) and
other damages resulting from (a) any breach by Advanced or an
Advanced Subsidiary of any of its covenants, obligations,
representations or warranties or breach or untruth of any
representation, warranty, a fact or conclusion pertaining to
Advanced and/or the Advanced Subsidiaries contained in this
Agreement or any certificate or document of Advanced delivered
pursuant to this Agreement, and (b) any claim that is brought or
asserted by any third party(ies) arising out of the ownership,
licensing, operation or conduct of Advanced and the Advanced
Subsidiaries through the Closing.
9.5 Rules Regarding Indemnification. The obligations and
liabilities of each party hereto (the "indemnifying party") which
may be subject to indemnification liability hereunder
24
to the other party(ies) (the "indemnified party") will be subject
to the following terms and conditions:
(1) Claims by Non-Parties. The indemnified party will
give written notice to the indemnifying party, within such time as
not to prejudice unduly the indemnifying party's ability to defend
against the underlying claim, of any written claim by a third party
which is likely to give rise to a claim by the indemnified party
against the indemnifying party based on the indemnity agreements
contained in this Article, stating with reasonable specificity the
nature of said claim and the amount thereof, to the extent known.
The indemnified party will give notice to the indemnifying party
that pursuant to the indemnity, the indemnified party is asserting
against the indemnifying party a claim with respect to a potential
loss from the third party claim, and such notice will constitute
the assertion of a claim for indemnity by the indemnified party.
If, within ten (10) days after receiving such notice, the
indemnifying party advises the indemnified party that it will
provide indemnification and assume the defense at its expense, then
so long as such defense is being conducted, the indemnified party
will not settle or admit liability with respect to the claim
without the consent of the indemnifying party and will afford to
the indemnifying party and defending counsel reasonable assistance
in defending against the claim. If the indemnifying party assumes
the defense, counsel reasonably acceptable to the indemnified party
will be selected by such party and if the indemnified party then
retains its own counsel, it will do so at its own expense. If the
indemnified party does not receive a written objection to the
notice from the indemnifying party within ten (10) days after the
indemnifying party's receipt of such notice, the claim for
indemnity will be conclusively presumed to have been assented to
and approved, and in such case the indemnified party may control
the defense of the matter or case and, at its sole discretion,
settle or admit liability. If within the aforesaid ten (10) day
period the indemnified party will have received written objection
to a claim (which written objection will briefly describe the basis
of the objection to the claim or the amount thereof, all in good
faith), then for a period of thirty (30) days after receipt of such
objection the parties will attempt to settle the dispute as between
the indemnified party and indemnifying parties. If they are unable
to settle the dispute, the unresolved issue or issues will be
settled by a court of competent jurisdiction located in Nashville,
Tennessee. During the pendency of any such dispute, the
indemnified party may control all aspects of the defense of the
matter or case.
(2) Claims by a Party. The determination of a claim
asserted by a party hereunder (other than as set forth in
subsection (1) above) pursuant to this Article will be made as
follows: the indemnified party will give written notice to the
indemnifying party, within such time as not to prejudice unduly the
indemnifying party's ability to defend against the underlying
claim, of any claim by the indemnified party which has not been
made pursuant to subsection (1) above, stating with reasonable
specificity the nature of such claim and the amount thereof, to the
extent known. The claim will be deemed to have resulted in a
determination in favor of the indemnified party and to have
resulted in a liability of the indemnifying party in an amount
equal to the amount of such claim estimated pursuant to this clause
(2) if within thirty (30) days after the indemnifying party's
receipt of the claim the indemnified party will not have received
written objection to the claim. In such event, the claim will be
conclusively presumed to have been assented to and approved. If
within the aforesaid thirty (30) day period the indemnified party
will have received written
25
objection to a claim (which written objection will briefly describe
the basis of the objection to the claim or the amount thereof, all
in good faith), then for a period of sixty (60) days after receipt
of such objection the parties will attempt to settle the disputed
claim as between the indemnified and indemnifying parties. If they
are unable to settle the dispute, the unresolved issue or issues
will be settled by a court of competent jurisdiction located
in Nashville, Tennessee.
9.6 Exclusive Remedy. The indemnification obligations under
this Article IX are the sole and exclusive remedies available to
ACS2, Advanced, Dynamic and the LLC with respect to this Agreement
and the transactions contemplated hereunder. The parties hereto
expressly acknowledge and agree that they may make no claim nor
institute any action against any Original ACS2 Stockholder with
respect to this Agreement, any related agreement or the
transactions contemplated hereunder and thereunder.
ARTICLE X. MISCELLANEOUS
10.1 Other Expenses. Except as otherwise provided in this
Agreement, each party will pay all of its expenses in connection
with the negotiation, execution, and implementation of the
transactions contemplated under this Agreement.
10.2 Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this
Agreement will be in writing and will be deemed to have been duly
given: (a) if delivered personally or sent by facsimile, on the
date received, (b) if delivered by overnight courier, on the day
after mailing, and (c) if mailed, five days after mailing with
postage prepaid. Any such notice will be sent as follows:
To ACS2 or Advanced:
Advanced Clinical Systems, Inc.
00 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxx
with a courtesy copy to:
Xxxxxx Xxxxxxxx
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
1800 First American Center
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
26
To Dynamic or the LLC:
Dynamic Associates, Inc.
Suite B-169
7373 N. Scottsdale
Scottsdale, Arizona 85253
with courtesy copies to:
Xxxxxxx X. Xxxxxx Xxxxxxx X. Cane
X'Xxxxx & Company Cane & Company
Xxxxx 0000, Xxxxx Xxxxxx Xxxxx 0000
0000 Xxxx Xxxxxxx Street, Box 11122 000 Xxxxxxxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx Las Vegas, Nevada
V6E 3P3 89109
10.3 Confidentiality; Prohibition on Trading. All parties
agree to maintain the confidentiality of the existence of the
Contribution Agreement, this Agreement and the transactions
contemplated hereunder and thereunder, unless disclosure is
required by law and except for disclosures to be made in connection
with obtaining shareholder approval and third party consents, and
actions required to consummate the contemplated transactions.
ACS2, Advanced and the Advanced Subsidiaries agree not to trade in
the securities of Dynamic based upon any nonpublic information.
10.4 Controlling Law. This Agreement will be construed,
interpreted and enforced in accordance with the substantive laws of
the State of Delaware, without giving effect to its conflicts of
laws provisions.
10.5 Headings. Any table of contents and Section headings in
this Agreement are for convenience of reference only and will not
be considered or referred to in resolving questions of
interpretation.
10.6 Benefit. This Agreement will be binding upon and will
inure to the exclusive benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns.
No party hereto may assign any rights or delegate any duties
hereunder without the prior written consent of the other parties
hereto and any prohibited assignment or delegation will be deemed
null and void. This Agreement also inures to the benefit of the
Original ACS2 Stockholders, individually and as a group, and the
parties hereto acknowledge and agree that each ACS2 Stockholder is
a third party beneficiary of this Agreement and the
representations, warranties and obligations set forth herein of
each party hereto.
10.7 Partial Invalidity. The invalidity or unenforceability
of any particular provision of this Agreement will not affect the
other provisions hereof, and this Agreement will be construed in
all respects as if such invalid or unenforceable provisions were
omitted. Further, there will be automatically substituted for such
invalid or unenforceable provision a provision as similar as
possible which is valid and enforceable.
27
10.8 Counterparts and Facsimiles This Agreement may be
executed simultaneously in two (2) or more counterparts each of
which will be deemed an original and all of which together will
constitute but one and the same instrument. The signature page to
this Agreement and all other documents required to be executed at
Closing may be delivered by facsimile and the signatures thereon
will be deemed effective upon receipt by the intended receiving
party.
10.9 Interpretation. All pronouns and any variation thereof
will be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identity of the person or entity, or the
context, may require. Further, it is acknowledged by the parties
that this Agreement has undergone several drafts with the
negotiated suggestions of both; and, therefore, no presumptions
will arise favoring either party by virtue of the authorship of any
of its provisions or the changes made through revisions.
10.10 Entire Agreement; Waivers. This Agreement, including the
Exhibits and Attachments hereto and those portions incorporated
herein by reference, constitutes the entire agreement between the
parties hereto with regard to the matters contained herein and it
is understood and agreed that all previous undertakings,
negotiations, letter of intent and agreements between the parties,
other than the Contribution Agreement and documents related
thereto, are merged herein. This Agreement may not be modified
orally, but only by an agreement in writing signed by the parties
hereto. The failure of any party to this Agreement or the failure
of any Original ACS2 Stockholder to assert any of its rights under
this Agreement or otherwise will not constitute a waiver of such
rights. Neither the failure nor any delay on the part of any party
hereto in exercising any rights, power or remedy hereunder will
operate as a waiver thereof or of any right, power or remedy; nor
will any single or partial exercise of any right, power or remedy
preclude any further or other exercise thereof, or the exercise of
any other right, power or remedy.
10.11 Legal Fees and Costs. In the event any party hereto
incurs legal expenses to enforce or interpret any provision of this
Agreement, the prevailing party will be entitled to recover such
legal expenses, including, without limitation, attorney's fees,
costs and disbursements, in addition to any other relief to which
such party will be entitled.
28
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement and Plan of Merger as of the date first above written.
"ADVANCED":
ADVANCED CLINICAL SYSTEMS, INC.
By: /s/ Xxxxx X. Xxx
Title: President
"ACS2":
ACS2, INC.
By: /s/Xxxxx X. Xxx
Title: President
"DYNAMIC":
DYNAMIC ASSOCIATES, INC.
By: /s/ Xxx Xxxxxxx
Title: President, CEO
"DAC":
DYNAMIC ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxx
Title: Chief Manager
