AGREEMENT AND PLAN OF MERGER, dated as of September 19, 1996 (herein
sometimes referred to as the "Agreement"), among Advanced Alliance Management
Corp., a New York corporation ("AAMC" or the "Seller") and the shareholders of
the Seller set forth on Exhibit A hereto (individually a "Shareholder" and
collectively called the "Shareholders"), on the one hand, and AAMC Acquisition
Corp., a New York corporation ("Newco"), and Complete Management, Inc., a New
York corporation ("Complete"), on the other hand.
WITNESSETH:
WHEREAS, the respective Boards of Directors of each of Newco, Complete and
Seller deem it desirable and in the best interests of their respective
corporations and stockholders that Seller merge with and into Newco (the
"Merger") in accordance with this Agreement and the applicable laws of the State
of New York; and
WHEREAS, the Merger is intended to qualify as a tax-free reorganization
under Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
MERGER OF SELLER WITH AND INTO NEWCO
1.01 Merger and Surviving Corporation.
(a) Pursuant to the applicable laws of the State of New York, on the
Effective Date (as hereinafter defined) Seller shall merge with and into Newco,
and Newco
shall be the surviving corporation after the Merger (the "Surviving
Corporation") and shall continue to exist under the provisions of the Business
Corporation Law of the State of New York ("BCL"). The name of the Surviving
Corporation shall be Advanced Alliance Management Corp. The separate existence
of Seller shall cease upon the Effective Date (as defined below).
(b) The Certificate of Incorporation of Newco, shall (as amended to
change the name of Newco to Advanced Alliance Management Corp.), from and after
the Effective Date, be the Certificate of Incorporation of the Surviving
Corporation, until amended in accordance with the BCL.
(c) The By-Laws of Newco shall, from and after the Effective Date be
the By-Laws of the Surviving Corporation, until altered or amended in accordance
with the BCL or as provided herein.
1.02 Effectiveness of the Merger. In the event that all of the conditions
precedent to the obligations of each of the parties hereto as hereinafter set
forth shall either have been satisfied or waived, a Certificate of Merger under
the applicable provisions of the BCL substantially in the form annexed hereto as
Exhibit B, annexed hereto (the "Merger Certificate"), shall be delivered for
filing as soon as practicable following the Closing Date (as defined below) to
the Secretary of State of New York and shall become effective upon the
acceptance of the filing of such Merger Certificate by said Secretary State,
which date shall be the "Effective Date" for purposes of this Agreement and
which date shall be as soon as practicable after the Closing.
1.03 Conversion of Seller Stock and Newco Stock. The manner and basis of
converting the shares of capital stock of Seller and Newco shall be as follows:
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(a) Each of the 100 outstanding shares of common stock, par value $.01
per share, of Newco (the "Newco Stock"), issued and outstanding at the Effective
Date and all rights with respect thereto shall, by reason of and simultaneous
with the Merger and without any action on the part of the holder thereof, be
unaltered, and shall continue to be the sole issued and outstanding shares of
Newco's capital stock immediately following the Effective Date.
(b) (i) All of the shares of the common stock, no par value, of Seller
(the "Seller Common Stock") issued and outstanding at the Effective Date and all
rights with respect thereto shall, by reason of and simultaneous with the Merger
and without any action on the part of the holders thereof (except with respect
to any Dissenting Shares as defined in Section 1.03(b)(iv) below), be canceled
and converted into a right to receive in the aggregate the Consideration (as
defined below).
(ii) Immediately following the Effective Date each Shareholder
shall be entitled, upon the surrender to Newco of such certificates of Seller
Common Stock as shall represent all of his shares of such stock, properly
endorsed, to receive the percentage of the Consideration as is set forth next to
such Shareholder's name under the column headed Applicable Percentage on Exhibit
A (the "Applicable Percentage").
(iii) All rights with respect to shares of Seller Common Stock
shall cease and terminate at the Effective Date, notwithstanding that any
certificates evidencing said shares of such Common Stock shall not have been
surrendered to Newco, and the holders of said shares shall have no interest in
or claims against the Surviving Corporation arising out of the ownership of such
shares of Common Stock, except for the right to receive the Consideration for
such Common Stock in accordance with the terms hereof (and the right to
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receive payment for any Dissenting Shares in accordance with the applicable
provisions of the BCL).
(iv) Any Dissenting Shares owned by the holders thereof shall not
be converted into or represent the right to the Consideration for such Common
Stock and shall be entitled only to receive payment for such Dissenting Shares
in accordance with the provisions of Section 623 of the BCL, provided that such
holder shall comply with each of the requirements and procedures set forth
therein. If any holder of Dissenting Shares shall effectively withdraw or lose
his rights as a dissenting shareholder under such provisions, then such
Dissenting Shares shall be converted into the right to receive the Consideration
for such Common Stock in accordance with the provisions of this Section 1.03.
For the purposes hereof, "Dissenting Shares" shall mean any shares of AAMC
Common Stock as to which the holder thereof has complied with each of the
requirements and procedures for dissenting shareholders set forth in Section 623
of the BCL in order to be entitled to receive payment for such shares.
(c) Immediately following the Effective Date, any and all options or
other rights to acquire any shares of the capital stock or other equity security
of Seller shall be canceled and shall thereafter be void and of no further force
and effect.
1.04 Effect of Merger.
(a) On the Effective Date, except as otherwise specifically set forth
herein, or in the Merger Certificate, the identity, existence, purposes, powers,
franchises, liabilities, rights and immunities of Newco shall continue
unaffected and unimpaired by the Merger, and the corporate identity, existence,
purposes, powers, franchises, liabilities, rights and immunities of Seller shall
be merged into Newco, and Newco, as the Surviving Corporation,
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shall be fully vested therewith. On the Effective Date, the separate existence
and corporate organization of Seller (except insofar as may be continued by
applicable law) shall cease as of the Effective Date.
(b) At the Effective Date:
(i) the rights, privileges, good will and franchises and all
property, real, personal and mixed and all debts, liabilities, obligations and
penalties due on whatever account and all other things in action belonging or
accruing to Seller shall be bargained, conveyed, granted, confirmed,
transferred, assigned and set over to and vested in the Surviving Corporation,
by operation of law and without further act or deed, and all property and rights
and liabilities, and all and every other interest of Seller shall be as
effectively the property, rights and interests and liabilities of the Surviving
Corporation, as they were of Seller; and
(ii) no action or proceeding, whether civil or criminal, pending
at the Effective Date by or against either Seller or Newco, or any stockholder,
officer or director thereof, shall xxxxx or be discontinued by the Merger, but
may be enforced, prosecuted, settled or compromised as if the Merger had not
occurred, or the Surviving Corporation may be substituted in such action or
proceeding in place of Seller, or Newco, as the case may be; and
(iii) all rights of employees and creditors and all liens upon
the property of Seller and Newco shall be preserved unimpaired, limited in lien
to the property affected by such liens at the Effective Date, and all of the
debts, liabilities, obligations and duties of Seller and Newco shall attach to
the Surviving Corporation, and shall be enforceable against the Surviving
Corporation to the same extent as if all such debts, liabilities, obligations
and duties had been incurred or contracted by the Surviving Corporation.
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1.05 Directors and Officers of the Surviving Corporation. The Board of
Directors of the Surviving Corporation shall consist of those persons set forth
on Exhibit C-1 hereto, which Directors shall hold office from and after the
Effective Date, in accordance with the By-Laws of the Surviving Corporation
until the next annual meeting of stockholders and until their respective
successors shall have been duly elected and qualified. The officers of the
Surviving Corporation shall be those persons set forth on Exhibit C-2 hereto;
provided, however, that the listing of such persons on said Exhibit C-2 shall
not be deemed to constitute an employment agreement with the Surviving
Corporation or any other entity or any assurance as to future employment. Such
persons shall continue to hold their respective offices until such time as their
successors shall have been duly appointed and qualified:
ARTICLE II
CONSIDERATION; CLOSING
2.01 Consideration. The "Consideration" to be received by the Shareholders
of Seller in the Merger shall consist of the "First Consideration" as determined
in accordance with Section 2.04 hereof and the "Additional Consideration" as
determined in accordance with Section 2.05 hereof.
2.02 Payment of Consideration. The manner and time of payment of the First
Consideration shall be as provided in Section 2.04 hereof and the manner and
time of payment of the Additional Consideration shall be as provided in Section
2.05 hereof.
2.03 Definitions. As used in this Article II and elsewhere in this
Agreement, the following terms shall have the following respective meanings:
(a) "Adjustment Period" shall mean the period beginning on January 1,
1997 and ending on December 31, 2000.
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(b) "Closing Price of Complete Common Stock" for any given trading day
shall mean the closing price per share of the common stock, par value $.001 of
Complete ("Complete Common Stock") as quoted in the Wall Street Journal American
Stock Exchange Composite Transactions Table for such day or if shares of
Complete Common Stock are not listed on the American Stock Exchange on such day
the closing price per share of Complete Common Stock in the then primary market
for shares of Complete Common Stock on such day.
(c) "Company Business" shall mean (i) the business of Seller as
conducted through Newco or any successor company to Newco during the Adjustment
Period and (ii) the business generated by the management agreement between
Complete (or an affiliate of Complete) and Northern Metropolitan Medical, P.C.
during the Adjustment Period.
(d) "Company Earnings" shall mean the net income, computed on an
accrual basis, of the Company Business for the relevant period determined in
accordance with generally accepted accounting principles, consistently applied,
after depreciation and amortization of intangibles, including those arising in
this transaction, but prior to any accrual for, or payment of, any federal,
state or local taxes measured by such net income, all as conclusively determined
by the independent public accountants who examine and report on the consolidated
financial statements of Complete and its subsidiaries. Notwithstanding that the
same may not be in accordance with generally accepted accounting principles, the
following principles shall apply to the determination of Company Earnings: (i)
Company Earnings shall not include any gains or losses on the sale or other
disposition of any fixed assets; (ii) Company Earnings shall not include any
general corporate overhead of Complete or management fees to Complete and; (iii)
charges for services provided to or on behalf of the
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Company Business by or on behalf of Complete (such as fees for audit and legal
service or for insurance) shall be chargeable to Company Earnings but shall not
be greater than the charges which the Company Business would reasonably have had
to pay for such services if they were rendered by an unaffiliated third party.
2.04 First Consideration. The First Consideration shall be $4,033,948, in
cash, and 285,678 shares of Complete Common Stock, payable on the Effective Date
by Complete to the Shareholders against the delivery to Newco of all of the
outstanding shares of Seller Common Stock.
2.05 Additional Consideration. The Shareholders shall be entitled to
receive, and Complete shall pay to the Shareholders, as "Additional
Consideration" the following:
(a) Within fifteen (15) days after the determination of the annual
Company Earnings for each of the first three calendar years in the Adjustment
Period (each a "Payment Date"), the Shareholders shall be paid Additional
Consideration, if any, in an amount equal to 80% of five (5) times the average
annual Company Earnings in excess of $2,600,000 for the period beginning January
1, 1997 and ending on the December 31 immediately preceding the Payment Date,
reduced by the aggregate Additional Consideration paid on all prior Payment
Dates.
(b) Within fifteen (15) days after the determination of the Company
Earnings for the entire Adjustment Period, the Shareholders shall be paid
Additional Consideration, if any, in an amount equal to five (5) times the
amount by which the average annual Company Earnings for the Adjustment Period
are in excess of $2,600,000 reduced by the aggregate Additional Consideration
paid on all prior Payment Dates.
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(c) An Additional Consideration shall be payable entirely in shares of
Complete Common Stock valued for purposes thereof at the average of the Closing
Price of Complete Common Stock for the first 20 of the 25 trading days preceding
the issuance thereof.
(d) Each Shareholder shall be entitled to that portion of the
Additional Consideration as shall be equal to such Additional Consideration
multiplied by such Shareholder's Applicable Percentage.
(e) Notwithstanding anything to the contrary contained anywhere in
this Agreement including, without limitation, in this Section 2.05, the maximum
amount of the Additional Consideration to be paid to the Shareholders may not
exceed $7 million.
2.06 Closing Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Morse, Zelnick, Rose & Lander,
LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 2:00 P.M. on the day following
the date on which all of the conditions set forth in Articles VIII and IX hereof
have been satisfied, or at such other place, date or time as shall be mutually
agreed on by the Seller and Complete (such time and such date or such other
agreed upon time and date is called the "Closing Date"). The parties agree that
if the Closing shall not have occurred on or before October 15, 1996, either
AAMC or Complete may terminate this Agreement by written notice to each of the
parties hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, for himself only, and not jointly, hereby represents and
warrants to and agrees with Newco and Complete, as follows:
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3.01 Ownership. As of the date hereof, such Shareholder owns beneficially
and of record the number of shares of Seller Common Stock set forth opposite his
name in Schedule 3.01.
3.02 No Liens. Except as set forth on Schedule 3.02, and except for the
obligation of the Shareholder to deliver shares hereunder, the shares of Seller
Common Stock owned by such Shareholder are free and clear of all liens, charges,
encumbrances and restrictions of any kind and nature whatsoever and none of such
shares is subject to any agreement whatsoever with respect to the voting, sale
or pledge thereof or any like matter, nor has any proxy been granted to any
corporation, company, partnership, joint venture, other entity or natural person
(a "Person") with respect to any such shares of Seller Common Stock.
3.03 Authorization of Agreement. This Agreement has been duly and validly
executed and delivered by or on behalf of such Shareholder and constitutes a
valid obligation of such Shareholder, enforceable in accordance with its terms
against such Shareholder, except to the extent that such enforceability may be
limited by applicable insolvency, bankruptcy, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by general equity
principles.
3.04 Interests in Property or Activities of the Sellers. Except as set
forth on Schedule 3.04, such Shareholder does not have any (direct or indirect)
interest (a) in any property, real or personal, tangible or intangible, used in
the business of the Seller or (b) in any Person which conducts business with the
Seller.
3.05 Complete Documents. Complete has distributed to such Shareholder, and
such Shareholder represents and warrants to Complete that he has had an
opportunity to review, prior to his execution and delivery of this Agreement,
Complete's Form 10-K for the year
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ended December 31, 1995 and Complete's Form 10-Q for each of the quarter ended
March 31, 1996 and the quarter ended June 30, 1996 and the Final Prospectuses
dated December 27, 1995 and June 5, 1996, each as filed by Complete with the
Securities and Exchange Commission together with any amendments thereto (the
"Commission Reports").
3.06 Investment Intent. All shares of Complete Common Stock to be acquired
by such Shareholder pursuant to this Agreement are being acquired by such
Shareholder solely for the purpose of investment and not with a view to, or for
sale in connection with, any distribution thereof other than in compliance with
federal and state securities laws. Such Shareholder acknowledges that all such
shares of Complete Common Stock have not been registered under the Securities
Act of 1933, as amended, or the securities laws of any state or other
jurisdiction, and that all such shares of Complete Common Stock bear a legend in
substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS A REGISTRATION STATEMENT WITH
RESPECT TO THESE SHARES HAS BECOME EFFECTIVE UNDER THE
SECURITIES ACT, OR THE CORPORATION HAS BEEN FURNISHED WITH AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED."
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE SHAREHOLDERS WITH RESPECT TO SELLER
The Seller and the Shareholders, jointly and severally, hereby represent
and warrant to and agree with Newco and Complete as follows; it being
acknowledged and agreed by Newco and Complete that each and every representation
and warranty made in this Article IV is made to the actual knowledge of the
Seller and each Shareholder (except for the representations and warranties made
(i) in the first sentence of Section 4.02, (ii) in the second sentence of
Section 4.06 and (iii) in Section 4.15, which representations and warranties are
made absolutely):
4.01 Organization and Good Standing. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full power and authority to conduct its business as now conducted
and to own or lease and operate the assets and properties now owned or leased
and operated by it. The Seller is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
character of its properties requires such qualification except where the failure
to be so qualified would not have a material adverse effect on the business of
the Seller taken as a whole (a "Material Adverse Effect"). The jurisdictions in
which Seller is so qualified are set forth on Schedule 4.01.
4.02 Capitalization of Seller. The total authorized capital stock of Seller
consists of 200 shares of common stock, no par value, of which 59 shares are
issued and outstanding. All of such issued and outstanding shares have been duly
authorized and validly issued, are fully
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paid and non-assessable and were issued in compliance with all appropriate
federal and state securities laws.
4.03 Subsidiaries of Seller. The Seller has no subsidiaries nor owns any
equity interest in any corporation, partnership or other entity.
4.04 Options, Etc. Except as set forth on Schedule 4.04, the Seller has
outstanding (a) no option, warrant or other right to purchase, acquire or
convert into any shares of its capital stock or other equity securities, or (b)
no other agreement or right (preemptive, contractual or otherwise) to issue or
sell any such shares of its capital stock or other equity securities.
4.05 No Restrictions on Securities. Except as set forth on Schedule 4.05,
and except as may be contemplated hereby, the Seller is not a party to any
agreement (a) creating rights in any person with respect to shares of its
capital stock or (b) relating to the voting of shares of its capital stock on
any matter.
4.06 Authority and Compliance. The Seller has full corporate power and
authority to execute and deliver this Agreement. The consummation and
performance by the Seller of the transactions contemplated by this Agreement has
been duly and validly authorized by all necessary corporate and other
proceedings including, without limitation, the approval of the stockholders of
the Seller. This Agreement has been duly and validly executed and delivered on
behalf of the Seller and constitutes a valid obligation of the Seller,
enforceable against the Seller in accordance with its terms, except to the
extent that such enforceability may be limited by applicable insolvency,
bankruptcy, reorganization or similar laws affecting the enforcement of
creditors' rights generally and by general equity principles. Except for the
Certificate of Merger and as otherwise contemplated hereby and as set forth on
Schedule 4.06 no consent,
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authorization or approval of, exemption by, or filing with, any domestic
governmental or administrative authority, or any court, is required to be
obtained or made by the Seller in connection with the execution, delivery and
performance of this Agreement by the Seller or the consummation of the
transactions contemplated hereby by the Seller.
4.07 Certificate of Incorporation; By-Laws. The Seller has previously
furnished to Newco and Complete true, complete and correct copies of (a) the
Certificate of Incorporation, as amended to date, of the Seller and (b) the
By-Laws, as currently in effect, of the Seller.
4.08 No Conflict. Except as set forth on Schedule 4.08, the performance of
this Agreement by the Seller and the consummation of the transactions
contemplated hereby by the Seller will not result in a breach or violation of
any of the terms or provisions of, or constitute a default under, (i) any
material contract or other agreement or instrument to which Seller is a party or
by which Seller or any of its properties or assets is bound, or (ii) the
articles of incorporation or by-laws of the Seller, or (iii) any law, order,
rule, regulation, writ, injunction or decree applicable to the Seller.
4.09 Compliance with Law. Except as set forth on Schedule 4.09, the Seller,
and its use and occupancy of its assets and properties wherever located, are
both in substantial compliance with all, and not in material violation of any,
regulation of the Health Care Finance Administration ("HCFA"), except for
violations caused by unknowing reliance on misinformation provided by clients or
of any other applicable law, statute or ordinance, or any order, rule or
regulation of any governmental agency or body to which the Seller or its
business, operations, assets or properties is subject, nor has the Seller
received any claim or notice that it is in violation of any of the foregoing or
failed to obtain or to substantially adhere
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to the requirements of any material government license, permit or authorization
necessary to the ownership, possession, use or occupancy of its assets and
properties or to the conduct of its business. All governmental permits, licenses
and authorizations utilized by Seller in the ownership or possession of the
assets and properties of the Seller or to the operation of the business of the
Seller is set forth in Schedule 4.09.
4.10 Financial Statements.
(a) Schedule 4.10A contains copies of the unaudited financial
statements of the Seller for each of the three years ended December 31, 1995,
December 31, 1994 and December 31, 1993 (the "Financial Statements"). The
Financial Statements are true and correct and present fairly, in all material
respects, the financial position of the Seller as of December 31, 1995, December
31, 1994 and December 31, 1993, as the case may be, and the results of its
operations and cash flows for each of the years then ended (except that certain
transactions relating to the provision of certain services by Seller are
reflected on a cash basis).
(b) Schedule 4.10B contains copies of the unaudited financial
statements of the Seller for the 6 months ended June 30, 1996 (the "Interim
Statements"). The Interim Statements are true and correct and present fairly, in
all material respects, the financial position of the Seller as of June 30, 1996
and the results of its operations and cash flows for the 6 month period then
ended (except that certain transactions relating to the provision of certain
services by Seller are reflected on a cash basis).
(c) As at the date of the Interim Statements, except (i) as reflected
in the Interim Statements; (ii) not required to be reflected in the Interim
Statements in accordance with generally accepted accounting principles, or (iii)
as provided in the Schedules referred to
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in this Agreement or not required to be disclosed therein by reason of term or
amount or other qualifications, the Seller at such date did not have any
liabilities or obligations of any kind or nature whatsoever, whether absolute,
accrued, contingent or other.
4.11 Books and Records. The books of account and other financial records of
the Seller are complete and correct in all material respects and are maintained
in accordance with good business practices, and accurately reflect the basis for
the preparation of the Financial Statements and the Interim Statements.
4.12 Real Property. The Seller does not own any real property.
4.13 Assets and Properties. Except as set forth on Schedule 4.13, the
Seller has good and marketable title to all of its personal property reflected
in the Interim Statements or acquired by them subsequent thereto (except for
such property sold or otherwise disposed of in the ordinary course of business
since such date), free and clear of all liens, pledges, mortgages, security
interests, conditional sales contracts, leases, subleases, licenses and other
encumbrances of any kind or nature whatsoever except liens reflected on the
Financial Statements or the Interim Statements, liens for taxes not yet due and
payable and liens which do not, individually or in the aggregate, materially
impair the value or use of such property or the ability of the Seller to conduct
its business as now conducted.
4.14 Condition of Assets and Properties. All tangible assets and properties
owned or used by the Seller in its business are in good operating condition and
repair (normal wear and tear excepted) and are usable in the ordinary course of
the business of the Seller as previously conducted and all computer hardware has
been serviced and maintained by approved vendors.
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4.15 Receivables. All accounts receivable reflected on the Interim
Statements, all accounts receivable existing on June 30, 1996 but not reflected
on the Interim Statements because of the cash basis of preparation thereof (the
"Accrual Receivables") and all accounts receivable acquired or created by the
Seller (on an accrual basis) subsequent to the date of such Interim Statements
to and including the Closing Date (the "New Receivables") arose and/or will
arise from bona fide transactions in the ordinary course of business. All
accounts receivable reflected on the Interim Statements and all Accrual
Receivables and New Receivables as shall exist on the Closing Date, in excess of
a reserve of 10% of the aggregate amount thereof plus $50,000 will be collected
in full within nine months following the Closing Date.
4.16 Absence of Certain Events. Except as set forth on Schedule 4.16, or as
otherwise contemplated by this Agreement, since December 31, 1995, the Seller
has not:
(a) amended its Certificate of Incorporation or By-Laws:
(b) changed its authorized capital stock or issued or sold, or
purchased, redeemed or otherwise acquired, or issued any rights to subscribe
for, or warrants to purchase, or entered into any agreement, commitment or
obligation (including, without limitation, any convertible securities) to issue,
sell, purchase, redeem or otherwise acquire, any shares of its capital stock, or
made any declaration or any payment or distribution of any dividend or any other
distribution with respect to its capital stock;
(c) incurred any liabilities, other than liabilities incurred in the
ordinary course of business consistent with past practice, or discharged or
satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice;
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(d) sold, assigned or transferred any of its assets or properties
except in the ordinary course of business consistent with past practice;
(e) created, incurred, assumed or guaranteed any indebtedness for
money borrowed (other than in the ordinary course of business consistent with
past practice), or mortgaged, pledged or subjected to any lien, pledge,
mortgage, security interest, conditional sales contract or other encumbrance any
of its assets or properties;
(f) made any amendment or termination of any material contract,
commitment or agreement to which it is a party or by which it is bound, or
canceled, modified or waived any material debts or claims held by it, in each
case other than in the ordinary course of business consistent with past
practice, or waived any rights of substantial value, whether or not in the
ordinary course of business;
(g) other than in the ordinary course of business consistent with past
practice, or as required by law or any Contract (as hereafter defined) or
Employee Plan (as hereafter defined) increased the salaries or other
compensation of, or made any advance (excluding advances for ordinary and
necessary business expenses) or loan to, any of its shareholders, directors,
officers or employees, or made any increase in, or any additions to, other
benefits to which any of its shareholders, directors, officers or employees may
be entitled;
(h) made any capital expenditure or capital addition or betterment
(including any capitalized lease transaction) except such which were made in the
ordinary course of business consistent with past practice and which do not
exceed $25,000 in amount in the aggregate;
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(i) changed any of the accounting principles followed by it or the
methods of applying such principles; or
(j) entered into any material transaction or operated other than in
the ordinary course of business consistent with past practice.
4.17 Taxes and Tax Returns. The amounts established as liabilities or
reserves for taxes on the Financial Statements and the Interim Statements are
sufficient for the payment of all federal, state and local taxes, and all
employment and payroll-related taxes, including any penalties or interest
thereon, whether or not based upon or measured by, in whole or in part, net
income of the Seller accrued for, or applicable to, all periods ended on or
prior to the date of the Interim Statements. Seller has not entered into any tax
sharing agreement. The Seller has (i) duly made all deposits required by law to
be made with respect to employees' withholding taxes; (ii) duly filed (subject
to any extensions of time to file any tax returns which the Seller has duly
availed itself of)with all appropriate governmental agencies and bodies, whether
federal, state or local, all income, sales, license, franchise, excise, gross
receipts, employment and payroll-related and real and personal property tax
returns and all other tax returns which were required to be filed, all of which
properly reflect the taxes owed by them for the periods covered thereby, and
they have paid, or established adequate liabilities or reserves for the payment
of, all taxes shown to be due on such returns; and (iii) not received any notice
of assessment or deficiency or proposed assessment by the Internal Revenue
Service or any other taxing authority in connection with such tax returns which
has not been satisfied in full and there is no pending tax examination of or tax
claim asserted against the Seller. None of the federal income tax returns of the
Seller has ever been audited by the Internal Revenue Service. No agreement for
the extension of time or waiver of the
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statute of limitations for the assessment of any tax deficiency or adjustment
for any year is in effect as against the Sellers. True, correct and complete
copies of all federal, state and local income and/or franchise tax returns filed
by the Seller since January 1, 1994 have previously been made available to
Complete and Newco.
4.18 Patents, Trademarks, Copyrights, Etc. Schedule 4.18 contains a
complete and correct list of all patents, patent rights, patent applications,
licenses, trademarks, trademark applications, trade names, copyrights, computer
software and similar rights (collectively "Rights") currently owned or used by
the Seller in the conduct of the business of the Seller, indicating, where
applicable, the registered and beneficial owner and the expiration date thereof.
Except as indicated on Schedule 4.18, the Seller owns or validly licenses all
Rights and other proprietary information utilized in the conduct of its business
as currently being conducted (the "Seller's Rights and the conduct of the
business of the Seller as currently conducted does not conflict with valid
Rights of others in any way.
4.19 Legal Proceedings, Etc. Except as set forth on Schedule 4.19 hereto,
there are no claims, actions, suits, proceedings, arbitrations or
investigations, either administrative or judicial, pending or threatened by, or
against the Seller, or affecting its business or any of its assets or
properties, whether or not covered by insurance, or specifically relating to the
transactions contemplated by this Agreement, at law or in equity or otherwise,
before or by any court or governmental agency or body, domestic or foreign, or
before an arbitrator of any kind nor are there any facts which are likely give
rise to any claim, action, suit, proceeding, arbitration or investigation
affecting the Seller, its business or any of its assets or properties.
4.20 Customers; Suppliers; Adverse Conditions. Except as set forth on
Schedule 4.20, there has not, since January 1, 1996, been any termination or
cancellation, nor
20
has the Seller received written notice of any threatened termination or
cancellation of the business relationship of the Seller with (a) any of the
customers of the Seller, or (b) any of the major suppliers of the Seller, which
would, either individually or in the aggregate have a Material Adverse Effect.
Set forth on Schedule 4.20 are the ten largest customers of the Seller for the
year ended December 31, 1995, indicating the name of each such customer and the
volume of such business during 1995.
4.21 Insurance. Schedule 4.21 contains a list all policies or binders of
fire, liability, errors and omissions, vehicular, title and other insurance held
by or on behalf of the Seller. The policies and binders included in Schedule
4.21 are in full force and effect, are valid, binding and enforceable in
accordance with their terms. There is no default by the Seller with respect to
any material provision contained in any such policy or binder nor has there been
any failure to give any notice or present any claim under any such policy or
binder in due and timely fashion. No notice of cancellation or nonrenewal of any
such policy or binder has been received.
4.22 Schedules of Assets; Properties; Customers; Suppliers. Set forth on
Schedule 4.22 are complete and accurate lists of the following:
(a) All machinery, vehicles, equipment and software owned by the
Seller;
(b) All machinery, vehicles, equipment and software under lease or
license to the Seller and material to the Seller's business, together with the
identity of the lessor or licensor the annual rental or fees and unexpired lease
term for any such leased property;
(c) All real property and interests in real property (including the
location thereof and the description of any structures located thereon) under
lease to the Seller, together with the annual rental and unexpired lease term
and identity of the lessor;
21
(d) All entities or persons to whom the Seller has paid aggregate fees
to, and/or made aggregate purchases from, in excess of $50,000 during the year
ended December 31, 1995; and
(e) All potential material contracts or agreements in active process
of negotiation which are not otherwise described on any other Schedule hereto.
4.23 Contracts and Commitments.
(a) Except as listed and described on Schedule 4.23, or any other
Schedule annexed hereto, the Seller is not a party to any:
(i) Contract (as defined below) with any present or former
shareholder, director, officer, employee or consultant (including, without
limitation, any employment agreement);
(ii) Contract for the future purchase of, or payment for,
supplies, products, insurance or financial instruments involving annual payment
in excess of $50,000 or for the performance of services by a third party
involving annual payment in excess of $25,000;
(iii) Contract to sell or supply products or to perform services
involving receipt by the Seller of consideration in excess of $50,000 annually;
(iv) lease under which the Seller is the lessor or lessee
relating to either real or personal property and involving annual payments by or
to the Seller in excess of $10,000;
(v) Contract or Contracts for the borrowing of money for a line
of credit, or for a guarantee, pledge or undertaking of the indebtedness of any
other person;
22
(vi) factoring agreement or agreement for the assignment of
receivables;
(vii) Contract with respect to any Rights;
(viii) Contract for any capital expenditure involving future
payments, which, together with future payments under all other existing
Contracts for all capital projects are in excess of $50,000;
(ix) Contract limiting or restraining in any respect the Seller
from engaging or competing in any lines of business or with any person;
(x) Contract requiring the Seller to loan money to any person in
the future; or
(xi) any other Contract material to the operation of the
business. As used in the Agreement, the term "Contract" includes any mortgage,
indenture, agreement, license, contract, commitment or lease.
(b) Except as may be otherwise set forth on Schedule 4.23, with
respect to each of the Contracts listed on any Schedule to this Agreement, (i)
such Contract is valid and enforceable against the Seller in accordance with its
terms, except to the extent that such enforceability may be limited by
applicable insolvency, bankruptcy, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by general equity principles,
(ii) the Seller is in compliance with the provisions thereof in all material
respects, (iii) no other party is in default in the performance, observance or
fulfillment of any obligations, covenant or condition contained therein and (iv)
no event has occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder by the Seller. Except as
set forth on Schedule 4.23, the transactions as contemplated by this Agreement,
will not (i)
23
result in the automatic termination of any Contract listed on any Schedule to
this Agreement; or (ii) result in the automatic amendment of any of the terms of
any such Contract; or (iii) give rise to a right in any party to unilaterally
amend the terms of, or terminate, any such Contract.
4.24 Officers and Directors, Employees, Powers of Attorney and Certain
Authorized Persons. Set forth on Schedule 4.24 are complete and accurate lists
of the following:
(a) the names of all current directors and the names and offices of
all current officers of the Seller;
(b) the names, current annual compensation and current address of the
principal place of employment, of all present directors, officers and employees
of the Seller whose compensation is in excess of $30,000 per annum, together
with a statement of the full amount of any remuneration paid to each such person
during the year ended December 31, 1995;
(c) the names of all persons holding powers of attorney from the
Seller and a summary statement of the terms thereof;
(d) the names of all persons authorized to borrow money or incur or
guarantee indebtedness on behalf of the Seller;
(e) all safes, vaults and safe deposit boxes maintained by or on
behalf of the Seller and the names of all persons authorized to have access
thereto; and
(f) all bank accounts of the Seller and the names of all persons who
are authorized signatories with respect to such accounts.
24
4.25 Employee Benefit Plans.
(a) Set forth on Schedule 4.25 is a summary of each and every bonus,
incentive, deferred compensation, profit sharing, pension, retirement,
disability, hospitalization, life insurance, health benefit, medical
reimbursement, vacation, sick pay, severance pay or other plan, program,
arrangement or agreement (whether written or oral) maintained by the Seller or
any other person relating to Seller's business and providing benefits to any of
the employees of the Seller ("Employee Plans").
(b) Set forth on Schedule 4.25 is the total amount of cumulative
fringe benefits to which employees of the Seller have accrued entitlement as of
July 31, 1996. All amounts required by the provisions of any Employee Plan and
applicable law to be contributed to any Employee Plan, have been or will be
contributed to such Employee Plan through the Closing Date, no contribution
being disproportionately large compared to any prior contribution.
(c) None of the Employee Plans is a "multiemployer plan" as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Sellers have never at any time contributed to a "multiemployer
plan." All Employee Plans are in compliance in all material respects with the
requirements prescribed by any and all applicable statutes, orders or
governmental rules or regulations currently in effect with respect thereto, and
the Seller has performed all material obligations required to be performed by it
under, and are not in default under or in violation of, any of the Employee
Plans. Each Employee Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code (the "Code") has heretofore been determined by the
Internal Revenue Service (the "IRS") to so qualify, and each trust created
thereunder has heretofore been determined by
25
the IRS to be exempt from tax under the provisions of Section 501(a) of the
Code. As of the date hereof, the Seller has not incurred any "withdrawal
liability" within the meaning of Section 4201 of ERISA with respect to any
Employee Plan. There are no actions, suits or claims pending, or threatened, or
anticipated (other than routine claims for benefits) against any Employee Plan
or against the assets of any Employee Plan. None of the transactions
contemplated herein will (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Employee Plan or individual
agreement that will or may result in any payment (whether of severance pay or
otherwise), acceleration, vesting, or increase in benefits with respect to any
employee, former employee or director of the Seller. None of the Employee Plans
nor any of the trusts relating thereto has incurred any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA. No person has
engaged in any transaction involving any Employee Plan which is a "prohibited
transaction" under Section 406 of ERISA or Section 4975 of the Code.
(d) The Seller has provided Complete with true and correct copies of
all Employee Plans, any related trusts and the most recent IRS determination
letters with respect to each Employee Plan intended to qualify under Section
401(a) of the Code. The Seller has provided Complete with true and correct
copies of all actuarial reports, and all filings with the IRS, the Department of
Labor and the Pension Benefit Guaranty Corporation prepared during the past two
(2) years with respect to all of the Employee Plans.
(e) None of the Employee Plans provides post-retirement medical or
life insurance coverage with respect to the current or former employees of the
Seller, other than those contemplated under paragraph (f) below.
26
(f) The Seller fully complied with the continuation coverage
requirements set forth under Part 6 of Title 1 of ERISA so that no tax under
Section 4980B of the Code would result.
4.26 Finder. There is no firm, corporation, agency or other Person that is
entitled to a finder's fee or any type of brokerage commission in relation to or
in connection with the transactions contemplated by this Agreement as a result
of any agreement or understanding with any of the Shareholders, the Seller or
any of its directors, officers, employees or shareholders.
4.27 Full Disclosure. (i) Each Shareholder with respect to any
representation or warranty made individually by him and (ii) the Seller and
Shareholders with respect to representations and warranties made jointly by
them, whether in this Agreement or in any document to be delivered by the Seller
or the Shareholders pursuant hereto, further represent and warrant that such
representation and warranties do not contain or will not contain any untrue
statement of a material fact or fail or will fail to state any material fact
necessary to make any statement herein or therein not materially misleading.
4.28 Whenever the phrase to the "actual knowledge" is used, it shall mean
the actual knowledge (without the requirement of inquiry) of the entity or
persons referred to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NEWCO AND COMPLETE
Newco and Complete hereby, jointly and severally, represent and warrant to
the Seller and the Shareholders as follows:
27
5.01 Organization and Good Standing.
(a) Newco is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, with full corporate power
and authority to conduct its business as now conducted and to own or lease and
operate the assets and properties now owned or leased and operated by it. The
total authorized capital stock of Newco consists of 100 shares of Common Stock
par value $.0001 per share. The outstanding shares of capital stock of Newco
consist of 100 shares of common stock, par value $.0001, all of the which are
owned by Complete. All of such issued and outstanding shares have been duly
authorized and validly issued, are fully paid and non-assessable and were issued
in compliance with all federal and state securities laws.
(b) Complete is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, with full corporate power
and authority to conduct its business as now conducted and to own or lease and
operate the assets and properties now owned or leased and operated by it.
5.02 Authority and Compliance. Each of Newco and Complete has full
corporate power and authority to execute and deliver this Agreement. The
consummation and performance by Newco and Complete of the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate and other proceedings. This Agreement has been duly and
validly executed and delivered on behalf of each of Newco and Complete and
constitutes a valid obligation of each of Newco and Complete, enforceable in
accordance with its terms. Except for the Certificate of Merger and for filings
and/or approvals under applicable securities laws, no consent, authorization or
approval of, exemption by, or filing with, any domestic governmental or
administrative authority, or any
28
court, is required to be obtained or made by Newco or Complete in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
5.03 No Conflict. The performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a breach or violation of
any of the terms or provisions of, or constitute a default under, (i) any
contract or other agreement or instrument to which Newco or Complete is a party
or by which Newco or Complete or any of their properties or assets is bound, or
(ii) the articles of incorporation or by-laws of Newco or Complete or (iii) any
law, order, rule, regulation, writ, injunction or decree applicable to Newco or
Complete.
5.04 Complete Documents. Complete has delivered to the Shareholders true,
correct and complete copies of the Commission Reports. The Commission Reports,
at the respective date of their filing with the Commission, did not contain any
untrue statement of a material fact and did not fail to state any material fact
necessary in order to make any statement made therein, in the light of the
circumstances under which they were made, not misleading.
5.05 Absence of Certain Events. Except as may be disclosed in the
Commission Reports, since June 30, 1996 there has not been any change in the
financial condition or in the nature of the business or operations of Complete,
which has had or which might have a materially adverse effect on its business,
operations, assets, properties or prospects.
5.06 Complete Stock. All of the shares of Complete Common Stock to be
issued to the Shareholders as contemplated by this Agreement will, upon
delivery, be duly authorized and validly issued, fully paid and non-assessable
and assuming the accuracy of the
29
Shareholders' investment representation, issued in compliance with all federal
and state securities laws and free and clear of all liens, charges,
restrictions, mortgages, security interests or claims of any kind.
5.07 Finder. There is no firm, corporation, agency or other Person that is
entitled to a finder's fee or any type of brokerage commission in relation to or
in connection with the transactions contemplated by this Agreement as a result
of any agreement or understanding with either of Newco or Complete or any of
their directors, officers, employees or shareholders.
5.08 Full Disclosure. No representation or warranty made by Complete or
Newco in this Agreement or in any document to be delivered by Complete or Newco
pursuant hereto contains, or will contain, any untrue statement of a material
fact or fails, or will fail, to state any material fact necessary to make any
statement herein or therein not materially misleading.
5.09 Business, Liabilities, etc. Newco has conducted no business, has
incurred no liabilities or become subject to any liens or encumbrances and has
no assets other than the cash received in payment of the par value of its
outstanding shares.
5.10 No Known Violations. Neither Complete nor Newco has actual knowledge
(without the requirement of inquiry) of any violation by the Sellers or the
Shareholders of any of the representations or warranties contained in this
Agreement.
30
ARTICLE VI
COVENANTS OF THE SELLER
The Seller and the Shareholders hereby, jointly and severally, covenant and
agree with Newco and Complete as follows:
6.01 Conduct of Business Until Closing Date. Except as contemplated by this
Agreement or as set forth in the Schedules annexed hereto, from and after the
date hereof until the Closing Date, the Seller will:
(a) operate its business only in the usual, regular and ordinary
manner and, to the extent consistent with such operation, to (i) preserve the
present business organization intact, (ii) use its best efforts to keep
available the services of their present officers and significant employees
unless the Seller determined it to be in the best interests of the Seller to
terminate their relationship with such persons and (iii) use their best efforts
to preserve the present business relationships with customers, suppliers, and
others having business dealings with the Seller;
(b) use its best efforts to maintain all properties necessary for the
conduct of their business in substantially the same condition as they now are
(reasonable wear and tear excepted) and maintain in full force and effect
insurance with responsible companies comparable in amount, scope and coverage to
that in effect on the date of this Agreement;
(c) maintain its books, records and accounts in the usual, regular and
ordinary manner on a basis consistent with prior periods;
(d) duly comply with all laws known to be applicable to them and
material to the conduct of its business;
31
(e) perform all of its material obligations without default unless
being contested in good faith;
(f) neither (i) amend or change the Articles of Incorporation or the
By-Laws of the Seller; (ii) merge with or into, consolidate or otherwise combine
with, or acquire all or substantially all of the stock or assets of, any other
entity; (iii) sell, lease or otherwise transfer any significant part of its
assets other than in the ordinary course of business consistent with past
practice, nor (iv) change the character of its business;
(g) neither (i) increase the number of shares of capital stock or
other equity securities of the Seller issued and outstanding nor (ii) grant any
option, warrant, or other right to purchase or to convert any obligation into
shares of capital stock of the Seller;
(h) neither (i) declare, pay or make any dividend or other
distribution or payment in respect of the outstanding shares of capital stock of
the Seller, nor (ii) purchase, redeem or otherwise acquire for consideration any
shares of capital stock of the Seller;
(i) neither (i) encumber, mortgage, or subject to lien any of their
properties or assets other than in the ordinary course of business or other than
such encumbrances, mortgages or liens which individually or in the aggregate,
would not have a material adverse effect on the business of the Seller taken as
a whole; (ii) convey, transfer or acquire any material asset or property other
than in the ordinary course of business; nor (iii) enter into any contract or
undertaking relating to, or pay or promise to pay, any bonus, profit-sharing, or
special compensation to any employee or director or make any increase in the
compensation payable or to become payable to any employee or director other than
in the ordinary course of business, a Contract or Employee Plan;
32
(j) neither (i) incur any long-term debt nor (ii) modify, change or
terminate any of the Contracts disclosed on any Schedule to this Agreement,
other than in the ordinary course of business or such modifications, changes or
terminations which, individually or in the aggregate, would not have a material
adverse effect on the business of the Sellers taken as a whole;
(k) neither (i) change the banking arrangements described in Schedule
4.24 other than in the ordinary course nor (ii) grant any power of attorney; and
(l) not enter into any employment agreement not terminable by the
Seller on thirty (30) days notice or less without cost or liability.
6.02 Access. The Seller shall, upon prior notice, afford to Complete and
its representatives free and full access during regular business hours to all of
the books, records, contracts, documents, key personnel and properties of the
Seller. The Seller will use its best efforts to cause the key employees,
accountants, attorneys and other representatives of the Seller to cooperate
fully with Complete and to make full disclosure to Complete of all material
facts affecting the business properties and financial condition of the Seller,
as Complete shall reasonably request.
ARTICLE VII
COVENANTS OF THE SHAREHOLDERS
Each of the Shareholders for himself only, and not jointly, hereby
covenants and agrees with Newco and Complete as follows:
7.01 Sale of Stock of Seller. From the date hereof to the Effective Date,
such Shareholder will not sell, transfer, pledge, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer,
33
pledge, assignment or other disposition of, any shares of the capital stock of
the Seller now owned by such Shareholder, other than pursuant to the Merger.
7.02 Actions of the Shareholders. From the date hereof to the Effective
Date, each Shareholder will not willfully take any action or willfully do
anything in the conduct of the business of the Seller or otherwise which would
be contrary to or in breach of any of the terms, conditions or provisions of
this Agreement or which would cause any of the representations and warranties
made by the Seller and the Shareholders in this Agreement to be untrue on and as
of the Closing Date in any material respect.
7.03 Covenant Not to Compete. For the period beginning on the Closing Date
and ending on December 31, 2001 (the "Non-Compete Period"), each of the
Shareholders hereby covenants and agrees that without Complete's prior written
consent, such Shareholder will not anywhere in the States of New York, New
Jersey or Connecticut (i) compete, directly or indirectly, with Complete or any
of its affiliates in the business or activities in which the Sellers are now
engaged (the "Sellers Business"); (ii) directly or indirectly, on his own behalf
or in behalf of or as an employee or agent of any other person or entity,
contact or approach any person or business, wherever located, for the purpose of
competing with Complete in the Seller's Business, in the States of New York, New
Jersey or Connecticut; (iii) participate as a director, officer, consultant, or
partner of, or have any other direct or indirect financial interest in, any
enterprise which engages in the Sellers Business in the States of New York, New
Jersey or Connecticut; provided, however, that each Shareholder may own up to
two (2%) percent of the capital stock of any corporation (other than Complete as
to which this proviso shall not apply), required to file reports pursuant to the
Securities Exchange Act of 1934 that is in competition with the Sellers; or (iv)
participate as an employee, agent,
34
representative or consultant in, or render any services to, any enterprise in
which he has responsibilities for activities which compete, directly or
indirectly, with the Sellers Business in the States of New York, New Jersey or
Connecticut.
7.04 Confidential Information. During the Non-Competition Period and at any
time thereafter, such Shareholder shall keep secret and retain in strictest
confidence, and shall not use for the benefit of himself or others, all
confidential matters relating to the Sellers Business, including, without
limitation, customer lists, operational methods and other business affairs
relating to the Sellers Business known by any of them and, except as otherwise
required by law, shall not disclose them to anyone, except with Complete's
express prior written consent.
7.05 Employees of Complete. Each Shareholder shall not at any time during
the Non-Compete Period and for a period of one year thereafter (i), directly or
indirectly, hire, solicit or encourage to leave the employment of Complete or
any of its affiliates, any employee of Complete or any of its affiliates who
work in or perform services for the Sellers Business, including any person who
has left the employment of Complete or any of its affiliates during the six
months preceding the end of the Non Compete Period, or (ii) solicit business
from or services to any entity that was a customer of the Surviving Company
during the Non Compete Period.
7.06 Acknowledgment; Severability. Each of the Shareholders acknowledge
that the restrictions contained in Sections 7.03, 7.04 and 7.05 are reasonable
and necessary to protect the business and interests of Complete and that any
violation of these restrictions will cause substantial and irreparable injury to
Complete. Therefore, each Shareholder agrees that Complete is entitled, in
addition to any other remedies, to preliminary and permanent
35
injunctive relief to secure specific performance, and to prevent a breach or
contemplated breach, of Sections 7.03, 7.04 and/or 7.05 The restrictions set
forth herein shall be construed as independent covenants, and the existence of
any claim or cause of action against Complete, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Complete of the restrictions contained in Sections 7.03, 7.04 and 7.05. In the
event that the provisions of Sections 7.03, 7.04 and/or 7.05 should ever be
deemed to exceed the time or geographic limitations or any other limitations
permitted under applicable laws, then such provisions shall be deemed reformed
to the maximum extent permitted by applicable laws.
ARTICLE VIIA
COVENANTS OF NEWCO AND COMPLETE
Complete and Newco hereby jointly and severally covenant and agree that (i)
Complete shall operate the Company Business as a separate and distinct profit
center and shall maintain separate books of account and other financial records
for the Company Business and that (ii) the Company Business on a day-to-day
basis shall be operated in substantially the same manner in which it has been
operated prior to the date hereof.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
NEWCO AND COMPLETE
The obligations of Newco and Complete pursuant to this Agreement are
subject to the satisfaction at the Closing of each of the following conditions;
provided, however, that Newco and Complete may, in their sole discretion, waive
any of such conditions and proceed with the transactions contemplated hereby.
36
8.01 Accuracy of Representations and Warranties. The representations and
warranties of the Seller and the Shareholders contained in this Agreement or any
other document delivered to Newco or Complete at the Closing in connection with
this Agreement or in any other agreement by the Shareholders dated even date
herewith shall taken in the aggregate be true and correct in all material
respects on and as of the Closing Date, as if made on and as of the Closing
Date.
8.02 Performance of Agreements. The Seller and the Shareholders shall have
performed and complied in all respects with all covenants, obligations and
agreements to be performed or complied with by any of them on or before the
Closing Date pursuant to this Agreement.
8.03 Litigation, etc.
(a) No claim, action, suit, proceeding, arbitration, or hearing or
notice of hearing shall be pending (and no action or investigation by any
governmental authority shall be threatened) which seeks to enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
(b) No law, regulation or decree shall have been adopted or
promulgated after the date hereof, the enforcement of which would materially
adversely affect the assets, properties, financial condition, results of
operations, properties or business of the Sellers; and no law, regulation or
decree shall have been adopted or promulgated after the date hereof, the
enforcement of which would materially adversely affect Newco and Complete's
ability to consummate the transactions contemplated by this Agreement.
8.04 Approvals; Consents. All material approvals, consents, waivers,
filings, registrations, permits, authorizations or other actions required in
connection with the Merger
37
or which may be required on account of the change in ownership of the Seller
shall have been obtained or made.
8.05 Opinion of Counsel. Newco and Complete shall have received from Pirro,
Collier, Xxxxx & Xxxxxxx, LLP, counsel to the Seller, an opinion addressed to
Newco and Complete, dated the Closing Date in the form annexed hereto as Exhibit
E.
8.06 Good Standing Certificates. Complete shall have received a certificate
of the Secretary of State of New York dated within thirty (30) days before the
Closing Date certifying that the Seller is validly existing under the laws of
the state of New York.
8.07 Actions, Proceedings, etc. All actions, proceedings, instruments and
documents from Seller and Shareholders required to carry out the transactions
contemplated by this Agreement and all other related legal matters shall be
reasonably satisfactory to Complete and its counsel; and Complete shall have
been furnished by the Sellers and Shareholders with such other instruments and
documents as it shall have reasonably requested.
8.08 Casualty; Condemnation. Subsequent to the date hereof and prior to the
Closing Date, no material portion of the physical operating assets of Seller
shall have been destroyed or damaged (whether or not such entity is insured
against such loss) and no material portion of such physical operating assets
shall have been taken by condemnation or eminent domain or made the subject of
any condemnation or eminent domain proceeding, nor shall any such proceeding be
threatened.
8.09 Financial Statements; Consents.
(a) Prior to the Closing Date, Seller shall have delivered to Newco
and Complete financial statements of Seller for the years ending December 31,
1995, December 31, 1994 and December 31, 1993, which financial statements shall
have been
38
reported on by Xxxxxxxxx, Xxxxx & Solomon, P.C., or such other independent
certified public accountants as shall reasonably be agreed to by Complete and
Newco (the "Seller Accountants"), without qualification (the "Audited Financial
Statements"), and which Audited Financial Statements shall be in form
satisfactory to meet the rules, regulations and requirements of the Securities
and Exchange Commission with respect to financial statements required to be
included in any registration statement to be filed under the Securities Act of
1933, as amended (the "Securities Act"), and/or any report to be filed under the
Securities and Exchange Act of 1934, as amended. The audit procedures undertaken
by the Seller Accountants in connection with the preparation of their report on
the Audited Financial Statements shall be reasonably satisfactory to Xxxxxx
Xxxxxxxx LLP, whom Complete shall direct to act expeditiously in the matter in
order to consummate the transactions contemplated hereby within the time set
forth in Section 2.06, above.
(b) The financial position of the Sellers as at December 31, 1995,
December 31, 1994 and December 31, 1993, as the case may be, and the results of
Seller's operations and cash flows for each of the years then ended as reflected
in the Audited Financial Statements shall not differ in a materially adverse
manner from that shown in the Financial Statements.
(c) Prior to the Closing Date, the Seller Accountants shall have
delivered to Complete and Newco a letter (i) indicating that they understand
that the Audited Financial Statements may be included in a registration
statement filed by Complete under the Securities Act and (ii) agreeing with
Complete that subject to their prompt performance of any required procedures and
subject to payment by Complete of their reasonable fees in connection with their
performing such required procedures, they will promptly execute such consents as
may
39
be required in connection with the inclusion of the Audited Financial Statements
in any registration statement to be filed under the Securities Act.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
THE SELLER AND THE SHAREHOLDERS
The obligations of the Seller and the Shareholders under this Agreement are
subject to the satisfaction at the Closing of each of the following conditions;
provided, however, that the Seller and the Shareholders may, in their sole
discretion, waive any of such conditions and proceed with the transactions
contemplated hereby.
9.01 Accuracy of Representations and Warranties. The representations and
warranties of Newco and Complete contained in this Agreement, the Other
Agreement or any other document delivered by Newco or Complete to the Sellers or
the Shareholders at the Closing or in any other agreement dated the date hereof
in connection with this Agreement shall taken in the aggregate be true and
correct in all material respects on and as of the Closing Date, as if made on
and as of the Closing Date.
9.02 Performance of Agreements. Newco and Complete shall have performed and
complied in all respects with all covenants, obligations and agreements to be
performed or complied with by any of them on or before the Closing Date pursuant
to this Agreement.
9.03 Litigation, etc. No claim, action, suit, proceeding, arbitration or
hearing or notice of hearing shall be pending (and no action or-investigation by
any governmental authority shall be threatened) which seeks to enjoin or prevent
the consummation of the transactions contemplated by this Agreement.
40
9.04 Registration Rights Agreement.. Complete and each of the Shareholders
shall have entered into a registration rights agreement in the form annexed
hereto as Exhibit D.
9.05 Opinion of Counsel to Complete. The Seller shall have received from
Messrs. Morse, Zelnick, Rose & Lander, LLP, counsel to Newco and Complete, a
favorable opinion addressed to the Seller, dated the Closing Date in the form
annexed hereto as Exhibit F..
9.06 Actions, Procedures, etc. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
and all other related legal matters shall be reasonably satisfactory to the
Seller and its counsel; and the Seller shall have been furnished with such other
instruments and documents as it shall have reasonably requested.
9.07 Material Adverse Change. There shall not have been, and on the Closing
Date there shall not be in existence, any event, condition or state of facts
which could reasonably be expected to result in any material adverse change in
the condition (financial or otherwise) of the assets, results of operation,
business or prospects of Newco or Complete.
ARTICLE X
GENERAL PROVISIONS
10.01 Survival of Representations, Warranties, Covenants, and Agreements.
The representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution of this Agreement and the closing of the
transactions contemplated by this Agreement until November 15, 1997; provided,
however, that any representations, warranties, covenants and agreements
contained herein which specifically set forth longer time periods of
effectiveness shall survive for the periods indicated therein and provided
further that the representations, warranties, covenants and agreements relating
to (i) compliance with
41
HCFA regulations as set forth in Section 4.09 and (ii) federal, state and local
tax obligations of AAMC set forth in Section 4.17 shall survive for the period
of the applicable statute of limitations with respect thereto. If any claim for
indemnity has been timely made but has not been resolved by the parties prior to
the expiration of the applicable time period of survival them, and in such
event, such claim shall survive until finally resolved..
10.02 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated including all accounting,
auditing and legal fees hereby shall be paid by the party incurring such expense
provided that Seller shall pay up to a maximum $100,000 of Seller's and
Shareholders' legal and audit fees in connection with this Agreement.
10.03 Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when (a) delivered in
person,(b) the day following dispatch by an overnight courier service (such as
Federal, Express or UPS, etc.) or (c) five (5) days after dispatch by certified
or registered first class mail, postage prepaid, return receipt requested, to
the party to whom the same is so given or made:
If to Newco or
Complete addressed to: Complete Management, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxxxxx,
Chief Executive Officer
with a copy to: Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx, Esq.
If to a Shareholder addressed
to the address set forth
below such Shareholder's name
on Exhibit A.
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In each case, with a copy to: Pirro, Collier, Xxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Xx., Esq.
or such other address as any of the parties shall hereafter notify the other
parties in writing.
10.04 Assignability and Amendments. This Agreement and the rights and
obligations created hereunder shall not be assignable by any of the parties.
This Agreement cannot be altered or otherwise amended except pursuant to an
instrument in writing signed by each of the parties. This Agreement shall be
binding upon and inure to the benefit of the parties, their successors, legal
representatives and assigns.
10.05 Entire Agreement. This Agreement and the Exhibits and Schedules which
are a part hereof and the other writings and agreements specifically identified
herein contain the entire agreement between the parties with respect to the
transactions contemplated herein and supersede all previous written or oral
negotiations, commitments and understandings.
10.06 Waivers, Remedies. Any condition to the performance of any party
hereto which legally may be waived on or prior to the Closing Date may be waived
by the party entitled to the benefit thereof. Any waiver must be in writing and
signed by the party to be bound thereby. A waiver of any of the terms or
conditions of this Agreement shall not in any way affect, limit or waive a
party's rights under any other term or condition of this Agreement. All remedies
under this Agreement shall be cumulative and not alternative.
10.07 Counterparts and Headings. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. All headings (including,
without limitation, Article
43
headings and Section titles) are inserted for convenience of reference only and
shall not affect its meaning or interpretation.
10.08 Severability. If and to the extent that any court of competent
jurisdiction holds any provision (or any part thereof) of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
10.09 No Third-Party Beneficiaries. Nothing contained in this Agreement
shall be deemed to confer rights on any Person or to indicate that this
Agreement has been entered into for the benefit of any Person, other than the
parties hereto.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
10.11 Binding Effects. This Agreement shall be binding upon and incur to
the benefit of the parties hereto, their successors, legal representatives and
assigns.
10.12 Disclosure on Schedules. For purposes of this Agreement, a disclosure
by any party hereto of any fact on any Schedule shall be deemed a disclosure on
every Schedule of any party hereto to the extent such disclosure properly could
have been made thereon but was not made.
ARTICLE XI
INDEMNIFICATION
11.01 Indemnification by the Shareholders. The Shareholders hereby jointly
and severally covenant and agree with Newco and Complete that they shall
reimburse and indemnify Newco and Complete and their respective successors and
assigns (individually an
44
"Indemnified Party") and hold them harmless from, against and in respect of any
and all costs, losses, claims, liabilities, fines, penalties, damages and
expenses (including interest which may be imposed in connection therewith and
court costs and reasonable fees and disbursements of counsel) incurred by any of
them due to, arising out of, or in connection with, a breach of any of the
representations, warranties, covenants or agreements made by such Shareholder
(either individually or jointly and severally with Seller or any other
Shareholder) in this Agreement (a "Claim").
11.02 Indemnification by Complete. Complete hereby covenants and agrees
with the Shareholders that it shall reimburse and indemnify the Shareholders and
their respective successors and assigns (also individually an "Indemnified
Party") and hold them harmless from, against and in respect of any and all
costs, losses, claims, liabilities, fines, penalties, damages and expenses
(including interest which may be imposed in connection therewith and court costs
and reasonable fees and disbursements of counsel) incurred by any of them due
to, arising out of, or in connection with, a breach of any of the
representations, warranties, covenants or agreements made by Complete or Newco
in this Agreement (also a "Claim").
11.03 Right to Defend, etc.
(a) If the facts giving rise to any such indemnification shall involve
any actual Claim or demand by any third party against an Indemnified Party, the
indemnifying party shall be entitled to notice of and entitled to defend or
prosecute such Claim at its expense
45
and through counsel of its own choosing if it advises in writing of its
intention to do so to the Indemnified Party within thirty (30) days after notice
of such Claim has been given to the indemnifying party (without prejudice to the
right of any Indemnified Party to participate at its expense through counsel of
its own choosing). Such Indemnified Party shall cooperate in the defense and/or
settlement of such Claim, but shall be entitled to be reimbursed, as provided
herein, for all costs and expenses incurred by it in connection therewith. No
settlement of any Claim may be made without the consent of the indemnifying
party, which consent may not be unreasonably withheld; provided, however, that
if such indemnifying party has been offered the opportunity to defend such Claim
and has elected not to do so then settlement may be made without the consent of
the indemnifying party.
(b) Notwithstanding Section 11.03(a) hereof, if, in the reasonable
opinion of Complete, any Claim involves an issue or matter which could have a
materially adverse effect on the business, operations, assets or prospects of
Complete or Newco, then, and in such event, Complete shall have the right to
control the defense or settlement of any such Claim. If Complete should so elect
to exercise such right, the indemnifying party shall have the right to
participate in, but not control, the defense or settlement of such Claim. No
settlement of any such Claim may be made without the consent of the indemnifying
party, which consent may not be unreasonably withheld.
46
11.04 Limitations on Indemnification.
(a) Newco and Complete shall not be entitled to receive any
indemnification amounts pursuant to Section 11.01 until the aggregate
indemnification amounts pursuant thereto and not otherwise payable pursuant to
Sections 11.04(b) equal $150,000 (the "Basket Amount"), whereupon Newco and
Complete shall be entitled to receive payments to the extent that such aggregate
exceeds the Basket Amount.
(b) The limitation on indemnification set forth in Section 11.04(a)
shall not apply to any Claims based upon, arising out of or otherwise in respect
of (i) the representations and warranties made in Article III and Section 4.26,
and (ii) any covenant or agreement contained in Article VII.
(c) The aggregate liability of any Shareholder with respect to its
indemnification obligations under Section 11.01 (other than with respect to the
covenants and agreements contained in Article VII) shall not exceed the amount
of the Consideration received by such Shareholder.
11.05 Payment of Indemnification. In the event any payment of the indemnity
obligations of the Shareholders set forth in Section 11.01 is required to be
made, the Shareholders may, at their option, satisfy such payment by delivery to
Complete of shares of Complete Common Stock acquired by them pursuant to the
Merger, which shares, for such purpose, shall be valued at the Closing Price of
Complete Common Stock on the trading day immediately preceding the date on which
such liability is finally determined.
47
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Advanced Alliance Management Corporation
By: ____________________________________
AAMC Acquisition Corp.
By: ____________________________________
Complete Management, Inc.
By: _____________________________________
_________________________________ _______________________________
Xxxxx Xxxxxxxx Xxxx Xxxx
_________________________________ _______________________________
Xxxxxxx X. Xxxxxxxx Xxxx Xxxxx
_________________________________ _______________________________
Xxxxxxx Xxxxxxx Xxxxxx Xxxxxxx
_________________________________ _______________________________
Xxxxxx Xxxxxxx Xxxxxxx Xxxxxxx
_________________________________ _______________________________
Xxx Xxxxxxxxx Xxxx Xxxx
_________________________________ _______________________________
Xxx Xxxxxxxxxx Xxxxx Xxxxxx
_________________________________
Xxxxxxx Xxxxxxxx
