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SHARE EXCHANGE AGREEMENT
by and among
HEALTHSTAR CORP.,
a Delaware corporation,
and
XXXXXXXXXXX.XXX, INC.,
a Delaware corporation,
M2 LIMITED, INC.
a Maryland corporation,
KEY INDIVIDUALS OF M2 LIMITED, INC.
Dated as of _________________, 2001
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TABLE OF CONTENTS
Page No.
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ARTICLE I EXCHANGE OF SHARES................................................................................2
Section 1.1 Exchange Of M2 Shares........................................................................2
Section 1.2 Issuance And Exchange Of HealthStar Shares...................................................2
Section 1.3 Closing......................................................................................2
(a) CLOSING DELIVERIES BY SALESMATION, M2 AND THE KEY INDIVIDUALS................................2
(b) CLOSING DELIVERIES BY HEALTHSTAR.............................................................2
(c) DIRECTORS OF HEALTHSTAR ON AND AFTER THE CLOSING DATE........................................2
(d) OFFICERS OF HEALTHSTAR ON AND AFTER THE CLOSING DATE.........................................3
Section 1.4 Transfer Taxes...............................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS.....................................................3
Section 2.1 Organization..................................................................................3
Section 2.2 Capitalization................................................................................4
Section 2.3 Ownership Of Stock............................................................................4
Section 2.4 Authorization; Validity Of Agreement..........................................................4
Section 2.5 Consents And Approvals; No Violations.........................................................4
Section 2.6 M2 Financial Statements.......................................................................5
Section 2.7 No Undisclosed Liabilities....................................................................5
Section 2.8 Absence Of Certain Changes....................................................................5
Section 2.9 Employee Benefit Plans; ERISA.................................................................6
Section 2.10 Major Customers..............................................................................7
Section 2.11 [Reserved]...................................................................................7
Section 2.12 Litigation...................................................................................7
Section 2.13 No Default; Compliance With Applicable Laws..................................................8
Section 2.14 Taxes........................................................................................8
Section 2.15 Real Property Leases.........................................................................9
Section 2.16 Properties...................................................................................9
Section 2.17 Intellectual Property........................................................................10
Section 2.18 Contracts....................................................................................10
Section 2.19 Labor Matters................................................................................11
Section 2.20 Environmental Matters........................................................................11
Section 2.21 Subsidiaries.................................................................................11
Section 2.22 Broker Or Finders............................................................................12
Section 2.23 Performance Of Services......................................................................12
Section 2.24 Insurance....................................................................................12
Section 2.25 Related Party Transactions...................................................................13
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Page No.
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Section 2.26 Full Disclosure..............................................................................14
Section 2.27 Investment Representations Of Salesmation....................................................14
(a) QUALIFICATIONS................................................................................14
(b) INVESTMENT INTENT.............................................................................15
(c) HEALTHSTAR INFORMATION........................................................................15
(d) RESALE RESTRICTIONS...........................................................................15
(e) EXEMPT SALE...................................................................................15
(f) LEGENDS ON CERTIFICATES.......................................................................15
(g) OTHER.........................................................................................16
Section 2.28 Investment Representations of Sellers........................................................16
Section 2.29 Corporate Name...............................................................................16
Section 2.30 Knowledge Of Individuals.....................................................................16
Section 2.31 Stockholder Distributions....................................................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HEALTHSTAR............................................................17
Section 3.1 Organization..................................................................................17
Section 3.2 Authorization; Validity Of Agreement;
Necessary Action..............................................................................17
Section 3.3 Consents And Approvals; No Violations.........................................................17
Section 3.4 Brokers Or Finders............................................................................18
Section 3.5 Capitalization................................................................................18
Section 3.6 Investment Intent.............................................................................18
ARTICLE IV COVENANTS................................................................................................18
Section 4.1 Tax Matters...................................................................................18
Section 4.2 Further Assurances............................................................................19
Section 4.3 Proprietary Information.......................................................................19
Section 4.4 Form 8-K......................................................................................19
ARTICLE V INDEMNIFICATION...........................................................................................19
Section 5.1 Indemnification By Sellers....................................................................19
Section 5.2 Indemnification By HealthStar.................................................................20
Section 5.3 Survival Of Representations And Warranties;
Limitations On Indemnity......................................................................20
Section 5.4 Notice And Opportunity To Defend..............................................................20
Section 5.5 Mitigation Of Loss............................................................................21
Section 5.6 Subrogation...................................................................................21
Section 5.7 Tax Indemnification...........................................................................21
Section 5.8 Remedy........................................................................................21
Section 5.9 Investigation.................................................................................21
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ARTICLE VI PRE-CLOSING COVENANTS OF SELLERS.........................................................................21
Section 6.1 Access And Investigation......................................................................21
Section 6.2 Operation Of Business.........................................................................22
Section 6.3 Filings And Consents..........................................................................24
Section 6.4 Notification..................................................................................24
Section 6.5 No Negotiation................................................................................25
Section 6.6 Best Efforts..................................................................................25
Section 6.7 Confidentiality; Publicity....................................................................25
Section 6.8 Stockholder Distributions.....................................................................26
Section 6.9 Transition....................................................................................26
ARTICLE VII PRE-CLOSING COVENANTS OF HEALTHSTAR.....................................................................26
Section 7.1 Best Efforts..................................................................................26
ARTICLE VIII CONDITIONS.............................................................................................26
Section 8.1 Conditions To Each Party's Obligation To Effect
The Closing...................................................................................26
Section 8.2 Conditions To The Obligations Of HealthStar...................................................26
Section 8.3 Conditions To The Obligations Of Sellers......................................................28
ARTICLE IX TERMINATION..............................................................................................29
Section 9.1 Termination...................................................................................29
Section 9.2 Effect Of Termination.........................................................................29
ARTICLE X MISCELLANEOUS.............................................................................................30
Section 10.1 Knowledge....................................................................................30
Section 10.2 Governing Law And Consent To Jurisdiction....................................................30
Section 10.3 Amendment And Modification...................................................................30
Section 10.4 Notices......................................................................................30
Section 10.5 [Reserved]...................................................................................32
Section 10.6 Counterparts.................................................................................32
Section 10.7 Incorporation By Reference...................................................................32
Section 10.8 Entire Agreement; Third Party Beneficiaries..................................................32
Section 10.9 Severability.................................................................................32
Section 10.10 Service Of Process..........................................................................32
Section 10.11 Specific Performance........................................................................32
Section 10.12 Assignment..................................................................................32
Section 10.13 Expenses....................................................................................32
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Section 10.14 Waivers.....................................................................................33
Section 10.15 Attorney Fees...............................................................................33
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INDEX OF DEFINED TERMS
DEFINED TERMS SECTION
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Accredited Investor...................................................................2.27(a)(iii)
Acquisition Transaction...............................................................6.2(d)
Agreement.............................................................................Preamble
Blue Sky laws.........................................................................2.27(d)
Closing...............................................................................1.3
Closing Date..........................................................................1.3
COBRA.................................................................................2.9(b)
Code..................................................................................Recitals
Employee Benefit Plans................................................................2.9(a)
Encumbrances..........................................................................1.1
ERISA.................................................................................2.9(a)
GAAP..................................................................................2.5
Government Entity.....................................................................2.5
Group Health Plans....................................................................2.9(b)
Hazardous.............................................................................2.20
Hazardous Materials...................................................................2.20
HealthStar............................................................................Preamble
HealthStar Acquisition Shares.........................................................1.2
HealthStar Shares.....................................................................Recitals
Indemnifying Party....................................................................5.4
Indemnitee............................................................................5.4
Intellectual Property.................................................................2.17
Key Individual........................................................................Preamble
Key Individuals.......................................................................Preamble
Knowledge.............................................................................10.1
Landlord..............................................................................2.15
Legends...............................................................................2.27(f)
Letter of Intent......................................................................Recitals
Liability.............................................................................2.23(a)
Listed Individuals....................................................................2.30
Losses................................................................................5.1
M2....................................................................................Preamble
M2 Contract...........................................................................2.5
M2 Financial Statements...............................................................2.6
M2 Intellectual Property..............................................................2.17
M2 Shares.............................................................................Recitals
Material Adverse Effect...............................................................2.8
Material Agreement(s).................................................................2.18
Ordinary Course of Business...........................................................2.7
Parties...............................................................................Preamble
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Party.................................................................................Preamble
PCBs..................................................................................2.20
Permits...............................................................................2.13(a)
Person................................................................................2.8
Pre-Closing Period....................................................................6.1
Preferred Stock.......................................................................3.5
Proprietary Information...............................................................4.3
Qualified Beneficiaries...............................................................2.9(b)
Reasonable Inquiry....................................................................10.1
Related Party.........................................................................2.25(e)
Representatives.......................................................................2.25(f)
Salesmation...........................................................................Preamble
Salesmation Contract..................................................................2.5
SEC...................................................................................2.27(c)
Securities Act........................................................................2.27(a)(iii)
Sellers...............................................................................Article
Tax Return............................................................................2.14
Taxes.................................................................................2.14
Toxic.................................................................................2.20
Transaction...........................................................................Recitals
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SCHEDULES
Schedule 2.1(a) M2: No subsidiaries or equity interests
Schedule 2.1(b) M2: Foreign State Qualification
Schedule 2.1(c) Salesmation: Foreign State Qualification
Schedule 2.1(d) Certificate of Incorporation and Bylaws of Salesmation
Schedule 2.1(e) Articles of Incorporation and Bylaws of M2
Schedule 2.2(a) Capitalization of M2
Schedule 2.2(b) Encumbrances on M2 Capital Stock, Including M2 Shares
Schedule 2.5 Third Party Consents Necessary or Required for M2 to Perform the
Agreement
Schedule 2.6(a) M2 Unaudited Financial Statements
Schedule 2.6(b) M2 Audited Financial Statements (within 15 days of signing the
Agreement)
Schedule 2.7 Liabilities of M2, including each note, bond, mortgage, indenture,
pledge, security agreement, credit agreement, guarantee, suretyship
arrangement, endorsement or other instrument in respect of
indebtedness for borrowed money or guarantees or promises
Schedule 2.8 Adverse Changes Suffered by M2
Schedule 2.9 Employee Benefit Plans; ERISA
Schedule 2.10 Major Customers of M2
Schedule 2.12 Litigation
Schedule 2.13 No Default; Compliance with Applicable Laws; Permits
Schedule 2.14 Tax Matters
Schedule 2.15 Real Property Leases
Schedule 2.16 Properties
Schedule 2.17(a) All M2 Intellectual Property
Schedule 2.17(b) Pending or Threatened Intellectual Property Claims Against M2
Schedule 2.18 Contracts/Material Agreements; Indebtedness Instruments and
Guarantees of M2
Schedule 2.19 Labor Matters
Schedule 2.23 Performance of Services
Schedule 2.24 Insurance
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Schedule 2.25 Related Party Transactions
Schedule 2.30 Knowledge; Listed Individuals of M2
viii
EXHIBITS
EXHIBIT A Letter of Intent dated January 24, 2001
EXHIBIT B Accredited Investor Questionnaire
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SHARE EXCHANGE AGREEMENT
Share Exchange Agreement, dated as of February ___, 2001 (this
"Agreement") by and among HealthStar Corp., a Delaware corporation
("HealthStar"), and Xxxxxxxxxxx.xxx, Inc., a Delaware corporation
("Salesmation"), M2(M-squared) Limited, Inc., a Maryland corporation ("M2"),
and each of Xxxxxxx X. Pellet, the President and Chief Executive Officer of M2,
Mercedes M. Pellet, the Chief Operating Officer of M2, and Xxxxx-Xxxx Pellet,
Senior Vice President of M2 (collectively, the "Key Individuals" and
individually, a "Key Individual"). Each of HealthStar, Salesmation, M2 and each
of the Key Individuals is deemed a "party" to this Agreement and hereinafter
may collectively be referred to as the "parties."
RECITALS
A. M2 is a wholly owned subsidiary of Salesmation, which is the holder
and owner of all of the Sixty Six Thousand Two Hundred (66,200) issued and
outstanding shares of capital stock, par value $1.00 per share, of M2 (the "M2
Shares");
B. As set forth in a letter of intent, dated January 24, 2001, by and
among HealthStar, Salesmation and M2 (the "Letter of Intent"), attached hereto
as Exhibit A, Salesmation wishes to exchange such M2 Shares for shares of
common stock of HealthStar, par value $.00l per share (the "HealthStar
Shares"), and HealthStar wishes to issue the HealthStar Shares in exchange for
the M2 Shares, upon the terms and subject to the conditions set forth in this
Agreement; and
C. The parties intend that the share exchange transaction contemplated
by this Agreement (the "Transaction") qualifies as a reorganization within the
meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements as set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE I
EXCHANGE OF SHARES
SECTION 1.1 EXCHANGE OF M2 SHARES. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date (as hereinafter
defined), Salesmation shall sell, assign, transfer and deliver to HealthStar,
and HealthStar shall purchase from Salesmation, the M2 Shares, free and clear
of all options, pledges, security interests, liens, claims, preemptive rights,
imperfections of title, conditions or restrictions of any nature, or other
encumbrances, or restrictions on voting or transfer ("Encumbrances"), other
than restrictions imposed by Federal or state securities laws.
SECTION 1.2 ISSUANCE AND EXCHANGE OF HEALTHSTAR SHARES. On the Closing
Date (as hereinafter defined) and subject to the terms and conditions set forth
in this Agreement, in consideration of the sale, assignment, transfer and
delivery of the M2 Shares, HealthStar shall deliver to Salesmation an aggregate
of four million (4,000,000) HealthStar Shares (collectively, the "HealthStar
Acquisition Shares"). In order that the Transaction qualifies as a
reorganization under Section 368(a)(1)(B) of the Code, the consideration paid
by HealthStar shall consist solely of the HealthStar Acquisition Shares (which
are voting common stock) and no other consideration shall be paid by HealthStar.
SECTION 1.3 CLOSING. The Transaction contemplated by this Agreement
shall take place at a closing (the "Closing") to be held on or before April 15,
2001 at the offices of Xxxxx & Xxxxxxx, LLP, 0000 X Xxxxxx, X.X., Xxxxx 000,
Xxxxxxxxxx, X.X. 00000 at 12:00 Noon, Washington, D.C. time or at such other
place, time or date on which the parties may mutually agree in writing
following satisfaction of Articles VI, VII and VIII, below (the date on which
the Closing takes place being the "Closing Date"), and effective as of 12:01
a.m. on the Closing Date.
(a) CLOSING DELIVERIES BY SALESMATION, M2 AND THE KEY INDIVIDUALS. At
the Closing, Salesmation shall deliver or cause to be delivered to HealthStar
(i) stock certificates evidencing the M2 Shares (or delivery of affidavits
accounting for any lost certificates), duly endorsed in blank with Medallion
Guarantee or accompanied by stock powers duly executed in blank, and (ii) all
other previously undelivered documents required to be delivered by Salesmation,
M2 and the Key Individuals to HealthStar at or prior to the Closing Date in
connection with the Transaction contemplated hereby including those documents
required to be delivered by Article VIII hereof.
(b) CLOSING DELIVERIES BY HEALTHSTAR. At the Closing, HealthStar shall
deliver to Salesmation, stock certificates evidencing the HealthStar
Acquisition Shares, and (ii) all other previously undelivered documents
required to be delivered by HealthStar to Salesmation, M2 and the Key
Individuals at or prior to the Closing Date in connection with the Transaction
contemplated hereby including those documents required to be delivered by
Article VIII hereof.
(c) DIRECTORS OF HEALTHSTAR ON AND AFTER THE CLOSING DATE. On the
Closing Date, Xxxxx X. Xxxxx shall resign as a director of HealthStar. Xxxxxx
X. Xxxxx, who shall remain Chairman of HealthStar's board of directors, Xx.
Xxxxxxx X. Xxxx, Xx. Xxxx X. Xxxxxx and Xxxxxx Xxxxxxxx, Xx.,
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currently serving as directors of HealthStar immediately prior to the Closing
Date, shall continue to serve on HealthStar's board of directors. In addition,
HealthStar's board of directors shall be expanded to include Xxxxxxx X. Pellet
and Xxxxx-Xxxx Pellet. Each director shall hold office, subject to the
applicable provisions of HealthStar's certificate of incorporation and bylaws,
until the next annual stockholder's meeting of HealthStar and until their
respective successors shall be duly elected or appointed and qualified.
(d) OFFICERS OF HEALTHSTAR ON AND AFTER THE CLOSING DATE. On the
Closing Date, Xxxxxx X. Xxxxx shall continue to serve as Chief Executive
Officer and President of HealthStar, and Xxxxxx X. Xxxxxx shall continue to
serve as the Chief Financial Officer of HealthStar, subject to the applicable
provisions of the certificate of incorporation and bylaws of HealthStar, until
their respective successors shall be duly elected or appointed and qualified.
SECTION 1.4 TRANSFER TAXES. All transfer taxes, fees and duties under
applicable law incurred in connection with the sale and transfer of the M2
Shares under this Agreement will be borne and paid by Sellers (as hereinafter
defined) and Sellers shall promptly reimburse HealthStar for any such tax, fee
or duty paid by HealthStar. All transfer taxes, fees and duties under
applicable law incurred in connection with the sale and transfer of the
HealthStar Acquisition Shares under this Agreement will be borne and paid by
HealthStar and HealthStar shall promptly reimburse Sellers for any tax, fee or
duty paid by Sellers. Notwithstanding anything in this Section 1.4 to the
contrary, however, HealthStar shall not pay, or reimburse Sellers for, any
transfer taxes, fees and duties imposed upon Sellers under applicable law.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Salesmation, M2 and each of the Key Individuals hereby jointly and
severally (collectively, the "Sellers"), represent and warrant to HealthStar as
of the date hereof and as of the Closing Date, as set forth below.
SECTION 2.1 ORGANIZATION. Each of Salesmation, M2 and Salesmation's
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdiction of its incorporation and
each of Salesmation, M2 and Salesmation's subsidiaries has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. As set forth on Schedule
2.1(a), M2 has no subsidiaries nor does it hold any equity interests in any
other person or entity including any other corporation, partnership, limited
liability company, business trust or joint venture. As set forth on Schedules
2.1(b) and 2.1(c), respectively, each of Salesmation and M2 is duly qualified
or licensed to do business as a foreign corporation or other entity and is in
good standing in each jurisdiction in which the nature of the business
conducted by it makes such qualification or licensing necessary. Each of
Salesmation and M2 has made available to HealthStar complete and correct copies
of the articles or certificate of incorporation and bylaws, as currently in
effect.
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SECTION 2.2 CAPITALIZATION. Schedule 2.2(a) sets forth all of the
authorized, issued and outstanding capital stock of M2 on a fully diluted
basis. All of the issued and outstanding shares of capital stock of M2
including the M2 Shares, are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth in Schedule
2.2(b), there are no existing Encumbrances including, but not limited to, (a)
options, warrants, calls, subscriptions or other rights, convertible
securities, agreements or commitments of any character obligating M2 to issue,
transfer or sell any shares of capital stock or other equity interest in M2 or
securities convertible into or exchangeable for such shares or equity
interests; (b) contractual obligations of M2 to repurchase, redeem or otherwise
acquire any capital stock of M2 or (c) voting trusts or similar agreements to
which M2 is a party with respect to the voting of the capital stock of M2.
SECTION 2.3 OWNERSHIP OF STOCK. Except as set forth in Schedule 2.3,
the M2 Shares are owned by Salesmation free and clear of all Encumbrances,
other than restrictions imposed by Federal and state securities laws. Upon the
consummation of the Transaction contemplated hereby, HealthStar will acquire
title to the M2 Shares free and clear of all Encumbrances, other than
restrictions imposed by Federal and state securities laws.
SECTION 2.4 AUTHORIZATION; VALIDITY OF AGREEMENT. Each of Salesmation
and M2 has the power and authority and each of the Key Individuals, in their
individual capacity, have full power and authority, without the need for
spousal, trustee or guardian consent, to enter into execute, deliver and
perform this Agreement and to consummate the Transaction contemplated hereby.
This Agreement has been duly executed and delivered by each of the Sellers and,
assuming due and valid authorization, execution and delivery hereof by
HealthStar, this Agreement constitutes a valid and binding obligation of each
of the Sellers, enforceable against each of the Sellers in accordance with its
terms, except that (a) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now
or hereafter in effect, affecting enforcement of creditors' rights generally;
and (b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
SECTION 2.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth
in Schedule 2.5, neither the execution, delivery, nor performance of this
Agreement by each of Salesmation and M2 nor the consummation of the Transaction
contemplated hereby will (a) violate any provision of the certificate or
articles of incorporation or bylaws of either of Salesmation or M2; (b) result
in a violation or breach of, conflict with, constitute (with or without due
notice or lapse of time or both) a default (or give rise to any obligation,
right of termination, cancellation, payment or acceleration) under, or result
in the creation of any lien, security interest, charge or encumbrance upon any
of the properties or assets of each of Salesmation or M2, or give rise to any
obligation, right of termination, cancellation, acceleration or increase of any
obligation or a loss of material benefit under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which each of Salesmation or M2
is a party or by which each of Salesmation or M2 or any of its properties or
assets may be bound (each, an "M2 Contract" or a "Salesmation Contract" as the
context may require); (c) violate any order, writ, judgment, injunction,
decree, law, statute, rule or regulation applicable to each of Salesmation, M2
or any of Salesmation's or M2's properties or assets, or (d)
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except for those filings required pursuant to applicable state and federal
securities laws, require on the part of each of Salesmation and M2 any filing
or registration with, notification to, or authorization, consent or approval
of, any court, legislative, executive or regulatory authority or agency
("Government Entity").
SECTION 2.6 M2 FINANCIAL STATEMENTS. As set forth on Schedule 2.6(a),
Sellers have, prior to the date of this Agreement, made available to HealthStar
true and complete copies of M2's unaudited year-end balance sheets for each of
the fiscal years ended August 31, 2000 and August 31, 1999 and an unaudited
balance sheet as of December 31, 2000 with successive months as such become
available and the related statements of operations of M2 for such fiscal years
or interim period, as the case may be, ended on such date (the "M2 Financial
Statements"). As set forth on Schedule 2.6(b), within fifteen days of executing
this Agreement, Sellers shall provide audited M2 Financial Statements to
HealthStar. The M2 Financial Statements were prepared in accordance with
generally accepted accounting principles ("GAAP") (except that there are no
notes attached thereto and the interim statements do not have year-end
adjustments) and present fairly the financial position of M2 as of the dates
thereof and the results of its operations for the periods then ended.
SECTION 2.7 NO UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 2.7 and except (a) for liabilities and obligations incurred in the
Ordinary Course of Business (as hereinafter defined) after August 31, 2000, (b)
for liabilities and obligations disclosed in or covered by the M2 Financial
Statements, and (c) for liabilities and obligations incurred in connection with
the Transaction contemplated hereby or otherwise as contemplated by this
Agreement, since August 31, 2000, M2 has not incurred any liabilities or
obligations that would be required to be reflected or reserved against in a
balance sheet of M2, prepared in accordance with GAAP. Action taken by or on
behalf of M2 shall not be deemed to have been taken in the "Ordinary Course of
Business" unless such action is: (a) recurring in nature, consistent with M2's
past practices with regard to M2's normal day-to-day operations; (b) taken in
good faith in accordance with sound and prudent business practices; and (c) not
required to be authorized by M2's sole stockholder, Salesmation, M2's board of
directors or any committee of M2's board of directors, and does not require any
other separate or special authorization of any nature.
SECTION 2.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 2.8, since August 31, 2000, M2 has not (a) suffered any change or
changes constituting in the aggregate, a Material Adverse Effect (as
hereinafter defined) and to each of Sellers' Knowledge (as defined in Section
10.1), no event has occurred that is reasonably likely to have a Material
Adverse Effect; (b) suffered any loss, damage or destruction to, or any
interruption in the use of any of M2's assets (whether or not covered by
insurance) that would constitute a Material Adverse Effect; (c) amended its
articles of incorporation or bylaws; (d) split, combined or reclassified the
capital stock of M2; (e) declared or set aside or paid any dividend or other
distribution with respect to the capital stock of M2, (f) changed its
accounting principles, practices or methods, except as required by GAAP or
applicable law; (g) made any capital expenditure in excess of Twenty Thousand
Dollars ($20,000); (h) written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness; (i) pledged or hypothecated any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance; (j) entered
into any transaction outside the Ordinary Course of Business; (k) incurred,
assumed or otherwise become
5
subject to any liability or obligation, other than in the Ordinary Course of
Business; (l) waived or released any material right; (m) approved any material
increase, direct or indirect, or other material change in the compensation paid
or payable to any officer, director, employee, independent contractor or agent
of M2, or established or created any employment, deferred compensation or
severance agreement or employee benefit plan or amended any of the foregoing;
(n) suffered any material loss of personnel, authorized any change in the terms
and conditions of the employment of senior members of management of M2 or
incurred any labor trouble; (o) made any arrangements relating to any royalty,
dividend or similar payment entered into by M2 based on the sales volume of M2
(other than sales commission arrangements), other than in the Ordinary Course
of Business; (p) entered into any material agreement with respect to the
endorsement of products or services, other than in the Ordinary Course of
Business; (q) revalued any of its material assets; (r) amended or terminated
any Material Agreement (as defined in Section 2.18); or (s) agreed, committed,
offered, or attempted to take any of the actions referred to in clauses (a)
through (r).
As used in this Agreement, "Material Adverse Effect" means any
material adverse change in, or material adverse effect on, the business,
financial condition, prospects or operations of a Person (as hereinafter
defined), taken as a whole; provided, however, that any adverse effect on a
Person resulting from the execution of this Agreement, the announcement of this
Agreement and the Transaction contemplated hereby shall be excluded from the
determination of Material Adverse Effect. "Person" means a natural person or
any partnership, limited liability company, trust, estate, association,
corporation, custodian, nominee or any other individual or entity in its own or
any representative, capacity or any other entity.
SECTION 2.9 EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as set forth on
Schedule 2.9, there are no Employee Plans (defined below) that are currently
maintained or contributed to by M2, that have previously been maintained or
contributed to by M2, or with respect to which M2 has incurred or could incur
any liability. For purposes of this Section 2.9, the term Employee Plan shall
include (a) all "Employee Benefit Plans" as defined by Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (b) all
specified fringe benefit plans as defined in Section 6039D of the Code, and (c)
all other bonus, incentive compensation, deferred compensation, profit sharing,
stock option, stock appreciation right, stock bonus, stock purchase, employee
stock ownership, savings, life insurance, group insurance, or fringe benefit
plan, and any other employee compensation or benefit plan, agreement, policy,
practice, commitment, contract, or understanding (whether qualified or
nonqualified, currently effective or terminated, written or unwritten, funded
or unfunded), and any trust, escrow or other agreement related thereto.
(b) Except as disclosed on Schedule 2.9, M2 has complied with the
continuation coverage provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") with respect to all current
employees and former employees and other "Qualified Beneficiaries" (as defined
in Code Section 4980B(g)(1) and ERISA Section 607(3)). All Employee Plans that
are "Group Health Plans," as defined in Section 5000(b) of the Code, have been
operated in conformance with the Medicare as Secondary Payer provisions of the
Social Security Act, and no Person is subject to liability under Section
5000(a) of the Code with respect to any such Employee Plan.
6
(c) Except as set forth in Schedule 2.9, M2 has maintained workers'
compensation coverage as required by applicable state law through purchase of
insurance and not by self-insurance or otherwise.
(d) Except as required by law, the consummation of the Transaction
contemplated by this Agreement will not accelerate the time of vesting or the
time of payment, or increase the amount, of compensation due to any employee,
officer, former employee or former officer of M2.
(e) Except for the continuation coverage requirements of COBRA, the
requirements of other applicable law, or benefits, the full cost of which is
borne by the current or former employee (or his or her beneficiary), M2 has no
obligations or potential liability for medical expenses incurred by employees
following termination of employment or retirement under any of the Employee
Plans.
(f) None of the transactions contemplated by this Agreement will
result in an amendment, modification or termination of any of the Employee
Plans. No written or oral representations have been made to any employee or
former employee of M2 promising or guaranteeing any employer payment or funding
for the continuation of medical, dental, life or disability coverage for any
period of time beyond the Closing (except to the extent of coverage required
under COBRA). No written or oral representations have been made to any employee
or former employee of M2 concerning the employee benefits of HealthStar.
SECTION 2.10 MAJOR CUSTOMERS. Schedule 2.10 accurately identifies each
such customer or other Person that accounted for more than Twenty Thousand
Dollars ($20,000) of the gross revenues of M2 during the M2's fiscal year
ending August 31, 2000 or during the four month period ending December 31,
2000. Except as set forth in Schedule 2.10, Sellers have not received any
written notice or other communication and Sellers do not have Knowledge
indicating that any customer of M2 or other Person described in Schedule 2.10
is reasonably likely to cease dealing with M2, to change the applicable payment
methodology such that M2 revenues received from such customer are reduced, or
is reasonably likely to otherwise reduce the volume of business transacted by
such customer or other Persons or entity with M2 below the levels set forth in
Schedule 2.10.
SECTION 2.11 [RESERVED]
SECTION 2.12 LITIGATION. (a) Except as set forth in Schedule 2.12,
there is no action, suit, proceeding or investigation pending or, to the
Knowledge of Sellers, threatened, involving M2, by or before any Government
Entity or by any third party. There is no action, suit, proceeding or
investigation, which Sellers currently intend to initiate.
(b) Except as set forth in Schedule 2.12, M2 is not subject to any
continuing order of, consent decree, settlement agreement or other similar
written agreement with, or, to the Knowledge of Sellers, continuing
investigation by, any Government Entity, or any judgment, order, writ,
injunction, decree, or award of any Government Entity, court, or arbitrator,
including, without limitation, cease-and-desist or other orders.
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SECTION 2.13 NO DEFAULT; COMPLIANCE WITH APPLICABLE LAWS.
(a) Except as set forth in Schedule 2.13, M2 is not, nor have Sellers
received written notice or any similar communication alleging that M2 may be,
in default or violation of any term, condition or provision of (i) its
certificate of incorporation or bylaws; (ii) any of the Material Agreements (as
defined in Section 2.18); (iii) any note, bond, mortgage, indenture, pledge,
security agreement, credit agreement, guarantee, suretyship arrangement or
other instrument in respect of indebtedness for borrowed money to which M2 is a
party or M2 or any of its assets is bound; or (iv) any statute, law, ordinance,
rule, regulation, judgment, decree, order, arbitration award or material
licenses, permits, consents, approvals and authorizations of a Government
Entity (collectively "Permits") applicable to M2 including, without limitation,
laws, rules and regulations relating to the environment, insurance,
occupational health and safety, employee benefits, wages, workplace safety,
equal employment opportunity, and race, religious or sex discrimination.
(b) Except as set forth in Schedule 2.13, M2 has all Permits necessary
to conduct its business in the manner and in the areas in which it is presently
being conducted, and all such Permits are valid and in full force and effect.
SECTION 2.14 TAXES.
(a) Except as set forth in Schedule 2.14, M2 has (i) timely filed all
Tax Returns (as hereinafter defined) required to be filed by it, and all such
Tax Returns were true, correct and complete in all material respects when filed
and (ii) paid or accrued (in accordance with GAAP) all Taxes (as hereinafter
defined) whether or not shown to be due on such Tax Returns other than such
Taxes that are being contested in good faith by M2;
(b) Except as set forth on Schedule 2.14, Sellers have not received
written notice of any ongoing federal, state, local or foreign audits or
examinations of any Tax Return of M2;
(c) There are no outstanding written requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any material Taxes or deficiencies against M2;
(d) There are no material statutory liens for Taxes upon the assets of
M2 which are not provided for in the Financial Statements, except liens for
Taxes not yet due and payable and liens for Taxes that are being contested in
good faith and which are set forth on Schedule 2.14;
(e) The provisions for Taxes on the Financial Statements are
sufficient in all material respects for the payment of all accrued and unpaid
federal, state, county and local Taxes of any nature, and any applicable Taxes
owing to any foreign jurisdiction, whether or not assessed or disputed, as of
such date;
(f) Schedule 2.14 sets forth accrued and unpaid Federal and State
withholding taxes (including interest and penalties with respect thereto).
Except as set forth in Schedule 2.14, all Taxes and other assessments and
levies which M2 was required to withhold or collect have been
8
withheld and collected and have been paid over to the proper governmental
authorities when due (without regard to any extensions); and
(g) M2 is not a party to any agreement, contract or obligation which
requires a distribution, dividend or similar payment of money to any
shareholder of M2.
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise,
real or personal property, sales, withholding, social security, occupation,
use, service, service use, value added, license, net worth, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States
Internal Revenue Service or any taxing authority (whether domestic or foreign,
including, without limitation, any state, local or foreign government or any
subdivision or taxing agency thereof (including a United States possession),
whether computed on separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest, penalties or additional
amounts attributable to, or imposed upon, or with respect to, any such Taxes,
charges, fees, levies or other assessments.
"Tax Return" shall mean any report, return, document, declaration or
other information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes.
SECTION 2.15 REAL PROPERTY LEASES. Schedule 2.15 sets forth all real
property leases to which M2 is a party together with a summary of lease terms,
size, rental amounts, expiration dates, escalation provisions and landlord
contacts. M2 does not own any real property. Except as set forth in Schedule
2.15, M2 has good, valid and (if applicable) marketable title to or valid
leasehold interests in all real property leases, free and clear of any claims
of default or breaches which over the passage of time could result in claim of
default or payment of amounts other than as disclosed, other than liens for
taxes not yet delinquent, liens imposed by law for obligations not past due to
carriers, warehousemen, laborers, materialmen and the like, liens in respect of
pledges or deposits under workers' compensation laws or similar legislation,
purchase money security interests given in connection with the acquisition of
assets and minor liens and encumbrances that do not materially detract from the
value of the assets subject thereto or materially impair the operations of M2.
All of the premises subject to the lease are in good condition and repair
(ordinary wear and tear excepted) and are fully effective and afford M2
peaceful and undisturbed possession of the property subject to the lease. The
property and assets of M2 are sufficient for the conduct of its business as
presently conducted. To the Knowledge of Sellers on due inquiry, M2 is not in
violation of any zoning, building or safety ordinance, regulation or
requirement or other law or regulation applicable to the operation of its owned
or leased properties, nor has M2 received any notice of any such violation.
There are no defaults by M2 or, to the Knowledge of Sellers, by any other
party, including the "Landlord" as defined under each such lease, under any
lease of real property which might curtail in any material respect the present
use by M2 of its respective properties.
SECTION 2.16 PROPERTIES. Schedule 2.16 sets forth (a) all of M2's
equipment leases and the most recent rent (on an annualized basis) with respect
to each of such leases, (b) the vehicles owned or leased by M2 and the
designation of the primary driver with respect to such
9
vehicles, and (c) a listing of M2's bank accounts (including account numbers).
Except as set forth in Schedule 2.16, M2 has good, valid and (if applicable)
marketable title to or valid leasehold interests in all assets material to its
business and to those assets reflected on the Financial Statements (except for
assets disposed of, cash used and accounts receivable collected or written down
in ordinary course since August 31, 2000), free and clear of Encumbrances,
other than liens for taxes not yet delinquent, liens imposed by law for
obligations not past due to carriers, warehousemen, laborers, materialmen and
the like, liens in respect of pledges or deposits under workers' compensation
laws or similar legislation, purchase money security interests given in
connection with the acquisition of assets and minor liens and encumbrances that
do not materially detract from the value of the assets subject thereto or
materially impair the operations of M2. All equipment included in such assets
which is necessary to the business of M2 is in good condition and repair
(ordinary wear and tear excepted) and all leases of real or personal property
to which M2 is a party are fully effective and afford M2 peaceful and
undisturbed possession of the property subject to the lease. The property and
assets of M2 are sufficient for the conduct of its business as presently
conducted. To the Knowledge of Sellers, M2 is not in violation of any zoning,
building or safety ordinance, regulation or requirement or other law or
regulation applicable to the operation of its owned or leased properties, nor
has M2 received any notice of any such violation. There are no defaults by M2
or, to the Knowledge of Sellers, by any other party under any lease of real or
personal property which might curtail in any material respect the present use
by M2 of its respective properties.
SECTION 2.17 INTELLECTUAL PROPERTY. Schedule 2.17(a) sets forth all M2
Intellectual Property (as defined below). Except as set forth in Schedule
2.17(b), there are no pending or threatened claims against M2 of which Sellers
have been given written notice, by any Person relating to M2's use or ownership
of any trademarks, trademark registrations, trade names, trade secrets, service
marks, service names, logos, assumed names, copyrights and copyright
registrations, patents and all applications therefor, or other intellectual
property ("Intellectual Property"). M2 has such rights, by license, lease or
other agreement, with respect to the Intellectual Property used in M2's
business as currently conducted (collectively, the "M2 Intellectual Property")
as are necessary to permit M2 to conduct its business as currently conducted,
except where the failure to have such rights, individually or in the aggregate,
would not have a Material Adverse Effect. Except as set forth in Schedule
2.17(b), M2 has not received any notice or other communication (in writing or
otherwise) of, and no inquiry by Sellers has revealed, any actual, alleged,
possible or potential infringement of any M2 Intellectual Property by any other
Person.
SECTION 2.18 CONTRACTS.
Schedule 2.18 sets forth all the written Material Agreements (defined
below) relating to M2. Sellers have delivered or made available to HealthStar
copies of all written Material Agreements. Each Material Agreement is in full
force and effect and is valid and enforceable by M2 in accordance with its
terms. To the Knowledge of Sellers, no other Person is in default in the
observance or the performance of any term or obligation to be performed by it
under any Material Agreement. As used in this Agreement, "Material
Agreement(s)" shall mean each agreement, arrangement, instrument, bond,
commitment, franchise, indemnity, indenture, lease, license or understanding to
which M2 is a party or to which M2 or any of its respective properties is
subject that (i) obligates M2 to pay an amount in excess of Twenty Five
Thousand Dollars ($25,000) in any
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twelve (12) month period beginning after August 31, 2000; (ii) provides for the
extension of credit to an unaffiliated third party in an amount greater than
Twenty Five Thousand Dollars ($25,000); (iii) provides for a guaranty by M2 of
obligations of others in excess of Twenty Five Thousand Dollars ($25,000); (iv)
constitutes an employment agreement, consulting agreement or personal service
contract not terminable on less than sixty (60) days' notice without penalty;
(v) expressly limits, in any material respect, the ability of M2 to engage in
any business, compete with any Person or expand the nature or geographic scope
of its business; (vi) pursuant to which M2 is entitled to receive an amount in
excess of Twenty Five Thousand Dollars ($25,000) in any twelve month period
beginning after August 31, 2000; or (vii) pursuant to which M2 leases real
property.
SECTION 2.19 LABOR MATTERS. M2 is neither a party to, nor bound by,
any collective bargaining agreement, contract or other agreement or
understanding with any labor union or labor or organization and there is no
unfair labor practice or labor arbitration proceeding pending or, to the
Knowledge of Sellers, threatened against Sellers relating to M2. M2 is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed
for it or amounts required to be reimbursed to such employees. Except as set
forth in Schedule 2.19, upon termination of employment of any of said
employees, no severance or other payments will become due. Except as set forth
in Schedule 2.19, M2 does not have any policy, practice, plan or program of
paying severance pay or any form of severance compensation in connection with
the termination of employment or services. M2 is and heretofore has been in
compliance with all applicable laws and regulations respecting labor,
employment, fair employment practices, terms and conditions of employment, and
wages and hours. There are no charges of employment discrimination or unfair
labor practices. There are no grievances, complaints or charges that have been
filed under any dispute resolution procedure (including, but not limited to,
any proceedings under any dispute resolution procedure under any collective
bargaining agreement).
SECTION 2.20 ENVIRONMENTAL MATTERS. M2 is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
No Hazardous Materials (as defined below) are used or have been used, stored,
or disposed of by M2 or, to the Knowledge of Sellers, by any other Person on
any property leased or used by M2. For the purposes of the preceding sentence,
"Hazardous Materials" shall mean (a) materials which are listed or otherwise
defined as "Hazardous" or "Toxic" under any applicable local, state, federal
and/or foreign laws and regulations that govern the existence and/or remedy of
contamination on property, the protection of the environment from
contamination, the control of hazardous wastes, or other activities involving
hazardous substances, including building materials, or (b) any petroleum
products or nuclear materials. To the Knowledge of Sellers, no site operated or
leased by M2 contains any asbestos or asbestos-containing material, any
polychlorinated biphenyls ("PCBs") or equipment containing PCBs, or any urea
formaldehyde foam insulation.
SECTION 2.21 SUBSIDIARIES. M2 does not own or control any equity
security or other interest of any other corporation, limited partnership or
other business entity. M2 is not a participant in any joint venture,
partnership or similar agreement.
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SECTION 2.22 BROKER OR FINDERS. Sellers represent that no agent,
broker, investment banker, financial advisor or other firm or Person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee from Sellers in connection with the Transaction contemplated by this
Agreement.
SECTION 2.23 PERFORMANCE OF SERVICES.
(a) To the Knowledge of Sellers, except as set forth in Schedule 2.23,
M2 will not incur or otherwise become subject to any Liability (as defined
below) arising directly or indirectly from any services performed by, or on
behalf of, M2 on or at any time prior to the Closing Date other than a Liability
arising in the Ordinary Course of Business. "Liability" shall mean any debt,
obligation, duty or liability of any nature (including any unknown, undisclosed,
unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied,
vicarious, derivative, joint, several or secondary liability), regardless of
whether such debt, obligation, duty or liability would be required to be
disclosed on a balance sheet prepared in accordance with GAAP and regardless of
whether such debt, obligation, duty or liability is immediately due and payable.
(b) No customer or other Person has asserted or, to the Knowledge of
Sellers, threatened to assert, any material claim against M2 (i) under or based
upon any warranty provided by or on behalf of M2, or (ii) under or based upon
any other warranty relating to any services provided by or on behalf of M2. To
the Knowledge of Sellers, no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for the assertion of any
such claim, against M2.
SECTION 2.24 INSURANCE.
(a) Schedule 2.24 sets forth, with respect to each insurance policy
maintained by or at the expense of, or for the direct or indirect benefit of,
M2:
(i) the name of the insurance carrier that issued such
policy and the policy number of such policy;
(ii) whether such policy is a "Claims Made" or an
"Occurrences" policy; and
(iii) the per incident and aggregate policy coverage limit.
Schedule 2.24 also identifies (A) each pending application for
insurance that has been submitted by or on behalf of M2, and (B) each
self-insurance or risk-sharing arrangement affecting M2 or any of its assets.
Sellers have delivered to HealthStar accurate and complete copies of all of the
insurance policies identified in Schedule 2.24 (including all renewals thereof
and endorsements thereto) and all of the pending applications identified in
Schedule 2.24.
(b) Each of the policies identified in Schedule 2.24 is valid,
enforceable and in full force and effect, and has been issued by an insurance
carrier that is solvent, financially sound and reputable. All of the information
contained in the applications submitted in connection with said policies was (at
the times said applications were submitted) accurate and complete, and all
12
premiums and other amounts owing with respect to said policies have been paid in
full on a timely basis. The nature, scope and dollar amounts of the insurance
coverage provided by said policies are sufficient to adequately insure M2's
business, assets, operations, key employees, services and potential liabilities.
(c) There is no pending claim under or based upon any of the policies
identified in Schedule 2.24, and to the Knowledge of Sellers, no event has
occurred, and no condition or circumstance exists, that might (with or without
notice or lapse of time) directly or indirectly give rise to or serve as a basis
for any such claim.
(d) Sellers' have not received:
(i) any notice or other communication (in writing or
otherwise) regarding the actual or possible cancellation or invalidation of any
of the policies identified in Schedule 2.24 or regarding any actual or possible
adjustment in the amount of the premiums payable with respect to any of said
policies;
(ii) any notice or other communication (in writing or
otherwise) regarding any actual or possible refusal of coverage under, or any
actual or possible rejection of any claim under, any of the policies identified
in Schedule 2.24; or
(iii) any indication that the issuer of any of the policies
identified in Schedule 2.24 may be unwilling or unable to perform any of its
obligations thereunder.
SECTION 2.25 RELATED PARTY TRANSACTIONS.
(a) Except as set forth in Schedule 2.25, no Related Party (as defined
below) has (i) entered into, or has had any direct or indirect financial
interest in, any M2 Contract, any Salesmation Contract, transaction or business
dealing of any nature involving M2, (ii) had any direct or indirect interest of
any nature in any amount and in or otherwise relating to M2, or (iii) been
indebted to M2.
(b) Except as set forth in Schedule 2.25, no Related Party (or any
employee of, consultant to or other Representative (as defined below) of a
Related Party) provides, or has provided, any materials, services or support to
M2, whether or not for compensation.
(c) Except as set forth in Schedule 2.25, no Related Party presently
acquires, or has acquired, any materials, services or support from M2, whether
or not for compensation.
(d) Except as set forth in Schedule 2.25, no Related Party has any
claim or right against M2. No event has occurred, and to the Knowledge of
Sellers, no condition or circumstance exists, that would (with or without notice
or lapse of time) directly or indirectly give rise to or serve as a basis for
any claim or right in favor of any Related Party against M2.
13
(e) A "Related Party" means any person who is or has been a
stockholder, director or officer of M2 or Salesmation, any member of the family
of any such individual, or any entity that is an affiliate of any one of the
foregoing.
(f) "Representatives" of a specified party shall mean officers,
directors, employees, attorneys, accountants, advisors and other representatives
of such party.
SECTION 2.26 FULL DISCLOSURE.
(a) Neither this Agreement nor any schedule, exhibit or certificate
delivered pursuant hereto contains or will contain any untrue statement of a
material fact, nor omits or will omit to state any fact necessary to make any of
the representations, warranties or other statements or information contained
herein and therein not materially misleading. To the extent such representations
permit omission of items within the Knowledge of Sellers which would otherwise
be required to be discussed because they are not material or do not or would not
have a Material Adverse Effect, such omissions in the aggregate will not and do
not have a Material Adverse Effect on M2 or HealthStar.
(b) There is no fact within the Knowledge of Sellers that (i) is
reasonably likely to have a Material Adverse Effect on M2 or on the ability of
M2 to comply with or perform any covenant or obligation under this Agreement, or
(ii) is reasonably likely to have the effect of preventing, delaying, making
illegal or otherwise interfering with any of the transactions contemplated
hereby.
(c) All of the information set forth in the schedules, and all other
information regarding M2 and its business, condition, assets, liabilities,
operations, financial performance and net income that has been furnished to
HealthStar or any of its Representatives by or on behalf of Sellers or his or
its Representatives, including copies of M2 Contracts, Salesmation Contracts,
Material Agreements and other documents, is accurate and complete in all
material respects.
(d) Sellers have provided HealthStar and HealthStar's Representatives
with full and complete access to all of Seller's records and other documents and
data.
SECTION 2.27 INVESTMENT REPRESENTATIONS OF SALESMATION.
(a) QUALIFICATIONS.
(i) Salesmation (x) has prior investment experience,
including investment in non-listed and non-registered securities,
(y) has the capacity to evaluate the merits and risks of the
acquisition of the HealthStar Acquisition Shares, and (z) understands
the nature of an investment in the HealthStar Acquisition Shares and
is able to bear the economic risks of such an investment;
(ii) Salesmation is experienced in evaluating the merits and
risks of investing in the businesses and industries in which HealthStar
operates; and
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(iii) Salesmation is an "accredited investor" as defined in
Rule 501(a) of Regulation D under the Securities Act of 1933 (the
"Securities Act") and has completed the Accredited Investor
Questionnaire attached hereto as Exhibit B to the satisfaction of
HealthStar.
(b) INVESTMENT INTENT. Salesmation will acquire the HealthStar
Acquisition Shares pursuant to this Agreement for investment for its
own account, and not with a view to the distribution (as such term is
used in Section 2(11) of the Securities Act) thereof.
(c) HEALTHSTAR INFORMATION. Salesmation acknowledges that it (i) has
received and reviewed copies of the HealthStar Filings with the
Securities and Exchange Commission (the "SEC"); (ii) has been furnished
such information with respect to HealthStar's operations, business and
prospects as it believes necessary and appropriate to evaluate the
merits of an investment in the HealthStar Acquisition Shares; and (iii)
has been given the opportunity to ask questions of and receive answers
from HealthStar and its representatives concerning such information.
(d) RESALE RESTRICTIONS. Salesmation understands and acknowledges that
the HealthStar Acquisition Shares will not be registered under the
Securities Act and applicable state "Blue Sky" laws at or after the
time of issuance, and must be held indefinitely unless or until (i)
they are subsequently registered under the Securities Act and
applicable state "Blue Sky" laws or (ii) an exemption from such
registration is available for any subsequent sale or distribution.
(e) EXEMPT SALE. Salesmation understands and acknowledges that the
offer and sale of the HealthStar Acquisition Shares by HealthStar under
this Agreement has not been registered (i) under the Securities Act and
is intended to be exempt from the registration and prospectus delivery
requirements of the Securities Act by virtue of Section 4(2) of the
Securities Act and/or Regulation D thereunder, or (ii) under applicable
state securities laws and regulations in reliance upon exemptions
contained in such laws and regulations, and (iii) that the reliance of
HealthStar on such exemption is predicated in part on Salesmation's
representations set forth in this Section 2.27. Salesmation has not
offered the HealthStar Acquisition Shares to any Person or taken any
other action that of itself would cause the aforesaid non-public
offering exemption not to be available to HealthStar with respect to
the issuance of the HealthStar Acquisition Shares.
(f) LEGENDS ON CERTIFICATES. Salesmation understands and acknowledges
that any certificate or other instrument evidencing any of the
HealthStar Acquisition Shares shall be stamped or otherwise imprinted
with the legends (the "Legends") substantially in the form set forth
below:
(i) The following legend under the Securities Act:
"THE SECURITIES REPRESENTED BY THIS CERTFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR UNDER THE SECURITIES
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LAW OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD OR OFFERED
FOR SALE OR OTHERWISE HYPOTHECATED OR DISTRIBUTED EXCEPT
(A)(i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR
SUCH SECURITIES UNDER THE SECURITIES ACT OR (ii) PURSUANT TO
A VALID EXEMPTION FROM SUCH REGISTRATION UNDER THE SECURITIES
ACT AND UNDER THE SECURITIES LAW OF ANY STATE, AND (B) UPON
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL FOR THE
HOLDER, WHICH OPINION SHALL BE SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY THAT SUCH SALE IS IN COMPLIANCE WITH
THE SECURITIES ACT AND SUCH STATE SECURITIES LAW."
(ii) Any legend imposed or required by HealthStar's
certificate of incorporation or bylaws or applicable state securities laws.
Salesmation understands and acknowledges that HealthStar will
make, or cause to be made, a notation in its stock transfer registry with
respect to the restrictions on offer and sale of the HealthStar Acquisition
Shares.
(g) OTHER. Salesmation acknowledges and represents that the M2 Shares
being transferred to HealthStar as a result of the Transaction are being
transferred by Salesmation to HealthStar pursuant to and in reliance upon an
exemption from the registration requirements of Section 5 of the Securities Act,
and upon exemptions contained in applicable state securities laws.
SECTION 2.28 INVESTMENT REPRESENTATIONS OF SELLERS.
(a) Sellers understand that the HealthStar Acquisition Shares may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the HealthStar Acquisition Shares or
an available exemption from registration under the Securities Act, the
HealthStar Acquisition Shares must be held indefinitely. In particular, Sellers
understand that HealthStar Acquisition Shares may not be sold pursuant to Rule
144 promulgated under the Securities Act unless all of the conditions of that
Rule are met.
(b) HealthStar shall not be obligated to register for resale, nor shall
Sellers seek to register for resale, any HealthStar Acquisition Shares obtained
in the Transaction.
SECTION 2.29 CORPORATE NAME. M2 has not done or conducted business
under, and currently is not conducting business under, any name or other
corporate identity other than "M2 Limited."
SECTION 2.30 KNOWLEDGE OF INDIVIDUALS. Schedule 2.30 sets forth those
current officers, directors or employees (collectively, the "Listed
Individuals") that hold positions such that the Listed Individuals, in the
aggregate, have access to information relating to, and responsibility for, the
conduct and operation of M2's business.
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SECTION 2.31 STOCKHOLDER DISTRIBUTIONS. M2 has not, since August 31,
2000, (a) declared, set aside or paid any dividend or other distribution,
whether payable in cash, stock or other property, in respect of its capital
stock or (b) directly or indirectly redeemed, purchased or otherwise acquired
any shares of its capital stock or other securities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HEALTHSTAR
HealthStar hereby represents and warrants to Sellers as follows:
SECTION 3.1 ORGANIZATION. HealthStar is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as is now being
conducted. HealthStar is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a Material Adverse
Effect.
SECTION 3.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION.
HealthStar has the corporate power and authority to execute and deliver this
Agreement and to consummate the Transaction contemplated hereby. The execution,
delivery and performance by HealthStar of this Agreement, and the consummation
of the Transaction contemplated hereby, have been duly authorized by all
necessary corporate proceedings, and no other corporate action on the part of
HealthStar is necessary to authorize the execution and delivery by HealthStar of
this Agreement and the consummation by it of the Transaction contemplated
hereby. This Agreement has been duly executed and delivered by HealthStar and,
assuming due and valid authorization, execution and delivery hereof by Sellers,
is a valid and binding obligation of HealthStar, enforceable against it in
accordance with its terms, except that (a) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and (b)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
SECTION 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the
execution, delivery nor performance of this Agreement by HealthStar nor the
consummation by HealthStar of the Transaction contemplated hereby will (a)
violate any provision of the certificate of incorporation or bylaws of
HealthStar; (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of HealthStar, or give rise to any obligation, right of
termination, cancellation, acceleration or increase of any obligation or a loss
of material benefit under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which HealthStar is a party or by
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which HealthStar or any of its properties or assets may be bound; (c) violate
any order, writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to HealthStar or any of its properties or assets, or
(d) except for those filings required pursuant to applicable state and
federal securities laws, require on the part of HealthStar any filing or
registration with, notification to, or authorization, consent or approval of
any Government Entity.
SECTION 3.4 BROKERS OR FINDERS. HealthStar represents that no agent,
broker, investment banker, financial advisor or other firm or Person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee from HealthStar in connection with the Transaction contemplated by this
Agreement.
SECTION 3.5 CAPITALIZATION. As of the date hereof, the total authorized
capital stock of HealthStar is (a) 15,000,000 shares of HealthStar Common Stock,
par value $.001 per share and (b) 1,000,000 shares of Preferred Stock, par value
$.001 per share (the "Preferred Stock"). As of November 13, 2000, 4,345,872
shares of HealthStar Common Stock were issued and outstanding, and an additional
1,000,000 shares of HealthStar Common Stock were reserved for issuance with
respect to options or awards that have been or may be granted under HealthStar's
stock option and award plans or other employee agreements.
SECTION 3.6 INVESTMENT INTENT. The M2 Shares to be acquired under this
Agreement are being acquired by HealthStar with the intention of investment and
not with a view to any public distribution thereof, and HealthStar will not sell
or otherwise dispose of any such M2 Shares so acquired by it in violation of the
Securities Act or any applicable securities laws of any jurisdiction.
ARTICLE IV
COVENANTS
SECTION 4.1 TAX MATTERS. Sellers shall be liable for, and shall
indemnify and hold HealthStar harmless against, all Taxes with respect to M2
payable for any taxable year or taxable period ending on or before the Closing
Date. HealthStar and M2 shall be liable for, and shall indemnify and hold
Sellers harmless against, any and all Taxes imposed on M2 relating or
apportioned to any taxable year or portion thereof ending after the Closing
Date. To appropriately apportion any income Taxes relating to any taxable year
beginning before and ending after the Closing Date, the parties shall apportion
such income Taxes to the taxable period ending on or before the Closing Date by
a closing of M2's books consistent with their past practices for reporting
items, except that exemptions, allowances or deductions that are calculated on a
time basis shall be apportioned on a time basis. The existing management of
HealthStar shall be responsible for preparing the Tax Returns of HealthStar, and
Salesmation shall be responsible for preparing the Tax Returns of M2, for all
periods ending on or before the Closing Date. Each party shall cooperate and
consult with the other party in connection with the preparation of such Tax
Returns. The obligations of the parties set forth in this Section 4.1 shall be
unconditional and absolute, and shall remain in effect until thirty (30) days
after the expiration of the applicable statute of limitations.
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SECTION 4.2 FURTHER ASSURANCES. Each party agrees to use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Transaction contemplated by
this Agreement.
SECTION 4.3 PROPRIETARY INFORMATION. Unless and until the Closing
occurs, each party shall keep and retain in confidence and shall not use for any
purpose other than to evaluate the Transaction contemplated under this Agreement
any and all of the confidential and proprietary information respecting the other
parties set forth or referenced in the schedules or otherwise provided to the
receiving party by the disclosing party in connection with or in anticipation of
the Closing, irrespective of the form in which it is delivered or when delivered
(the "Proprietary Information"). The preceding requirement shall not apply to
Proprietary Information that (a) a party was in the possession of, or was
rightfully known by, the receiving party or its Representatives, without an
obligation to maintain its confidentiality prior to receipt from the disclosing
party or its Representatives, (b) is or becomes generally known to the public
without violation of this Agreement, (c) is obtained by the receiving party or
its Representatives in good faith from a third party having the right to
disclose it without an obligation of confidentiality, or (d) is independently
developed by the receiving party or its Representatives without the
participation of individuals who have had access to the Proprietary Information.
In the event the Agreement is terminated prior to Closing for any reason, the
receiving party agrees to either return to the disclosing party all of the
Proprietary Information subject to this Section 4.4 (including all copies) in
its possession or under its control or to purge, shred or otherwise destroy all
such Proprietary Information not returned, at the option of the disclosing
party. The receiving party shall, and shall cause each of its Representatives
to, keep and maintain all Proprietary Information subject to this Section 4.4
confidential in any case in which the Closing does not occur and not avail
itself of or use any of such Proprietary Information for its own benefit. The
receiving party shall promptly certify its compliance with the foregoing in the
event of any termination of the Agreement.
SECTION 4.4 FORM 8-K. HealthStar and the Sellers will cooperate with
each other in the preparation of a Form 8-K to be filed with the SEC describing
the Transaction contemplated by this Agreement and such other items as are
required by the rules and regulations of the SEC.
ARTICLE V
INDEMNIFICATION
SECTION 5.1 INDEMNIFICATION BY SELLERS. Subject to the limits set forth
in this Article V, Sellers agree to indemnify, defend and hold HealthStar, and
its respective officers, directors and agents, harmless from and in respect of
any and all losses, damages, Liability, costs and expenses (including, without
limitation, reasonable expenses of investigation and defense fees and
disbursements of counsel and other professionals) (collectively, "Losses"),
arising directly or indirectly out of or directly or indirectly due to any
inaccuracy of any representation or the breach of any warranty, covenant,
undertaking or other agreement of Sellers contained in this Agreement, including
the Exhibits and Schedules attached hereto and incorporated by reference herein
as set forth in Section 10.7 hereof.
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SECTION 5.2 INDEMNIFICATION BY HEALTHSTAR. Subject to the limits set
forth in this Article V, HealthStar agrees to indemnify, defend and hold Sellers
harmless from and in respect of any and all Losses that arising directly or
indirectly out of or directly or indirectly due to any inaccuracy of any
representation or the breach of any warranty, covenant, undertaking or other
agreement of HealthStar contained in this Agreement.
SECTION 5.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; LIMITATIONS ON
INDEMNITY. The representations and warranties of the parties contained in this
Agreement or in any instrument delivered pursuant to this Agreement will survive
the Closing Date and will remain in full force and effect thereafter for a
period of eighteen (18) months from the Closing Date; provided, however, that
the representations and warranties contained in Section 2.14 will remain in full
force and effect for a period equal to the applicable statute of limitations;
and provided, further, that such representations or warranties shall survive (if
at all) beyond such period with respect to any inaccuracy therein or breach
thereof, notice of which shall have been duly given within such time period in
accordance with this Article V. Anything to the contrary contained herein
notwithstanding, HealthStar shall not be entitled to recover Losses from the
Sellers nor shall the Sellers be entitled to recover Losses from HealthStar
unless and until the total of all claims for Losses with respect to any
inaccuracy or breach of any such representations or warranties or breach of any
covenants, undertakings or other agreements, whether such claims are brought
under this Article V or otherwise, exceeds Fifty Thousand Dollars ($50,000) in
the aggregate. If the total amount of such Losses exceeds Fifty Thousand Dollars
($50,000), then the party entitled to recover hereunder shall be entitled to
recover the full amount of such losses and not merely the portion of such
damages exceeding Fifty Thousand Dollars ($50,000).
SECTION 5.4 NOTICE AND OPPORTUNITY TO DEFEND. If an event occurs which
a party asserts is an indemnifiable event pursuant to Section 5.1 or 5.2, the
party seeking indemnification (the "Indemnitee") shall promptly notify the other
party obligated to provide indemnification (the "Indemnifying Party"). If such
event involves (a) any claim or (b) the commencement of any action or proceeding
by a third Person, the Indemnitee will give such Indemnifying Party prompt
written notice of such claim or the commencement of such action or proceeding;
provided, however, that the Indemnitee's failure to provide prompt notice as
provided herein will relieve the Indemnifying Party of its obligations hereunder
only to the extent that such failure prejudices the Indemnifying Party
hereunder. If any such action is brought against any Indemnitee and it notifies
the Indemnifying Party of the commencement thereof, the Indemnifying Party shall
be entitled to participate therein and, to the extent that it wishes, to assume
the defense thereof, with counsel reasonably satisfactory to the Indemnitee.
After notice from the Indemnifying Party to the Indemnitee of such election to
so assume the defense thereof, the Indemnifying Party shall not be liable to the
Indemnitee for any legal expenses of other counsel or any other expenses
subsequently incurred by the Indemnitee in connection with the defense thereof,
and the Indemnitee agrees to cooperate fully with the Indemnifying Party and its
counsel in the defense against any such asserted liability. The Indemnitee shall
have the right to participate at its own expense in the defense of such asserted
liability. In no event shall an Indemnifying Party be liable for any settlement
effected by the Indemnitee without the consent of the Indemnifying Party, which
will not be unreasonably withheld. In no event shall an Indemnifying Party
effect any settlement without the consent of the Indemnitee, which will not be
unreasonably withheld.
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SECTION 5.5 MITIGATION OF LOSS. Each Indemnitee is obligated to use
reasonable efforts to mitigate to the fullest extent practicable the amount of
any Loss for which it is entitled to seek indemnification hereunder.
SECTION 5.6 SUBROGATION. Upon making any payment of Losses of the
Indemnitee, the Indemnifying Party will, to the extent of such payment, be
subrogated to all rights of the Indemnitee against any third party in respect of
the Loss to which the payment relates; provided, however, that until the
Indemnitee recovers full payment of its Loss, any and all claims of the
Indemnifying Party against any such third party on account of such payment are
hereby made expressly subordinated and subjected in right of payment of the
Indemnitee's rights against such third party. Without limiting the generality of
any other provision hereof, each such Indemnitee and Indemnifying Party will
duly execute upon request all instruments reasonably necessary to evidence and
perfect the above described subrogation and subordination rights.
SECTION 5.7 TAX INDEMNIFICATION. None of the provisions of Article V,
with the exception of Section 5.5, shall apply to the claims, obligations,
liabilities, covenants and representations under Section 4.1, which shall be
governed solely by the terms thereof.
SECTION 5.8 REMEDY. Following the Closing, a party suffering a Loss,
due to any breach of or inaccuracy in any representation or warranty or any
breach, nonfulfillment or default in the performance of any of the covenants or
agreements contained in this Agreement (but not any such covenants or agreements
to the extent they are by their terms to be performed after the Closing Date),
shall have, in its sole and absolute discretion, the right to seek redress for
such Loss either through the indemnification provided for in this ARTICLE V or
through a claim for rescission of the entire transaction under appropriate
contract law, common law, statute, law, regulation or otherwise, including,
without limitation, under the Racketeer Influence and Corrupt Organizations Act
of 1970, as amended, all of which the parties hereby expressly reserve
notwithstanding the absence of fraud with respect to such breach, inaccuracy,
nonfulfillment or default.
SECTION 5.9 INVESTIGATION. The representations, warranties, covenants
and obligations of the parties, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or the
knowledge of, the other parties, any of the other Indemnitees or any of their
Representatives.
ARTICLE VI
PRE-CLOSING COVENANTS OF SELLERS
SECTION 6.1 ACCESS AND INVESTIGATION. Sellers shall ensure that, at all
times from the date hereof to and until the Closing Date (the "Pre-Closing
Period"):
(a) Sellers will provide HealthStar and its Representatives with free
and complete access at reasonable times and with reasonable notice to M2's
premises and assets, and to all existing books, records, Tax Returns, work
papers and other documents and information relating to M2;
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(b) Subject to standards and procedures acceptable to Sellers, Sellers
and their Representatives will provide HealthStar and its Representatives the
opportunity to meet with M2's personnel and a reasonable number of parties to
M2's Material Agreements; and
(c) Sellers and their Representatives will compile and provide
HealthStar and its Representatives with such additional financial, operating and
other data and information regarding M2 as HealthStar may request in good faith.
SECTION 6.2 OPERATION OF BUSINESS. Unless Sellers first obtain a
written waiver or consent from HealthStar, Sellers shall ensure that, during the
Pre-Closing Period:
(a) M2 conducts its operations exclusively in the Ordinary Course of
Business and consistent with past practice and uses its best efforts to preserve
intact its current business organization, keep available the services of its
current officers and employees and maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with M2;
(b) Sellers keep in full force all insurance policies covering M2
identified in Schedule 2.24;
(c) Sellers confer regularly with HealthStar concerning operational
matters and otherwise report regularly to HealthStar concerning the status of
M2's business, condition, assets, liabilities, operations, financial performance
and prospects;
(d) Sellers immediately notify HealthStar of any inquiry, proposal or
offer from any Person relating to any Acquisition Transaction (as defined
herein); "Acquisition Transaction" shall mean any transaction involving: (a) the
sale or other disposition of all or any portion of M2's business or assets
(other than in the Ordinary Course of Business); (b) the issuance, sale or other
disposition of (i) any capital stock of M2, (ii) any option, call, warrant or
right (whether or not immediately exercisable) to acquire any capital stock of
M2, or (iii) any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock of M2; or (c) any merger,
consolidation, business combination, share exchange, reorganization or similar
transaction involving M2;
(e) M2 does not effect or become a party to any Acquisition
Transaction;
(f) M2 does not form any subsidiary or acquire any equity interest or
other interest in any other Person;
(g) M2 does not make any capital expenditure in excess of Ten Thousand
Dollars ($10,000) or otherwise outside the Ordinary Course of Business;
(h) M2 does not enter into any contract involving annual payments by M2
in excess of Twenty-Five Thousand Dollars ($25,000);
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(i) M2 does not incur, assume or otherwise become subject to any
liability, except for current liabilities (of the type required to be reflected
in a balance sheet prepared in accordance with GAAP) incurred in the Ordinary
Course of Business;
(j) M2 does not establish or adopt any new Employee Plan, does not
amend any existing Employee Plan and does not pay any bonus or make any profit
sharing or similar payment to, or increase the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, except for merit increases made to
employees in the Ordinary Course of Business;
(k) M2 does not change any of its methods of accounting or accounting
practices in any respect, except as required by GAAP or applicable laws;
(l) M2 does not make any Tax election;
(m) M2 does not commence any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding and any informal proceeding), prosecution, contest,
hearing, inquiry, inquest, audit, examination or investigation involving any
Government Entity or third party;
(n) M2 does not (i) acquire, dispose of, transfer, lease, license,
mortgage, pledge or encumber any fixed or other assets, other than in the
Ordinary Course of Business; (ii) incur, assume or prepay any indebtedness,
liability or obligation or any other liabilities or issue any debt securities,
other than in the Ordinary Course of Business; (iii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, other than in the Ordinary
Course of Business; or (iv) make any loans, advances or capital contributions
to, or investments in, any other Person, other than in the Ordinary Course of
Business;
(o) M2 pays debts and Taxes when due subject to good faith disputes
thereof, and pays or performs other obligations when due;
(p) M2 does not transfer to any Person or entity any Intellectual
Property or intangible asset other than in the Ordinary Course of Business;
(q) M2 does not enter into or amend any Material Agreements;
(r) M2 does not pay, discharge or satisfy in any amount in excess of
Ten Thousand Dollars ($10,000) in any one case or Thirty Thousand Dollars
($30,000) in the aggregate, any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise) arising other than in
the Ordinary Course of Business, other than the payment, discharge or
satisfaction of liabilities reflected or reserved against the Financial
Statements or reasonably incurred in connection with the transactions
contemplated by this Agreement;
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(s) M2 gives all notices and other information required prior to the
Closing Date to be given to the employees of M2 and any applicable Government
Entity pursuant to applicable law in connection with the transactions provided
for in this Agreement; and
(t) M2 shall not enter into any transaction, related party
transaction, or take any other action that likely would cause or constitute a
breach of any, representation, warranty or covenant made by Sellers in this
Agreement.
SECTION 6.3 FILINGS AND CONSENTS.
(a) Sellers covenant and agree that each filing or notice required to
be made or given (pursuant to any applicable legal requirement, order or
contract, or otherwise) by Sellers in connection with the execution and
delivery of this Agreement or in connection with the consummation or
performance of the Transaction contemplated hereby shall be made or given as
promptly as practicable after the date of this Agreement;
(b) Sellers shall use his or its best efforts to obtain or cause to be
obtained each consent or estoppel letter required to be obtained (pursuant to
any applicable legal requirement, order or contract, or otherwise) by Sellers
in connection with the execution and delivery of this Agreement or in
connection with the consummation or performance of the Transaction contemplated
hereby (including each of the consents identified in Section 2.5 of the
Disclosure Schedule) as promptly as practicable after the date of this
Agreement and each of such consents shall remain in full force and effect
through the Closing Date;
(c) Sellers shall promptly deliver to HealthStar a copy of each filing
made, each notice given and each consent obtained by Sellers during the
Pre-Closing Period; and
(d) During the Pre-Closing Period, Sellers and their Representatives
shall cooperate with HealthStar and with HealthStar's Representatives, and
prepare and make available such documents and take such other actions as
HealthStar may request in good faith.
SECTION 6.4 NOTIFICATION.
(a) During the Pre-Closing Period, Sellers shall promptly notify
HealthStar of:
(i) the discovery by Sellers of any event, condition, fact or
Circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a breach of any representation or warranty made
by Sellers in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a breach of any representation or warranty made by Sellers in this
Agreement if (i) such representation or warranty had been made as of the time
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (ii) such extent, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
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(iii) any breach of any covenant or obligation of Sellers; and
(iv) any event, condition, fact or circumstance that may make
the timely satisfaction of any of the conditions set forth Article VIII
impossible or unlikely; and
(b) Sellers shall have the obligation to supplement any section of the
schedules prior to Closing with respect to any transaction permitted under
Section 6.2 or any matter described in Section 6.4(a) above which occurs during
the Pre-Closing Period. Such supplementation is not a waiver by HealthStar of
any breach of a representation or warranty as to the matter so supplemented.
SECTION 6.5 NO NEGOTIATION. During the Pre-Closing Period, none of
Sellers nor their Representatives directly or indirectly:
(a) shall solicit or encourage the initiation of any inquiry, proposal
or offer from any Person (other than HealthStar) relating to any Acquisition
Transaction;
(b) shall participate in any discussions or negotiations with, or
provide any non-public information to, any Person (other than HealthStar)
relating to any Acquisition Transaction; or
(c) shall consider the merits of any unsolicited inquiry, proposal or
offer from any Person (other than HealthStar) relating to any Acquisition
Transaction.
SECTION 6.6 BEST EFFORTS. During the Pre-Closing Period, Sellers shall
use their best efforts to cause the conditions set forth in Article VIII to be
satisfied on a timely basis, and shall not take any action or omit to take any
action, the taking or omission of which would or could reasonably be expected
to result in any of the representations and warranties set forth in Article II
of this Agreement becoming untrue, in any of the conditions of Closing set
forth in Article VIII not being satisfied.
SECTION 6.7 CONFIDENTIALITY; PUBLICITY. During the Pre-Closing Period:
(a) Sellers and their Representatives shall keep strictly confidential
the existence and terms of this Agreement prior to the issuance or
dissemination of any mutually agreed upon press release or other disclosure of
the Transaction contemplated hereunder;
(b) none of Sellers nor their Representatives shall issue or
disseminate any press release or other publicity or otherwise make any
disclosure of any nature (to any of M2's suppliers, customers, landlords,
creditors or employees or to any other Person) regarding the Transaction
contemplated by this Agreement, except as required by federal securities laws
or other applicable laws and except as otherwise agreed by the parties; and
(c) if Sellers are required by law to make any disclosure regarding
the Transaction contemplated by this Agreement, Sellers shall advise
HealthStar, at least two (2) business days prior to making such disclosure, of
the nature and content of the intended disclosure.
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SECTION 6.8 STOCKHOLDER DISTRIBUTIONS. M2 shall not, from the date
hereof through the Closing, (a) declare, set aside or pay any dividend or other
distribution, whether payable in cash, stock or other property, in respect of
its capital stock or (b) directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or other securities.
SECTION 6.9 TRANSITION. Sellers shall take all reasonable steps to
ensure that the business of M2 shall be integrated with the business of
HealthStar following the Closing.
ARTICLE VII
PRE-CLOSING COVENANTS OF HEALTHSTAR
SECTION 7.1 BEST EFFORTS. During the Pre-Closing Period, HealthStar
shall not take any action or omit to take any action, the taking or omission of
which would or could reasonably be expected to result in any of the
representations and warranties set forth in Article III of this Agreement
becoming untrue or in any of the conditions of closing set forth in Article
VIII not being satisfied, other than in accordance with the fiduciary
obligation of the Board of Directors, as determined under applicable law.
ARTICLE VIII
CONDITIONS
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
CLOSING. The obligations of Sellers, on the one hand, and HealthStar, on the
other, to consummate the Closing are subject to the satisfaction (or, if
permissible, waiver by the party for whose benefit such conditions exist) of
the following conditions:
(a) no arbitrator or Government Entity shall have issued any order,
decree or ruling, and there shall not be any statute, rule or regulation,
restraining, enjoining or prohibiting the consummation of the Transaction
contemplated by this Agreement; provided that the parties shall have used their
best efforts to cause any such order, decree, statute, rule or regulation to be
vacated or lifted; and
(b) all action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the Transaction
contemplated hereby shall have been duly and validly taken by the respective
boards of directors of HealthStar, Salesmation and M2 and, where applicable,
their shareholders.
SECTION 8.2 CONDITIONS TO THE OBLIGATIONS OF HEALTHSTAR. The
obligations of HealthStar to consummate the Transaction contemplated hereby are
subject to the satisfaction (or waiver by HealthStar) of the following further
conditions:
(a) the representations and warranties of Sellers shall be true and
accurate as of the Closing Date as if made at and as of such time (other than
those representations and warranties that
26
address matters only as of a particular date or only with respect to a specific
period of time which need to be true and accurate only as of such date or with
respect to such period);
(b) Sellers shall have performed in all material respects the
obligations hereunder required to be performed by them at or prior to the
Closing Date;
(c) HealthStar shall have received (i) a certificate signed by two
duly authorized executive officers of Salesmation, dated as of the Closing
Date, to the effect that, to the best of their Knowledge, the conditions set
forth in Section 8.2(a) and 8.2(b) have been satisfied; and (ii) a certificate
of the secretary or assistant secretary of Salesmation certifying that each
officer was authorized under Salesmation's bylaws to sign the certificate in
his or her capacity as stated in the officer's certificate;
(d) HealthStar shall have received an opinion letter from counsel for
Sellers, as of the Closing Date, in a form acceptable to HealthStar;
(e) On, before or simultaneously with the Closing, M2 shall have paid
all Federal, Maryland, and any other state withholding taxes (including
interest and penalties with respect thereto) for all quarters ending on or
before the Closing Date and, at HealthStar's request, shall provide
documentation from the applicable Government Entity that such withholding taxes
have been paid;
(f) there shall have been no Material Adverse Effect with respect to
M2's business, condition (financial or otherwise), assets, liabilities,
operations or financial performance since August 31, 2000;
(g) there shall be no outstanding bank loans to or on behalf of M2
(including, but not limited to, loans from Potomac Valley Bank which shall have
been paid off prior to or simultaneously with the Closing);
(h) there shall have been no distributions, payments or similar
transfers of money (except for duly earned or accrued salary);
(i) since the date of this Agreement, there shall not have been
commenced or threatened against M2 or against any Person affiliated with M2,
any proceeding:
(1) involving any challenge to, or seeking damages or other
relief in connection with, the Transaction contemplated hereunder, or
(2) that are reasonably likely to have the effect of
preventing, delaying, making illegal or otherwise interfering with the
Transaction contemplated hereunder or having a Material Adverse Effect on M2.
(j) Sellers shall have obtained the consents and estoppel letters
referenced in Schedule 2.5 and such other consents and estoppel letters
necessary to ensure, on and after the Closing Date, the continuation in full
force of the real property and equipment leases referenced in Schedules 2.15
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and 2.16 or shall have arranged pursuant to a sublease or otherwise to ensure
that M2 shall be entitled to all of the same rights and benefits of such leases
after the Closing Date as M2 is entitled to immediately before the execution of
this Agreement;
(k) the receipt of a fairness opinion by HealthStar from Xxxxxx Xxxxx
Xxxxx, Inc. (or another recognized investment banker) in a form acceptable to
HealthStar;
(l) M2 shall have net working capital at the time of Closing of
$35,000. For purposes of this Section 8.2(l), net working capital (excluding
amounts referred to in Section 8.2(e) and Section 8.2(g)) shall be defined as
current assets minus current liabilities;
(m) the execution by Key Individuals and such other key personnel of
M2 of employment agreements in a form acceptable to HealthStar;
(n) M2 shall have obtained key man insurance policies on Xxxxx-Xxxx
Pellet and Xxxxxxx X. Pellet, each in the amount of $1 million.
SECTION 8.3 CONDITIONS TO THE OBLIGATIONS OF SELLERS. The obligations
of Sellers to consummate the Transaction contemplated hereby are subject to the
satisfaction (or waiver by Seller) of the following conditions:
(a) the representations and warranties of HealthStar shall be true and
accurate as of the Closing Date as if made at and as of such time (other than
those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time which need to
be true and accurate only as of such date or with respect to such period);
(b) HealthStar shall have performed in all material respects all of
the obligations hereunder required to be performed by HealthStar, at or prior
to the Closing Date;
(c) Sellers shall have received (i) a certificate signed by two duly
authorized executive officers of HealthStar, dated as of the Closing Date, to
the effect that, to the best of their Knowledge the conditions set forth in
Section 8.3(a) and Section 8.3(b) have been satisfied and (ii) a certificate of
the secretary or assistant secretary of HealthStar certifying that each officer
was authorized under HealthStar's bylaws to sign the certificate in his or her
capacity as stated in the officer's certificate;
(d) At the Closing, HealthStar Shares shall continue to be listed on
the NASD OTC Bulletin Board and no inquiry or proceeding by the NASD shall then
be in progress for the possible delisting of such shares; and
(e) since the date of this Agreement, there shall not have been
commenced or threatened against HealthStar or against any Person affiliated
with HealthStar, any proceeding;
(1) involving any challenge to, or seeking damages or other
relief in connection with, the Transaction contemplated hereunder, or
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(2) that are reasonably likely to have the effect of
preventing, delaying, making illegal or otherwise interfering with the
Transaction contemplated hereunder or having a Material Adverse Effect on
HealthStar.
ARTICLE IX
TERMINATION
SECTION 9.1 TERMINATION. This Agreement may be terminated and the
Transaction contemplated hereby abandoned at any time prior to the Closing Date:
(a) by mutual written consent of Sellers and HealthStar;
(b) by either Sellers or HealthStar if the Transaction contemplated
hereby shall not have been consummated by April 15, 2001;
(c) by either Sellers or HealthStar if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the consummation of the Transaction
contemplated hereby and such order, decree, ruling or any other action shall
have become final and non-appealable;
(d) by HealthStar if there shall have been any material breach of a
representation and warranty or material obligation of Sellers hereunder and, if
such breach is curable, such default shall not have been remedied within ten
(10) days after receipt by Sellers of notice in writing from HealthStar
specifying such breach and requesting that it be remedied; provided, that such
ten (10) day period shall be extended for so long as Sellers shall be making all
reasonable attempts to cure such breach, unless the breach is not susceptible of
a cure;
(e) by Sellers if there shall have been any material breach of a
representation and warranty or material obligation of HealthStar hereunder and,
if such breach is curable, such default shall have not been remedied within ten
(10) days after receipt by HealthStar of notice in writing from Sellers
specifying such breach and requesting that it be remedied; provided, that such
ten (10) day period shall be extended for so long as HealthStar shall be making
all reasonable attempts to cure such breach, unless the breach is not
susceptible of a cure; or
(f) by HealthStar if the Board of Directors of HealthStar determines in
good faith after consulting with outside counsel, and in the absence of a breach
by Sellers, giving grounds for termination pursuant to Section 9.1(d), that such
action is necessary to comply with the fiduciary duties of the Board of
Directors of HealthStar under applicable law.
SECTION 9.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Sections 9.1(a), 9.1(b), and 9.1(c) above, this
Agreement shall forthwith become of no further effect and there shall be no
liability or obligation on the part of any party or their respective officers or
directors. In the event of the termination of this Agreement pursuant to Section
9.1(d) above, Sellers shall pay HealthStar, as liquidated damages, the sum of
two hundred fifty thousand dollars ($250,000). In the event of the termination
of this Agreement pursuant to
29
Section 9.1(e) and Section 9.1(f) above, HealthStar shall pay Sellers, as
liquidated damages, the sum of two hundred fifty thousand dollars ($250,000).
The liquidated damages shall be paid by HealthStar or Sellers, as applicable,
within ten (10) days of the termination of this Agreement. If HealthStar or
Sellers, as applicable, fail to pay any amount pursuant to this Section 9.2
when due, HealthStar or Sellers, as applicable, shall pay interest thereon,
from the date due until the date paid in full, at the prime rate as announced
from time to time in the Wall Street Journal and shall reimburse the other
party for all reasonable attorneys' fees and other costs and expenses
incurred in collecting the amount due. Each party agrees that it would be
impracticable or extremely difficult to fix the actual damages resulting from
a termination of this Agreement pursuant to Sections 9.1(d), 9.1(e) or
9.1(f). The parties believe that the payment pursuant to this Section 9.2
represents a reasonable endeavor by the parties to estimate a fair
compensation for the foreseeable losses that might result from such a
termination and, consequently, that such payment represents liquidated
damages and not a penalty. The sole remedy with respect to a termination of
this Agreement pursuant to Sections 9.1(d), 9.1(e) or Section 9.1(f) shall be
liquidated damages provided for in this Section 9.2.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 KNOWLEDGE. The term "Knowledge" as used in this Agreement
with respect to the Sellers shall mean the actual knowledge of any of the Listed
Individuals (set forth on Schedule 2.29) after Reasonable Inquiry. "Reasonable
Inquiry" with respect to any such Listed Individuals shall mean such inquiry and
investigation as are reasonable and customary under the circumstances, which
circumstances shall include the proposed sale of all of M2's stock, based upon
the nature and scope of such individual's specific position and responsibilities
with M2.
SECTION 10.2 GOVERNING LAW AND CONSENT TO JURISDICTION. The laws of the
State of Florida (irrespective of its choice of law principles) shall govern all
issues concerning the validity of this Agreement, the construction of its terms
and the interpretation and enforcement of the right and duties of the parties.
Each party irrevocably submits to the exclusive jurisdiction of the courts of
the State of Florida and the Federal courts of the United States of America
located in Florida (and the Florida state and Federal courts having jurisdiction
over appeals therefrom) in respect of the transaction contemplated by this
Agreement, the other agreements and documents referred to herein and the
Transaction contemplated by this Agreement and such other documents and
agreements.
SECTION 10.3 AMENDMENT AND MODIFICATION. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all respects
only by written agreement duly executed and delivered by all of the parties.
SECTION 10.4 NOTICES. All notices, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given (a)
when delivered by hand or by Federal Express or a similar overnight courier; (b)
five (5) days after being deposited in any United States Post Office enclosed in
a postage prepaid, registered or certified envelope addressed; or (c) when
successfully transmitted by telecopier (with a confirming copy of such
communication to be
30
sent as provided in clauses (a) or (b) above), to the receiving party at the
address or telecopier number set forth below (or at such other address or
telecopier number for a party as shall be specified by like notice); provided
however, that any notice of change of address or telecopier number shall be
effective only upon receipt:
(a) if to HealthStar, to:
HealthStar Corp.
2875 N.E. 000xx Xxxxxx
Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attn: Xxxxxx X. Xxxxx, President
with a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx, LLP
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
(b) if to Salesmation, to:
Xxxxxxxxxxx.xxx, Inc.
0 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attn: Xxxxxxx Xxxxxx, President and Chief Executive Officer
(c) if to M2 and the Key Individuals, to:
M2 Limited, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxxxx Xxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attn: Xxxxxxx X. Pellet, President and Chief Executive Officer
31
SECTION 10.5 [Reserved].
SECTION 10.6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, all of which shall together be considered out and the same
agreement.
SECTION 10.7 INCORPORATION BY REFERENCE. The Preamble and Recitals to
this Agreement and the Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
SECTION 10.8 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This
Agreement (including the documents incorporated herein by reference in Section
10.7 hereof and other documents and instruments referred to herein) (a)
constitutes the entire agreement and supersedes any prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) except as expressly provided herein, are not
intended to confer upon any Person other than the parties herein any rights or
remedies hereunder.
SECTION 10.9 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
SECTION 10.10 SERVICE OF PROCESS. Each party irrevocably consents to
the service of process outside the territorial jurisdiction of the courts
referred to in Section 10.2 hereof in any such action or proceeding by mailing
copies thereof by registered United States mail, postage prepaid, return receipt
requested, to its address as specified in or pursuant to Section 10.4 hereof.
However, the foregoing shall not limit the right of a party to effect service of
process on the other party by any other legally available method.
SECTION 10.11 SPECIFIC PERFORMANCE. Each party acknowledges and agrees
that in the event of any breach of this Agreement each nonbreaching party would
be irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties will (a) waive, in any action
for specific performance, the defense of adequacy of a remedy at law and (b) be
entitled, in addition to any other remedy to which they may be entitled at law
or in equity, to compel specific performance of this Agreement in any action
instituted in accordance with Section 10.2.
SECTION 10.12 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either party (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by the parties and their respective
permitted successors and assigns.
SECTION 10.13 EXPENSES. Except as otherwise provided herein, all costs
and expenses incurred in connection with the transactions contemplated hereby,
this Agreement and the
32
consummation of the Transaction contemplated hereby shall be paid by the
party incurring such costs and expenses, whether or not the Transaction
contemplated hereby is consummated.
SECTION 10.14 WAIVERS. Except as otherwise provided in this Agreement,
any failure of either party to comply with any obligation, covenant, agreement
or condition herein may be waived by the party or parties entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
SECTION 10.15 ATTORNEY FEES. In the event of a dispute with respect to
the subject matter of this Agreement, the prevailing party in any proceeding,
including arbitration commenced to resolve such disputes, shall be entitled to
an award of its reasonable attorney fees and court or arbitration costs incurred
in resolving or settling the dispute, in addition to any and all other damages
or relief which the court or arbitrator may deem proper.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or have caused this Agreement to be duly executed with legal and
binding effect by their respective authorized officers, in their individual
capacity, as of the date first written above.
HEALTHSTAR CORP.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
XXXXXXXXXXX.XXX, INC.,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
M2 LIMITED, INC.,
a Maryland corporation
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
Xxxxxxxxxxx.xxx, Inc.
Sole Shareholder of
M2 Limited, Inc.
34
KEY INDIVIDUALS OF M2 LIMITED, INC.
By: /s/ Xxxxxxx X. Pellet
-------------------------------------
Name: Xxxxxxx X. Pellet
Title: President and Chief Executive
Officer of M2 Limited, Inc.
By: /s/ Mercedes M. Pellet
-------------------------------------
Name: Mercedes M. Pellet
Title: Chief Financial Officer of
M2 Limtied, Inc.
By: /s/ Xxxxx-Xxxx Pellet
-------------------------------------
Name: Xxxxx-Xxxx Pellet
Title: Senior Vice President of
M2 Limited, Inc.
35