EXHIBIT NUMBER 2.1
EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
HALIS, Inc., a Georgia corporation,
Compass Acquisition Co., a Georgia corporation,
The Compass group, Inc., a Georgia corporation,
and
The Sole Shareholder of The Compass Group, Inc.
_________________________
Dated as of January 10, 1997
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TABLE OF CONTENTS
Page
SECTION 1. DESCRIPTION OF TRANSACTION.................................................. 1
1.1 Merger of Compass into the Subsidiary....................................... 1
1.2 Effect of Merger............................................................ 1
1.3 Closing; Effective Time..................................................... 2
1.4 Articles of Incorporation and Bylaws; Directors and Officers................ 2
1.5 Conversion of Shares........................................................ 2
1.6 Closing of Compass Transfer Books........................................... 2
1.7 Exchange of Certificates.................................................... 3
1.8 Merger Consideration........................................................ 4
1.9 Tax Consequences............................................................ 6
1.10 Further Action.............................................................. 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPASS
AND THE SHAREHOLDER......................................................... 6
2.1 Due Organization; No Subsidiaries; Etc...................................... 6
2.2 Articles of Incorporation and Bylaws; Records............................... 7
2.3 Capitalization, Etc......................................................... 7
2.4 Financial Statements........................................................ 8
2.5 Absence of Changes.......................................................... 8
2.6 Title to Assets............................................................. 10
2.7 Bank Accounts; Receivables; Customers....................................... 10
2.8 Equipment; Leasehold........................................................ 11
2.9 Proprietary Assets.......................................................... 11
2.10 Contracts................................................................... 13
2.11 Liabilities................................................................. 15
2.12 Compliance with Legal Requirements.......................................... 15
2.13 Governmental Authorizations................................................. 15
2.14 Tax Matters................................................................. 16
2.15 Employee and Labor Matters; Benefit Plans................................... 17
2.16 Environmental Matters....................................................... 19
2.17 Sale of Products; Performance of Services................................... 20
2.18 Insurance................................................................... 20
2.19 Related Party Transactions.................................................. 20
2.20 Legal Proceedings; Orders................................................... 21
2.21 Authority; Binding Nature of Agreement...................................... 21
2.22 Non-Contravention; Consents................................................. 21
2.23 Full Disclosure............................................................. 22
SECTION 3. REPRESENTATIONS AND WARRANTIES OF HALIS AND THE SUBSIDIARY.................. 23
3.1 SEC Filings; Financial Statements........................................... 23
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3.2 Authority; Binding Nature of Agreement...................................... 23
3.3 Valid Issuance.............................................................. 23
SECTION 4. CERTAIN COVENANTS OF COMPASS AND THE SHAREHOLDER............................ 24
4.1 Access and Investigation.................................................... 24
4.2 Operation of Compass's Business............................................. 24
4.3 Notification; Updates to Disclosure Schedule................................ 26
4.4 No Negotiation.............................................................. 26
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES......................................... 27
5.1 Filings and Consents........................................................ 27
5.2 Public Announcements........................................................ 27
5.3 Best Efforts................................................................ 27
5.4 Employment and Noncompetition Agreements.................................... 27
5.5 Release..................................................................... 27
5.6 Termination of Employee Plans............................................... 27
5.7 FIRPTA Matters.............................................................. 28
5.8 Option Agreement............................................................ 28
5.9 Information Statement....................................................... 28
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HALIS
AND THE SUBSIDIARY.......................................................... 28
6.1 Accuracy of Representations................................................. 28
6.2 Performance of Covenants.................................................... 28
6.3 Consents.................................................................... 28
6.4 Agreements and Documents.................................................... 28
6.5 No Material Adverse Change.................................................. 29
6.6 Termination of Employee Plans............................................... 29
6.7 FIRPTA Compliance........................................................... 29
6.8 Rule 506.................................................................... 29
6.9 No Restraints............................................................... 29
6.10 No Legal Proceedings........................................................ 29
6.11 Completion of Due Diligence................................................. 29
6.12 Shareholder Investment Certifications....................................... 29
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF COMPASS AND THE
SHAREHOLDER................................................................. 30
7.1 Accuracy of Representations................................................. 30
7.2 Performance of Covenants.................................................... 30
7.3 Consents.................................................................... 30
7.4 Agreements and Documents.................................................... 30
7.5 No Restraints............................................................... 30
7.6 No Material Adverse Change.................................................. 31
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SECTION 8. TERMINATION................................................................. 31
8.1 Termination Events.......................................................... 31
8.2 Termination Procedures...................................................... 31
8.3 Effect of Termination....................................................... 32
SECTION 9. INDEMNIFICATION, ETC........................................................ 32
9.1 Survival of Representations and Warranties.................................. 32
9.2 Shareholder's Indemnity Agreement........................................... 32
9.3 Indemnity Agreement of HALIS and the Surviving Corporation.................. 33
9.4 Indemnification Procedure................................................... 34
9.5 Set-off..................................................................... 34
9.6 Limitations on Liability of Shareholder..................................... 35
SECTION 10. REGISTRATION OF SHARES...................................................... 35
10.1 Certain Definitions......................................................... 35
10.2 Registration Under Securities Act, Etc...................................... 35
10.3 Incidental Registration..................................................... 37
10.4 Registration Procedures..................................................... 39
10.5 Underwritten Offerings...................................................... 41
10.6 Preparation; Reasonable Investigation....................................... 43
10.7 Indemnification............................................................. 43
10.8 Amendments and Waivers...................................................... 45
10.9 Nominees for Beneficial Owners.............................................. 45
SECTION 11. MISCELLANEOUS PROVISIONS.................................................... 45
11.1 Further Assurances.......................................................... 45
11.2 Fees and Expenses........................................................... 45
11.3 Attorneys' Fees............................................................. 46
11.4 Notices..................................................................... 46
11.5 Confidentiality............................................................. 47
11.6 Time of the Essence......................................................... 47
11.7 Headings.................................................................... 47
11.8 Counterparts................................................................ 47
11.9 Governing Law; Venue........................................................ 47
11.10 Successors and Assigns...................................................... 48
11.11 Remedies Cumulative; Specific Performance................................... 48
11.12 Waiver...................................................................... 48
11.13 Amendments.................................................................. 49
11.14 Severability................................................................ 49
11.15 Parties in Interest......................................................... 49
11.16 Entire Agreement............................................................ 49
11.17 Construction................................................................ 49
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EXHIBITS
Exhibit A - Shareholders
Exhibit B - Certain Definitions
Exhibit C - Directors and Officers of Surviving Corporation
Exhibit D - Form of Option Agreement
Exhibit E - Forms of Employment Agreement and Noncompetition Agreement
Exhibit F - Form of Release
Exhibit G - Persons to Execute Estoppel Certificates
Exhibit H - Form of Shareholder Investment Certification
** Certain exhibits and schedules are not included with this filing. A copy of
any omitted exhibit or schedule will be furnished supplementally to the
Commission upon request. **
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization ("Agreement") is made
and entered into as of January 10, 1997, by and among: HALIS, Inc., a Georgia
corporation ("HALIS"); Compass Acquisition Co., a Georgia corporation and a
wholly owned subsidiary of HALIS (the "Subsidiary"); The Compass Group, Inc., a
Georgia corporation ("Compass"); and the party identified on Exhibit A, who is
the sole shareholder of Compass (the "Shareholder"). Certain capitalized terms
used in this Agreement are defined in Exhibit B.
RECITALS
X. XXXXX, Compass and the Subsidiary intend to effect a merger of Compass
into the Subsidiary in accordance with this Agreement and the Georgia Business
Corporation Code (the "Merger"). Upon consummation of the Merger, Compass will
cease to exist, and the Subsidiary will continue to exist as the surviving
corporation of the Merger.
B. It is intended that the Merger quality as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. This Agreement has been adopted and approved by the respective boards
of directors of HALIS, Compass and the Subsidiary.
D. The capitalization of Compass consists of 1,000 shares of the voting
common stock, 1.00 par value per share, of which 1,000 shares are issued and
outstanding (the "Compass Common Stock").
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF COMPASS INTO THE SUBSIDIARY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Compass shall be merged with and into the Subsidiary, and the
separate existence of Compass shall cease. The Subsidiary will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF MERGER. The Merger shall have the effects set forth in this
Agreement and in the applicable provisions of the Georgia Business Corporation
Code.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxx, Xxxxxxxx & Xxxxxxx, 0000 Xxxxxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx
00000, at 10:00 a.m. local time on January 10, 1997, or at such other time and
date during the period from January 10, 1997 through February 15, 1997, as the
parties shall designate (the "Scheduled Closing Time"). (The date on which the
Closing actually takes place is referred to in this Agreement as the "Closing
Date.") Contemporaneously with or as promptly as practicable after the Closing,
a properly executed certificates of merger for the merger of Compass into the
Subsidiary, conforming to the requirements of the Georgia Business Corporation
Code, shall be filed with the Secretary of State of the State of Georgia. The
Merger shall take effect at the time such certificate of merger is filed with
the Secretary of State of the State of Georgia (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
the parties agree otherwise prior to the Effective Time:
(a) the Articles of Incorporation of the Subsidiary shall continue as
the Articles of Incorporation of the Surviving Corporation;
(b) the Bylaws of the Subsidiary shall continue as the Bylaws of the
Surviving Corporation; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
Exhibit C.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.7(b), at the Effective Time, by virtue of
the Merger and without any further action on the part of HALIS, Compass, the
Subsidiary or any Shareholder, each share of Compass Common Stock outstanding
immediately prior to the Effective Time shall be canceled and retired and
converted into the right to receive a pro rata share of the aggregate Merger
Consideration described in Section 1.8.
(b) If any shares of Compass Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any restricted stock purchase
agreement or other agreement with Compass, then the shares of HALIS Common Stock
issued in exchange for such shares of Compass Common Stock will be unvested and
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of HALIS Common Stock may
accordingly be marked with appropriate legends.
1.6 CLOSING OF COMPASS TRANSFER BOOKS. At the Effective Time, the holders
of certificates representing shares of Compass Common Stock that were
outstanding immediately prior to the Effective Time shall cease to have any
rights as Shareholder of Compass, and the stock transfer books of Compass shall
be closed with respect to all shares of such Compass Common
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Stock outstanding immediately prior to the Effective Time. No further transfer
of any such shares of Compass capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of Compass Common Stock
(an "Compass Stock Certificate") is presented to HALIS, such Compass Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) At the Closing, each Shareholder shall surrender its respective
Compass Stock Certificate(s) to the Surviving Corporation, together with such
transmittal documents as the Surviving Corporation may reasonably require, and
the Surviving Corporation shall deliver to such Shareholder such Shareholder's
pro rata share of the aggregate Merger Consideration to be paid at Closing
pursuant to Section 1.8.
(b) No fractional shares of HALIS Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any Shareholder who would
otherwise be entitled to receive a fraction of a share of HALIS Common Stock
(after aggregating all fractional shares of HALIS Common Stock issuable to such
holder) shall, upon surrender of such Shareholder's Compass Stock
Certificate(s), be paid in cash at a rate of $2.00 per share in lieu of such
fractional shares.
(c) Until surrendered as contemplated by this Section 1.7, each
Compass Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive a pro rata share of the Merger
Consideration. If any Compass Stock Certificate shall have been lost, stolen or
destroyed, HALIS may, in its discretion and as a condition precedent to the
issuance of any certificate representing HALIS Common Stock, require the owner
of such lost, stolen or destroyed Compass Stock Certificate to provide an
appropriate affidavit and to deliver a bond (in such sum as HALIS may reasonably
direct) as indemnity against any claim that may be made against HALIS with
respect to such Compass Stock Certificate.
(d) The shares of HALIS Common Stock to be issued in the Merger shall
be characterized as "restricted securities" for purposes of Rule 144 under the
Securities Act, and each certificate representing any of such shares shall bear
a legend identical or similar in effect to the following legend (together with
any other legend or legends required by applicable state securities laws or
otherwise):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
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(e) HALIS shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable to any holder or former holder of
Compass Common Stock pursuant to this Agreement such amounts as HALIS may be
required to deduct or withhold therefrom under the Code or under any provision
of state, local or foreign tax law. To the extent such amounts are so deducted
or withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the Person to whom such amounts would otherwise have been
paid.
(f) HALIS shall not be liable to any holder or former holder of
Compass Common Stock for any shares of HALIS Common Stock (or dividends or
distributions with respect thereto), or for any cash amounts, delivered to any
public official pursuant to any applicable abandoned property, escheat or
similar law.
1.8 MERGER CONSIDERATION
(a) The aggregate merger consideration to be paid by HALIS to the
Shareholder in consideration of the Merger ("Merger Consideration") shall
consist of the Initial Merger Consideration and, subject to subparagraphs
1.8(c), (d), (e), (f) and (g) below, the Contingent Merger Consideration, each
as hereinafter defined.
(b) The Initial Merger Consideration shall consist of (i) 350,000
shares of HALIS Common Stock and (ii) options to purchase an additional 85,000
shares of HALIS Common Stock at an exercise price of $2.00 per share,
exercisable for a period of ten years from the Closing Date. A certificate
representing that portion of the Initial Merger Consideration consisting of
HALIS Common Stock and an Option Agreement substantially in the form of Exhibit
D hereto (the "Option Agreement") executed by HALIS shall be delivered to the
Shareholder at Closing.
(c) The Contingent Merger Consideration shall consist of shares of
HALIS Common Stock having an aggregate value calculated in accordance with
subparagraph 1.8(e) below. A certificate representing the Contingent Merger
Consideration, if any, will be delivered to the Shareholder not later than 30
days after the final Cash Flow, Net Income and Revenues Determination (as
defined in subparagraph 1.8(g)) in accordance with subparagraph 1.8(g).
(d) The Contingent Merger Consideration shall be payable to the
Shareholder only if all of the following conditions are met:
(i) the Surviving Corporation shall have positive Cash Flow (as
defined in subparagraph 1.8(f)) for the fiscal year ending December 31,
1997 (the "Determination Period");
(ii) the Surviving Corporation shall have Net Income (as defined
in subparagraph 1.8(f)) of at least $1.00 for the Determination Period; and
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(iii) the Surviving Corporation shall have Revenues (as defined
in subparagraph 1.8(f)) of more than $500,000 for the Determination Period.
(e) If all the conditions set forth in subparagraph 1.8(d) above are
met, the Contingent Merger Consideration shall be calculated as follows. The
Contingent Merger Consideration shall equal that number of HALIS Common Stock
having an aggregate value, based on the average bid and ask price of HALIS
Common Stock for the final ten trading days of calendar year 1997, equal to the
product of (i) the amount by which Revenues of the Surviving Corporation for the
Determination Period exceeds $500,000, multiplied by (ii) 1.5; provided,
however, that in no event shall the value of the Contingent Merger Consideration
exceed $2,000,000.
(f) For purposes of calculation of the Contingent Merger
Consideration, the following definitions shall apply:
(i) "Cash Flow" shall mean all cash funds derived from
operations, without reduction for any non-cash charges, but less funds used
to pay current operating expenses, determined in accordance with generally
accepted accounting principles;
(ii) "Net Income" shall mean net income, determined in accordance
with generally accepted accounting principles; and
(iii) "Revenues" shall mean total income on an accrual basis,
determined in accordance with generally accepted accounting principles.
(g) For purposes of calculation of the Contingent Merger
Consideration, the Cash Flow, Net Income and Revenues of the Surviving
Corporation for the Determination Period shall be determined by the Surviving
Corporation's independent certified public accountants within 120 days following
the end of the Determination Period (the "Cash Flow, Net Income and Revenues
Determination"). Within five business days after receiving the Cash Flow, Net
Income and Revenues Determination, HALIS shall deliver same to the Shareholder.
If the Shareholder does not deliver a list of written objections to the Cash
Flow, Net Income and Revenues Determination ("Objection Notice") to HALIS within
30 days following delivery to the Shareholder, the Cash Flow, Net Income and
Revenues Determination shall become final and binding upon the parties. If the
Shareholder delivers an Objection Notice within such 30-day period, the parties
will endeavor to reconcile any differences and agree upon a final Cash Flow, Net
Income and Revenues Determination. If the parties are unable to agree upon a
final Cash Flow, Net Income and Revenues Determination within 30 days following
delivery of the Objection Notice, at the request of either party the outstanding
matters shall be submitted for resolution by a mutually acceptable accounting
firm of recognized national or regional standing with offices in the Atlanta
area. If the parties are unable to agree upon a mutually acceptable accounting
firm, one will be selected by HALIS at random from a list of the ten largest
Atlanta offices of certified public accounting firms having no prior affiliation
with HALIS, Compass, the Surviving Corporation or the Shareholder. Each of
HALIS and the Shareholder shall bear 50% of the fees and expenses of the
accounting firm so
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selected. Such accounting firm shall promptly prepare a final Cash Flow, Net
Income and Revenues Determination and its conclusions shall be final and binding
upon the parties.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.10 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by HALIS to be necessary or desirable to carry out the
purposes of this Agreement or to vest HALIS with full right, title and
possession of and to all rights and property of Compass, the officers and
directors of HALIS shall be fully authorized (in the name of Compass and
otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPASS AND THE SHAREHOLDER
Compass and the Shareholder jointly and severally represent and
warrant, to and for the benefit of HALIS and the Subsidiary, as follows as of
the date hereof and as of the Closing Date:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) Compass is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted and in the manner in which its business is
proposed to be conducted; (ii) to own and use its assets in the manner in which
its assets are currently owned and used and in the manner in which its assets
are proposed to be owned and used; and (iii) to perform its obligations under
all Contracts by which it is bound.
(b) Compass has not conducted any business under or otherwise used,
for any purpose or in any jurisdiction, any fictitious name, assumed name, trade
name or other name.
(c) Compass is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the
Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on Compass. Compass is in good standing as a foreign corporation in each of the
jurisdictions identified in Part 2.1(c) of the Disclosure Schedule.
(d) Part 2.1(d) of the Disclosure Schedule accurately sets forth (i)
the names of the members of the Compass's board of directors, (ii) the names of
the members of each committee of Compass's board of directors, and (iii) the
names and titles of Compass's officers.
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(e) Compass has no subsidiaries, and has never owned, beneficially or
otherwise, any shares or other securities of, or any direct or indirect interest
of any nature in, any other Entity.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. Compass has delivered
to HALIS accurate and complete copies of: (i) Compass's articles of
incorporation and bylaws, including all amendments thereto; (ii) the stock
records of Compass; and (iii) the minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or otherwise
without a meeting) of the shareholders of Compass, the board of directors of
Compass and all committees of the board of directors of Compass. There have been
no meetings or other proceedings or actions of the shareholders of Compass, the
board of directors of Compass or any committee of the board of directors of
Compass that are not fully reflected in such minutes or other records. There has
not been any violation of any of the provisions of Compass's articles of
incorporation or bylaws or of any resolution adopted by Compass's shareholders,
Compass's board of directors or any committee of Compass's board of directors.
The books of account, stock records, minute books and other records of Compass
are accurate, up-to-date and complete, and have been maintained in accordance
with prudent business practices and all applicable Legal Requirements.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of Compass consists of 1,000 shares
of common stock, of which 1,000 shares have been issued and are outstanding.
There are no shares of capital stock held in Compass's treasury. Part 2.3(a) of
the Disclosure Schedule sets forth the names of Compass shareholders and the
number of shares of Compass common stock owned of record by each of such
shareholders. All of the outstanding shares of Compass common stock have been
duly authorized and validly issued, and are fully paid and non-assessable, and
none of such shares is subject to any repurchase option or restriction on
transfer.
(b) There is no: (i) outstanding subscription, option, call, warrant
or right (whether or not currently exercisable) to acquire, or otherwise
relating to, any shares of the capital stock or other securities of Compass;
(ii) outstanding security, instrument or obligation that is or may become
convertible into or exchangeable for any shares of the capital stock or other
securities of Compass; (iii) Contract under which Compass is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of Compass. Except as set forth in Part 2.3(c) of the
Disclosure Schedule, Compass has never issued or granted any option, call,
warrant or right to acquire, or otherwise relating to, any shares of its capital
stock or other securities.
(c) All outstanding shares of Compass Common Stock have been issued in
compliance with (i) all applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in applicable Contracts.
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(d) Except as set forth in Part 2.3(e) of the Disclosure Schedule,
Compass has never repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities. All securities so reacquired by Compass were
reacquired in compliance with (i) the applicable provisions of the Georgia
Business Corporation Code and all other applicable Legal Requirements, and (ii)
any requirements set forth in applicable Contracts.
2.4 FINANCIAL STATEMENTS.
(a) Compass has delivered to HALIS the following financial statements
and notes (collectively, the "Company Financial Statements"):
(i) the unaudited balance sheet of Compass as of December 31,
1995, and the related unaudited statements of income, shareholders' equity
and cash flow of Compass for the year then ended; and
(ii) the unaudited balance sheet of Compass as of September 30,
1996 (the "Unaudited Balance Sheet"), and the related unaudited statements
of income, shareholders' equity and cash flow of Compass for the nine-month
period then ended.
(b) The Company Financial Statements are accurate and complete in all
material respects and present fairly the financial position of Compass as of the
respective dates thereof and the results of operations and cash flows of Compass
for the periods covered thereby. The Company Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered except that the Company
Financial Statements do not contain footnotes and are subject to normal and
recurring year-end audit adjustments, which will not, individually or in the
aggregate, be material in magnitude).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Disclosure
Schedule, since September 30, 1996:
(a) there has not been any material adverse change in Compass's
business, condition, assets, liabilities, operations, financial performance or
prospects, and no event has occurred that will, or could reasonably be expected
to, have a Material Adverse Effect on Compass;
(b) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of Compass's assets (whether or not
covered by insurance);
(c) Compass has not declared, accrued, set aside or paid any dividend
or made any other distribution in respect of any shares of capital stock, and
has not repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities;
(d) Compass has not sold, issued or authorized the issuance of (i) any
capital stock or other security, (ii) any option, call, warrant or right to
acquire, or otherwise relating to, any
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capital stock or any other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(e) there has been no amendment to Compass's articles of incorporation
or bylaws, and Compass has not effected or been a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(f) Compass has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(g) Compass has not made any capital expenditure which, when added to
all other capital expenditures made by Compass since September 30, 1996, exceeds
$25,000 in the aggregate;
(h) Compass has not (i) entered into or permitted any of the assets
owned or used by it to become bound by any Material Contract (as defined in
Section 2.10(a)), or (ii) amended or prematurely terminated, or waived any
material right or remedy under, any Material Contract to which it is or was
party or under which it has or has had any rights or obligations;
(i) Compass has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for immaterial rights or other immaterial assets
acquired, leased, licensed or disposed of in the ordinary course of business and
consistent with Compass's past practices;
(j) Compass has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness;
(k) Compass has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except for
pledges of immaterial assets made in the ordinary course of business and
consistent with Compass's past practices;
(l) Compass has not (i) lent money to any Person, or (ii) incurred or
guaranteed any indebtedness for borrowed money;
(m) Compass has not (i) established, adopted or amended any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hired any new employee;
(n) Compass has not changed any of its methods of accounting or
accounting practices in any respect;
(o) Compass has not made any Tax election;
9
(p) Compass has not commenced or settled any legal Proceeding;
(q) Compass has not entered into any material transaction or taken any
other material action outside the ordinary course of business or inconsistent
with its past practices; and
(r) Compass has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(q)" above.
2.6 TITLE TO ASSETS.
(a) Compass owns, and has good, valid and marketable title to, all
assets purported to be owned by it, including: (i) all assets reflected on the
Unaudited Balance Sheet; (ii) all assets referred to in Parts 2.7(b), 2.8 and
2.9 of the Disclosure Schedule and all of Compass's rights under the Contracts
identified in Part 2.10(a) of the Disclosure Schedule; and (iii) all other
assets reflected in Compass books and records as being owned by Compass. Except
as set forth in Part 2.6(a) of the Disclosure Schedule, all of said assets are
owned by Compass free and clear of any liens or other Encumbrances, except for
(i) any lien for current taxes not yet due and payable, and (ii) minor liens
that have arisen in the ordinary course of business and that do not (in any case
or in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of Compass.
(b) Part 2.6(b) of the Disclosure Schedule identifies all assets that
are being leased or licensed to Compass.
2.7 BANK ACCOUNTS; RECEIVABLES; CUSTOMERS.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate and
complete information with respect to each account maintained by or for the
benefit of Compass at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of Compass as of September 30, 1996. Except as set forth in
Part 2.7(b) of the Disclosure Schedule, all existing accounts receivable of
Compass (including those accounts receivable reflected on the Unaudited Balance
Sheet that have not yet been collected and those accounts receivable that have
arisen since September 30, 1996 and have not yet been collected) (i) represent
valid obligations of customers of Compass arising from bona fide transactions
entered into in the ordinary course of business, and (ii) are current and will
be collected in full, without any counterclaim or set off, when due net of an
allowance for doubtful accounts not to exceed $25,000 in the aggregate.
(c) Part 2.7(c) of the Disclosure Schedule accurately identifies, and
provides an accurate and complete breakdown of the revenues received from, each
customer or other Person that (together with such Person's affiliates) accounted
for more than $100,000 of the net revenues of Compass in 1995 or 1996. Compass
has not received any notice or other communication indicating
10
that any customer or other Person identified in Part 2.7(c) of the Disclosure
Schedule intends or expects to cease dealing with Compass or to reduce the
volume of business transacted by such Person with Compass below historical
levels.
(d) Part 2.7(d) of the Disclosure Schedule provides an accurate and
complete breakdown of all pending and unfilled orders received by Compass for
products, systems and services.
2.8 EQUIPMENT; LEASEHOLD.
(a) Part 2.8 of the Disclosure Schedule provides accurate and complete
information with respect to all material items of equipment, fixtures, leasehold
improvements and other tangible assets owned by or leased to Compass. The
assets identified in Part 2.8 of the Disclosure Schedule are adequate for the
uses to which they are being put, are in good condition and repair (ordinary
wear and tear excepted) and are adequate for the conduct of Compass's business
in the manner in which such business is currently being conducted and in the
manner in which such business is proposed to be conducted.
(b) Compass does not own any real property or any interest in real
property, except for the leasehold(s) created under the real property lease(s)
identified in Part 2.10(a) of the Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(1) of the Disclosure Schedule sets forth, with respect
to each Company Proprietary Asset that has been registered, recorded or filed
with any Governmental Body or with respect to which an application has been
filed with any Governmental Body, (i) a brief description of such Company
Proprietary Asset, and (ii) the names of the jurisdictions covered by the
applicable registration, recordation, filing or application. Part 2.9(a)(2) of
the Disclosure Schedule identifies and provides a brief description of all other
Company Proprietary Assets owned by Compass. Part 2.9(a)(3) of the Disclosure
Schedule identifies and provides a brief description of each Company Proprietary
Asset that is owned by any other Person and that is licensed to or used by
Compass (except for any Company Proprietary Asset that is licensed to Compass
under any third party software license generally available to the public at a
cost of less than $500), and identifies the license agreement or other agreement
under which such Company Proprietary Asset is being licensed to or used by
Compass. Except as set forth in Part 2.9(a)(4) of the Disclosure Schedule, each
Company has good, valid and marketable title to all of the Proprietary Assets
identified in Parts 2.9(a)(1) and 2.9(a)(2) of the Disclosure Schedule, free and
clear of all liens and other Encumbrances, and has a valid right to use all
Proprietary Assets identified in Part 2.9(a)(3) of the Disclosure Schedule.
Except as set forth in Part 2.9(a)(5) of the Disclosure Schedule, Compass is not
obligated to make any payment to any Person for the use of any Company
Proprietary Asset. Except as set forth in Part 2.9(a)(6) of the Disclosure
Schedule, Compass is free to use, modify, copy, distribute, sell, license or
otherwise exploit each of the Company Proprietary Assets on an exclusive basis.
11
(b) Compass has taken all measures and precautions necessary to
protect and maintain the confidentiality and secrecy of all Company Proprietary
Assets (except Company Proprietary Assets whose value would be unimpaired by
public disclosure) and otherwise to maintain and protect the value of all
Company Proprietary Assets. Except as set forth in Part 2.9(b) of the
Disclosure Schedule, Compass has not disclosed or delivered or permitted to be
disclosed or delivered to any Person, and no Person (other than Compass) has
access to or has any rights with respect to, the source code, or any portion or
aspect of the source code, of any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or conflicts with
any Proprietary Asset owned or used by any other Person. Compass is not
infringing, misappropriating or making any unlawful use of, and Compass has not
at any time infringed, misappropriated or made any unlawful use of, or received
any notice or other communication of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of, any Proprietary Asset owned
or used by any other Person. To the best of the knowledge of Compass and the
Shareholder, no other Person is infringing, misappropriating or making any
unlawful use of, and no Proprietary Asset owned or used by any other Person
infringes or conflicts with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure Schedule: (i)
each Company Proprietary Asset conforms in all material respects with any
specification, documentation, performance standard, representation or statement
made or provided with respect thereto by or on behalf of Compass; and (ii) there
has not been any material claim by any customer or other Person alleging that
any Company Proprietary Asset does not conform in all material respects with any
specification, documentation, performance standard, representation or statement
made or provided by or on behalf of Compass, and, to the best of the knowledge
of Compass and the Shareholder, there is no basis for any such claim. Compass
has established adequate reserves on the Unaudited Balance Sheet to cover all
costs associated with any obligations that Compass may have with respect to the
correction or repair of programming errors or other defects in the Company
Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable Compass to conduct its business in the manner in
which such business has been conducted and in the manner in which such business
is proposed to be conducted. Except as set forth in Part 2.9(e) of the
Disclosure Schedule, (i) Compass has not licensed any of the Company Proprietary
Assets to any Person on an exclusive basis, and (ii) Compass has not entered
into any covenant not to compete or Contract limiting its ability to exploit
fully any of its Proprietary Assets or to transact business in any market or
geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure Schedule, all
current and former employees of Compass have executed and delivered to Compass
written employee confidentiality agreements (containing no exceptions to or
exclusions from the scope of their coverage) that are substantially identical to
the form attached to the Disclosure Schedule as
12
Appendix 2.9(f). Compass has never engaged or received services from any
consultant or independent contractor in connection with the design or
development of any Proprietary Asset.
2.10 CONTRACTS.
(a) Part 2.10(a) of the Disclosure Schedule identifies each Company
Contract that constitutes a "Material Contract." For purposes of this
Agreement, each of the following shall be deemed to constitute a "Material
Contract":
(i) any Contract relating to the employment or engagement of, or
the performance of services by, any employee, consultant or independent
contractor;
(ii) any Contract relating to the acquisition, transfer, use,
development, sharing or license of any technology or any Proprietary Asset;
(iii) any Contract imposing any restriction on Compass's right or
ability (A) to compete with any other Person, (B) to acquire any product or
other asset or any services from any other Person, to sell any product or
other asset to or perform any services for any other Person or to transact
business or deal in any other manner with any other Person, or (C) to
develop or distribute any technology;
(iv) any Contract creating or involving any agency relationship,
distribution arrangement or franchise relationship;
(v) any Contract relating to the acquisition, issuance or
transfer of any securities;
(vi) any Contract creating or relating to the creation of any
Encumbrance with respect to any asset owned or used by Compass;
(vii) any Contract involving or incorporating any guaranty, any
pledge, any performance or completion bond, any indemnity, any right of
contribution or any surety arrangement;
(viii) any Contract creating or relating to any partnership or
joint venture or any sharing of revenues, profits, losses, costs or
liabilities;
(ix) any Contract relating to the purchase or sale of any product
or other asset by or to, or the performance of any services by or for, any
Related Party (as defined in Section 2.19);
(x) any Contract to which any Governmental Body is a party or
under which any Governmental Body has any rights or obligations, or
involving or directly or
13
indirectly benefiting any Governmental Body (including any subcontract or
other Contract between Compass and any contractor or subcontractor to any
Governmental Body);
(xi) any Contract entered into outside the ordinary course of
business or inconsistent with Compass past practices;
(xii) any Contract that has a term of more than 60 days and that
may not be terminated by Compass (without penalty) within 60 days after the
delivery of a termination notice by the Subject Business; and
(xiii) any Contract that contemplates or involves (A) the payment
or delivery of cash or other consideration in an amount or having a value
in excess of $5,000 in the aggregate, or (B) the performance of services
having a value in excess of $5,000 in the aggregate.
(b) Compass has delivered to HALIS accurate and complete copies of all
Contracts identified in Part 2.10(a) of the Disclosure Schedule, including all
amendments thereto. Each Contract identified in Part 2.10(a) of the Disclosure
Schedule is valid and in full force and effect, and is enforceable by Compass in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10(c) of the Disclosure Schedule:
(i) Compass has not violated or breached, or committed any
default under, any Company Contract, and, to the best of the knowledge of
Compass and the Shareholder, no other Person has violated or breached, or
committed any default under, any Company Contract;
(ii) to the best of the knowledge of Compass and the Shareholder,
no event has occurred, and no circumstance or condition exists, that (with
or without notice or lapse of time) will, or could reasonably be expected
to, (A) result in a violation or breach of any of the provisions of any
Company Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Company Contract, (C) give any Person the
right to accelerate the maturity or performance of any Company Contract, or
(D) give any Person the right to cancel, terminate or modify any Company
Contract;
(iii) Compass has not received any notice or other communication
regarding (A) any actual or possible violation or breach of, or default
under, any Company Contract, or (B) any actual or possible termination of
any Company Contract; and
(iv) Compass has not waived any of its material rights under any
Contract.
14
(d) No Person is renegotiating, or has the right to renegotiate, any
amount paid or payable to Compass under any Company Contract or any other term
or provision of any Company Contract.
(e) The Contracts identified in Part 2.10(a) of the Disclosure
Schedule collectively constitute all of the Material Contracts necessary to
enable Compass to conduct its business in the manner in which its business is
currently being conducted and in the manner in which its business is proposed to
be conducted.
(f) Part 2.10(f) of the Disclosure Schedule identifies and provides a
brief description of each proposed Contract as to which any pending bid, offer
or proposal has been submitted or received by Compass.
2.11 LIABILITIES.
(a) Compass has no accrued, contingent or other liabilities of any
nature, either matured or unmatured (whether or not required to be reflected in
financial statements in accordance with generally accepted accounting
principles, and whether due or to become due), except for: (i) liabilities
identified as such in the "liabilities" column of the Unaudited Balance Sheet;
(ii) accounts payable or accrued salaries that have been incurred by Compass
since September 30, 1996, in the ordinary course of business and consistent with
Compass's past practices; and (iii) the liabilities identified in Part 2.11(a)
of the Disclosure Schedule.
(b) Part 2.11(c) of the Disclosure Schedule provides an accurate and
complete breakdown of Compass "deferred support revenue" and all related
obligations and other liabilities of Compass.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Compass is, and has at all times
since September 6, 1991 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have in any individual case or in the aggregate, a
Material Adverse Effect on Compass. Except as set forth in Part 2.12 of the
Disclosure Schedule, since September 6, 1991, Compass has not received any
notice or other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by Compass, and Compass
has delivered to HALIS accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. The
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule
are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable Compass to conduct its business
in the manner in which its business is currently being conducted and in the
manner in which its business is proposed to be conducted. Compass is, and at
all times since September 6, 1991 has been, in compliance with the material
terms and requirements of the respective Governmental Authorizations identified
in
15
Part 2.13 of the Disclosure Schedule. Since September 6, 1991, Compass has not
received any notice or other communication from any Governmental Body regarding
(i) any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (ii) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of Compass
with any Governmental Body with respect to any transaction occurring or any
taxable period ending on or before the Closing Date (the "Company Returns") (i)
have been or will be filed when due, and (ii) have been, or will be when filed,
accurately and completely prepared in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the Closing Date have been or will be paid on or before the Closing Date.
Compass has delivered to HALIS accurate and complete copies of all Company
Returns filed since September 6, 1991.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. Compass
will establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
September 30, 1996, through the Closing Date, and Compass will disclose the
dollar amount of such reserves to HALIS on or prior to the Closing Date.
(c) Each Company Return relating to income Taxes that has been filed
with respect to any period ended on or prior to January 1, 1991 has either (i)
been examined and audited by all relevant Governmental Bodies, or (ii) by virtue
of the expiration of the limitation period under applicable Legal Requirements,
is no longer subject to examination or audit by any Governmental Body. Except
as set forth in Part 2.14(c) of the Disclosure Schedule, there has been no
examination or audit of any Company Return, and no such examination or audit has
been proposed or scheduled by any Governmental Body. Compass has delivered to
HALIS accurate and complete copies of all audit reports and similar documents
(to which Compass has access) relating to the Company Returns. Except as set
forth in Part 2.14(c) of the Disclosure Schedule, no extension or waiver of the
limitation period applicable to any of the Company Returns has been granted (by
Compass or any other Person), and no such extension or waiver has been requested
from Compass.
(d) Except as set forth in Part 2.14(d) of the Disclosure Schedule, no
claim or Legal Proceeding is pending or has been threatened against or with
respect to Compass in respect of any Tax. There are no unsatisfied liabilities
for Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by Compass. There are no liens for Taxes upon any of
the assets of Compass, except liens for current Taxes not yet due and payable.
Compass has not entered into or become bound by any agreement or consent
pursuant to Section 341(f) of the Code. Compass has not been, and Compass will
not be, required to include any adjustment in taxable income for any tax period
(or portion thereof) pursuant to Section 481 of 263A of the Code or any
comparable provision under
16
state or foreign Tax laws as a result of transactions or events occurring, or
accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of Compass that, considered individually or considered
collectively with any other such Contracts, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162 of the Code.
Compass is not, and has never been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Disclosure Schedule contains a list of all
salaried employees of Compass as of the date of this Agreement, and correctly
reflects their salaries, any other compensation payable to them (including
compensation payable pursuant to bonus, deferred compensation or commission
arrangements), their dates of employment and their positions. Compass is not a
party to any collective bargaining contract or other Contract with a labor union
involving any of its employees.
(b) Part 2.15(b) of the Disclosure Schedule identifies each employee
of Compass who is not fully available to perform work because of disability or
other leave, and sets forth the basis of such leave and the anticipated date of
return to full service.
(c) Part 2.15(c) of the Disclosure Schedule identifies each salary,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, insurance,
supplemental unemployment benefits, profit-sharing, pension or retirement plan,
program or agreement (individually referred to as a "Plan" and collectively
referred to as the "Plans") sponsored, maintained, contributed to or required to
be contributed to by Compass for the benefit of any current or former employee
of Compass.
(d) Compass does not maintain, sponsor or contribute to, and, to the
best of the knowledge of Compass and the Shareholder, Compass has not at any
time in the past maintained, sponsored or contributed to, any employee pension
benefit plan (as defined in Section 3(2)) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not excluded from
coverage under specific Titles or Merger Subtitles of ERISA) for the benefit of
employees or former employees of Compass (a "Pension Plan").
(e) Compass does not maintain, sponsor or contribute to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA, whether or not
excluded from coverage under specific Titles or Merger Subtitles of ERISA) for
the benefit of employees or former employees of Compass (a "Welfare Plan")
except for those Welfare Plans described in Part 2.15(e) of the Disclosure
Schedule, none of which is a multiemployer plan (within the meaning of Section
3(37) of ERISA).
17
(f) With respect to each Plan, Compass has delivered to HALIS:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report (if
required under ERISA) with respect to such Plan for each of 1994 and 1995;
(iii) an accurate and complete copy of (A) the most recent
summary plan description, together with each Summary of Material
Modifications (if required under ERISA) with respect to such Plan, and (B)
each material employee communication relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and
complete copies of the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and recordkeeping
agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with
respect to such Plan (if such Plan is intended to be qualified under
Section 401(a) of the Code).
(g) Compass is not required to be, and, to the best of the knowledge
of Compass and the Shareholder, Compass has never been required to be, treated
as a single employer with any other Person under Section 4001(b)(1) of ERISA or
Section 414(b), (c), (m) or (o) of the Code. Compass has never been a member of
an "affiliated service group" within the meaning of Section 414(m) of the Code.
To the best of the knowledge of Compass and the Shareholder, Compass has never
made a complete or partial withdrawal from a "multiemployer plan" (as defined in
Section 3(37) of ERISA) resulting in "withdrawal liability" (as defined in
Section 4201 of ERISA), without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA.
(h) Compass does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law).
(i) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee of
Compass after any such employee's
18
termination of service (other than (i) benefit coverage mandated by applicable
law, including coverage provided pursuant to Section 4980B of the Code, (ii)
deferred compensation benefits accrued as liabilities on the Unaudited Balance
Sheet, and (iii) benefits the full cost of which are borne by current or former
employees of Compass (or their beneficiaries)).
(j) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(k) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
ERISA and the Code.
(l) Each of the Plans intended to be qualified under Section 401(a) of
the Code has received a favorable determination from the Internal Revenue
Service, and neither Compass, nor any of the Shareholder are aware of any reason
why any such determination letter should be revoked.
(m) Except as set forth in Part 2.15(m) of the Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, will result in any bonus payment, golden parachute payment, severance
payment or other payment to any current or former employee or director of
Compass (whether or not under any Plan), or materially increase the benefits
payable under any Plan, or result in any acceleration of the time of payment or
vesting of any such benefits.
(n) Compass is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, employee compensation, wages, bonuses and terms and conditions of
employment.
(o) Compass has good labor relations, and neither Compass nor any of
the Shareholder has any knowledge of any facts indicating that (i) the
consummation of the Merger or any of the other transactions contemplated by this
Agreement will have a material adverse effect on Compass's labor relations, or
(ii) any of Compass's employees intends to terminate his or her employment with
Compass.
2.16 ENVIRONMENTAL MATTERS. Compass is and has at all times been in
compliance, in all material respects, with all applicable Environmental Laws.
Compass possesses all permits and other Governmental Authorizations required
under applicable Environmental Laws, and Compass is and has at all times been in
compliance with the terms and requirements of all such Governmental
Authorizations. Compass has not received any notice or other communication
(whether from a Governmental Body, citizens group, employee or otherwise) that
alleges that Compass is not in compliance with any Environmental Law, and, to
the best of the knowledge of Compass and the Shareholder, there are no
circumstances that could reasonably be expected to prevent or interfere with
Compass compliance with any Environmental Law in the future. To the best of the
knowledge of Compass and the Shareholder, no current or prior owner of any
property leased or controlled by
19
Compass has received any notice or other communication (whether from a
Governmental Body, citizens group, employee or otherwise) that alleges that such
current or prior owner or Compass is not or was not in compliance with any
Environmental Law. All Governmental Authorizations currently held by Compass
pursuant to Environmental Laws are identified in Part 2.16 of the Disclosure
Schedule.
2.17 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) Other than normal returns for refunds in the ordinary course of
business at levels consistent with past experience under Compass's standard
return policy, Compass will not incur or otherwise become subject to any
material liability arising from (i) any product, system, program, Proprietary
Asset or other asset designed, developed, manufactured, assembled, sold,
supplied, installed, repaired, licensed or made available by Compass on or prior
to the Closing Date, or (ii) any consulting services, installation services,
programming services, repair services, maintenance services, training services,
support services or other services performed by Compass on or prior to the
Closing Date.
(b) Except as set forth in Part 2.17(b) of the Disclosure Schedule, no
customer or other Person has, at any time since September 6, 1991, asserted or
threatened to assert any claim against Compass (other than claims that have been
resolved satisfactorily at no material cost to Compass) under or based upon (i)
any warranty provided by or on behalf of Compass, or (ii) any services performed
by Compass.
2.18 INSURANCE. Part 2.18 of the Disclosure Schedule provides accurate and
complete information with respect to each insurance policy maintained by, at the
expense of or for the benefit of Compass and with respect to any claims made
thereunder. Compass has delivered to HALIS accurate and complete copies of the
insurance policies identified in Part 2.18 of the Disclosure Schedule. Each of
the insurance policies identified in Part 2.18 of the Disclosure Schedule is in
full force and effect. Since September 6, 1991, Compass has not received any
notice or other communication regarding any actual or possible (a) cancellation
or invalidation of any insurance policy, (b) refusal of any coverage or
rejection of any claim under any insurance policy, or (c) material adjustment in
the amount of the premiums payable with respect to any insurance policy.
2.19 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.19 of the
Disclosure Schedule: (a) no Related Party has, and no Related Party has at any
time since September 6, 1991 had, any direct or indirect interest in any
material asset used in or otherwise relating to the business of Compass; (b) no
Related Party is, or has at any time since September 6, 1991 been, indebted to
Compass; (c) since September 6, 1991, no Related Party has entered into, or has
had any direct or indirect financial interest in, any material Contract,
transaction or business dealing involving Compass; (d) no Related Party is
competing, or has at any time since September 6, 1991 competed, directly or
indirectly, with Compass; and (e) no Related Party has any claim or right
against Compass (other than rights to receive compensation for services
performed as an employee of Compass). For purposes of this Section 2.19, each of
the following shall be deemed to be a "Related Party": (i) each of the
Shareholder; (ii) each individual who is, or who has at any time since
20
September 6, 1991 been, an officer or director of Compass; (iii) each individual
who is, or who at any time since September 6, 1991 has been, a member of the
immediate family of any of the individuals referred to in clauses "(i)" and
"(ii)" above; and (iv) any trust or other Entity (other than Compass) in which
any one of the individuals referred to in clauses "(i)," "(ii)" and "(iii)"
above holds (or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or equity interest.
2.20 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.20(a) of the Disclosure Schedule,
there is no pending Legal Proceeding, and, to the best of the knowledge of
Compass and the Shareholder, no Person has threatened to commence any Legal
Proceeding: (i) that involves Compass or any of the assets owned or used by
Compass; or (ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, the Merger or any of the
other transactions contemplated by this Agreement. To the best of the knowledge
of Compass and the Shareholder, except as set forth in Part 2.20(a) of the
Disclosure Schedule, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) Except as set forth in Part 2.20(b) of the Disclosure Schedule, no
Legal Proceeding has ever been commenced by, and no Legal Proceeding has ever
been pending against, Compass.
(c) There is no order, writ, injunction, judgment or decree to which
Compass, or any of the assets owned or used by Compass, are subject. Neither
the Shareholder nor Compass is subject to any order, writ, injunction, judgment
or decree that relates to Compass business or to any of the assets owned or used
by Compass. To the best of the knowledge of Compass and the Shareholder, no
officer or other employee of Compass is subject to any order, writ, injunction,
judgment or decree that prohibits such officer or other employee from engaging
in or continuing any conduct, activity or practice relating to Compass's
business.
2.21 AUTHORITY; BINDING NATURE OF AGREEMENT. The Shareholder and Compass
have the absolute and unrestricted right, power and authority to enter into and
to perform their respective obligations under this Agreement; and the execution,
delivery and performance by Compass of this Agreement has been duly authorized
by all necessary action on the part of Compass and its board of directors and
shareholders. This Agreement constitutes the legal, valid and binding
obligation of the Shareholder and Compass, enforceable against the Shareholder
and Compass in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.22 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.22 of the
Disclosure Schedule, neither (i) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (ii)
the consummation of the Merger or any of the
21
other transactions contemplated by this Agreement, will directly or indirectly
(with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Compass's articles of incorporation or bylaws, or (ii) any
resolution adopted by Compass's shareholders, or Compass's board of directors or
any committee of Compass's board of directors;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the transactions
contemplated by this Agreement or to exercise any remedy or obtain any relief
under, any Legal Requirement or any order, writ, injunction, judgment or decree
to which Compass, or any of the assets owned or used by Compass, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by Compass or that otherwise relates to Compass's business or to
any of the assets owned or used by Compass;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract, or give any
Person the right to (i) declare a default or exercise any remedy under any
Company Contract, (ii) accelerate the maturity or performance of any Company
Contract, or (iii) cancel, terminate or modify any Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by Compass (except
for minor liens that will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of Compass).
Except as set forth in Part 2.22 of the Disclosure Schedule, Compass is not and
will not be required to make any filing with or given any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.23 FULL DISCLOSURE. This Agreement (including the Disclosure Schedule)
does not, and Shareholder's Closing Certificate (as defined in Section 6.4(f))
will not, (i) contain any representation, warranty or information that is false
or misleading with respect to any material fact, or (ii) omit to state any
material fact necessary in order to make the representations, warranties and
information contained and to be contained herein and therein not false or
misleading.
22
SECTION 3. REPRESENTATIONS AND WARRANTIES OF HALIS AND THE SUBSIDIARY
HALIS and the Subsidiary, jointly and severally, represent and
warrant to Compass and the Shareholder as follows:
3.1 SEC FILINGS; FINANCIAL STATEMENTS.
(a) HALIS has delivered to Compass accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by HALIS with the SEC
between January 1, 1995 and the date of this Agreement (the "HALIS SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the HALIS SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be); and (ii) none of the HALIS SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the HALIS SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to normal and recurring year-end audit
adjustments (which will not, individually or in the aggregate, be material in
magnitude); and (iii) fairly present the consolidated financial position of
HALIS as of the respective dates thereof and the consolidated results of
operations of HALIS for the periods covered thereby.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. HALIS and the Subsidiary
each have the absolute and unrestricted right, power and authority to perform
their respective obligations under this Agreement; and the execution, delivery
and performance by HALIS and the Subsidiary of this Agreement have been duly
authorized by all necessary action on the part of HALIS and the Subsidiary and
their respective boards of directors. This Agreement shall constitute the legal,
valid and binding obligation of HALIS and the Subsidiary, enforceable against
each of them in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
3.3 VALID ISSUANCE. The HALIS Common Stock to be issued as Merger
Consideration will, when issued in accordance with the provisions of this
Agreement, be validly issued, fully paid and nonassessable.
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SECTION 4. CERTAIN COVENANTS OF COMPASS AND THE SHAREHOLDER
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), Compass shall,
and shall cause its Representatives to: (a) provide HALIS and HALIS's
Representatives with reasonable access to Compass's Representatives, personnel
and assets and to all existing books, records, Tax Returns, work papers and
other documents and information relating to Compass; and (b) provide HALIS and
HALIS's Representatives with such copies of the existing books, records, Tax
Returns, work papers and other documents and information relating to Compass,
and with such additional financial, operating and other data and information
regarding Compass, as HALIS may reasonably request. Notwithstanding the
provisions of Section 11.17, paragraph 7 of the letter agreement between Compass
and HALIS dated August 15, 1996 ("Letter of Intent") shall remain in effect
through the Closing Date and shall bind HALIS with respect to any Evaluation
Material (as defined in the Letter of Intent) provided to HALIS or its
Representatives during the Pre-Closing Period.
4.2 OPERATION OF COMPASS'S BUSINESS. During the Pre-Closing Period,
unless HALIS otherwise consents in writing:
(a) Compass shall conduct its business and operations in the ordinary
course and in substantially the same manner as such business and operations have
been conducted prior to the date of this Agreement;
(b) Compass shall use reasonable efforts to preserve intact its
current business organizations, keep available the services of its current
officers and employees and maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with Compass;
(c) Compass shall keep in full force all insurance policies
identified in Part 2.18 of the Disclosure Schedule;
(d) Compass shall cause its officers to report regularly to HALIS
concerning the status of Compass's business;
(e) Compass shall not declare, accrue, set aside or pay any dividend
or make any other distribution in respect of any shares of capital stock, and
shall not repurchase, redeem or otherwise reacquire any shares of capital stock
or other securities;
(f) Compass shall not sell, issue or authorize the issuance of (i)
any capital stock or other security, (ii) any option, call, warrant or right to
acquire, or relating to, any capital stock or other security, or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security;
(g) neither Compass nor the Shareholder shall amend or permit the
adoption of any amendment to Compass articles of incorporation or bylaws, or
effect or permit Compass to
24
become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(h) Compass shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(i) Compass shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of Compass during the Pre-Closing Period, do not exceed $25,000 in the
aggregate;
(j) Compass shall not (i) enter into or become bound by, or permit
any of the assets owned or used by it to become bound by, any Material Contract,
or (ii) amend or prematurely terminate, or waive any material right or remedy
under, any Material Contract;
(k) Compass shall not, other than in the ordinary course of business
consistent with past practice (i) acquire, lease or license any right or other
asset from any other Person, (ii) sell or otherwise dispose of, or lease or
license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for immaterial assets acquired, leased, licensed or
disposed of by Compass pursuant to Contracts that are not Material Contracts;
(l) Compass shall not (i) lend money to any Person, or (ii) incur or
guarantee any indebtedness, except that Compass may make routine borrowings in
the ordinary course of business under its respective existing lines of credit;
(m) Compass shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) 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, or (iii) hire any new employee whose aggregate annual compensation is
expected to exceed $25,000;
(n) Compass shall not change any of its methods of accounting or
accounting practices in any respect;
(o) Compass shall not make any Tax election;
(p) Compass shall not commence or settle any Legal Proceeding;
(q) Compass shall not enter into any material transaction or take any
other material action outside the ordinary course of business or inconsistent
with its past practices; and
(r) Compass shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" of this Section 4.2.
25
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, Compass and the Shareholder shall
promptly notify in writing of:
(i) the discovery by Compass or the Shareholder 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 an inaccuracy in or
breach of any representation or warranty made by Compass or any of the
Shareholder 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 an inaccuracy in or breach of any representation or warranty
made by Compass or any of the Shareholder in this Agreement if (A) 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
(B) such event, condition, fact or circumstance had occurred, arisen or
existed on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of Compass or any
of the Shareholder; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Compass or the Shareholder shall promptly deliver to HALIS an
update to the Disclosure Schedule specifying such change. No such update shall
be deemed to supplement or amend the Disclosure Schedule for the purpose of (i)
determining the accuracy of any of the representations and warranties made by
Compass or any of the Shareholder in this Agreement, or (ii) determining whether
any of the conditions set forth in Section 6 has been satisfied.
4.4 NO NEGOTIATION. During the Pre-Closing Period, neither Compass nor
the Shareholder shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than HALIS) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
HALIS) relating to or in connection with a possible Acquisition Transaction; or
26
(c) consider, entertain or accept any proposal or offer from any
Person (other than HALIS) relating to a possible Acquisition Transaction.
Compass shall promptly notify HALIS in writing of any inquiry, proposal or offer
relating to a possible Acquisition Transaction that is received by Compass or
the Shareholder during the Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use his, its or their best efforts to obtain each
Consent (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger or any of the other transactions contemplated by this Agreement. Compass
shall promptly deliver to HALIS a copy of each such filing made, each such
notice given and each such Consent obtained by Compass during the Pre-Closing
Period. HALIS shall promptly deliver to Compass a copy of each such filing
made, each such notice given and each such consent obtained by HALIS during the
Pre-Closing Period.
5.2 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) neither
Compass nor the Shareholder shall (and Compass shall not permit any of its
Representatives to) issue any press release or make any public statement
regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without HALIS's prior written
consent, and (b) HALIS will use reasonable efforts to consult with Compass prior
to issuing any press release or making any public statement regarding the
Merger.
5.3 BEST EFFORTS. During the Pre-Closing Period, (a) Compass and the
Shareholder shall use their reasonable best efforts to cause the conditions set
forth in Section 6 to be satisfied on a timely basis, and (b) HALIS shall use
its reasonable best efforts to cause the conditions set forth in Section 7 to be
satisfied on a timely basis.
5.4 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. At the Closing, Xxxxx X.
York shall execute and deliver to HALIS an Employment Agreement in the form of
Exhibit E-1 (the "Employment Agreement") and a Noncompetition Agreement in the
form of Exhibit E-2 (the "Noncompetition Agreement").
5.5 RELEASE. At the Closing, the Shareholder shall execute and deliver
to HALIS a Release in the form of Exhibit F (the "Release").
5.6 TERMINATION OF EMPLOYEE PLANS. At the Closing, Compass shall
terminate all bonus plans and other benefit plans under which any of its
employees or former employees may have any rights, and shall ensure that no
employee or former employee of Compass has any rights thereunder
27
and that any liabilities of Compass thereunder (including any such liabilities
relating to services performed prior to the Closing) are fully extinguished at
no cost to Compass.
5.7 FIRPTA MATTERS. At the Closing, (a) Compass shall deliver to HALIS a
statement (in such form as may be reasonably requested by counsel to HALIS)
conforming to the requirements of Section 1.897-2(h)(1)(i) of the United States
Treasury Regulations, and (b) Compass shall deliver to the Internal Revenue
Service the notification required under Section 1.897-2(h)(2) of the United
States Treasury Regulations.
5.8 OPTION AGREEMENT. At the Closing, HALIS shall execute and deliver to
the Shareholder the Option Agreement.
5.9 INFORMATION STATEMENT. As promptly as practicable after the execution
of this Agreement, HALIS and Compass shall jointly prepare an Information
Statement relating to the approval of the Merger by the shareholder of Compass
(the "Information Statement").
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HALIS AND THE SUBSIDIARY
The obligations of HALIS and the Subsidiary to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Compass and the Shareholder in this Agreement and in each of
the other agreements and instruments delivered to HALIS in connection with the
transactions contemplated by this Agreement shall have been accurate in all
respects as of the date of this Agreement, and shall be accurate in all respects
as of the Scheduled Closing Time as if made at the Scheduled Closing Time
(without giving effect to any update to the Disclosure Schedule).
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that Compass or
any of the Shareholder is required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all respects.
6.3 CONSENTS. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in Part 2.22 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
6.4 AGREEMENTS AND DOCUMENTS. HALIS shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) the Employment Agreement and the Noncompetition Agreement,
executed by Xxxxx X. York;
(b) a Release, executed by the Shareholder;
28
(c) the statement referred to in Section 5.7, executed by Compass;
(d) estoppel certificates, each dated as of a date not more than five
days prior to the Closing Date and satisfactory in form and content to HALIS,
executed by the Persons identified on Exhibit G and by such other Persons as
HALIS may reasonably specify;
(e) a legal opinion of X. Xxxxxxx Lennard, P.C., dated as of the
Closing Date, satisfactory in form and substance to HALIS and its counsel; and
(f) a certificate executed by Compass and the Shareholder and
containing the representation and warranty of Compass and the Shareholder that
each of the representations and warranties set forth in Section 2 is accurate in
all material respects as of the Closing Date as if made on the Closing Date and
that the conditions set forth in Sections 6.1, 6.2, 6.3, 6.4 and 6.5 have been
duly satisfied (the "Compass and Shareholder's Closing Certificate").
6.5 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in Compass's business, condition, assets, liabilities, operations,
financial performance or prospects since the date of this Agreement.
6.6 TERMINATION OF EMPLOYEE PLANS. Compass shall have provided HALIS with
evidence, satisfactory to HALIS, as to the termination of the plans referred to
in Section 5.6.
6.7 FIRPTA COMPLIANCE. Compass shall have filed with the Internal Revenue
Service the notification referred to in Section 5.7.
6.8 RULE 506. All applicable requirements of Rule 506 under the
Securities Act shall have been satisfied.
6.9 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.10 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Compass of any material right pertaining to its ownership of
stock of the Surviving Corporation.
6.11 COMPLETION OF DUE DILIGENCE. HALIS shall have completed its due
diligence investigation of Compass and shall have been satisfied with the
results thereof.
6.12 SHAREHOLDER INVESTMENT CERTIFICATIONS. A Shareholder Investment
Certification in the form of Exhibit H executed by the Shareholder shall have
been delivered to HALIS.
29
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF COMPASS AND THE
SHAREHOLDER.
The obligations of Compass and the Shareholder to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by HALIS and the Subsidiary in this Agreement and in each of the
other agreements and instruments delivered to Compass in connection with the
transactions contemplated by this Agreement shall have been accurate in all
respects as of the date of this Agreement, and shall be accurate in all respects
as of the Scheduled Closing Time as if made at the Scheduled Closing Time.
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
HALIS is required to comply with or to perform at or prior to the Closing shall
have been complied with and performed in all respects.
7.3 CONSENTS. All Consents required to be obtained in connection with the
merger and the other transactions contemplated by this Agreement shall have been
obtained and shall be in full force and effect.
7.4 AGREEMENTS AND DOCUMENTS.
(a) HALIS and the Subsidiary shall have entered into the Employment
Agreement described in Section 6.4(a);
(b) Compass shall have received a legal opinion of Xxxxx, Xxxxxxxx &
Xxxxxxx in form and substance satisfactory to Compass and its counsel;
(c) Compass shall have received a certificate executed by HALIS and
the Subsidiary, and containing the representation and warranty of HALIS and the
Subsidiary that each of the representations and warranties set forth in Section
3 are accurate in all material respects as of the Closing Date as if made on the
Closing Date and that the conditions set forth in Sections 7.1, 7.2, 7.3 and 7.4
have been duly satisfied (the "HALIS Closing Certificate"); and
(d) HALIS shall have entered into the Option Agreement.
7.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
Compass shall have been issued by any court of competent jurisdiction and remain
in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger by Compass
illegal.
30
7.6 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in HALIS's business, condition, assets, liabilities, operations,
financial performance or prospects since the date of this Agreement.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by HALIS if HALIS reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of HALIS to comply with or
perform any covenant or obligation of HALIS set forth in this Agreement);
(b) by Compass if Compass reasonably determines that the timely
satisfaction of any condition set forth in Section 7 has become impossible
(other than as a result of any failure on the part of Compass or any of the
Shareholder to comply with or perform any covenant or obligation set forth in
this Agreement or in any other agreement or instrument delivered to HALIS);
(c) by HALIS at or after the Scheduled Closing Time if any condition
set forth in Section 6 has not been satisfied by the Scheduled Closing Time;
(d) by Compass at or after the Scheduled Closing Time if any condition
set forth in Section 7 has not been satisfied by the Scheduled Closing Time;
(e) by HALIS if the Closing has not taken place on or before February
15, 1997 (other than as a result of any failure on the part of HALIS to comply
with or perform any covenant or obligation of HALIS set forth in this
Agreement);
(f) by Compass if the Closing has not taken place on or before
February 15, 1997 (other than as a result of the failure on the part of Compass
or any of the Shareholder to comply with or perform any covenant or obligation
set forth in this Agreement or in any other agreement or instrument delivered to
HALIS);
(g) by the mutual consent of HALIS and Compass; or
(h) by HALIS under the circumstances described in Section 4.3(b).
8.2 TERMINATION PROCEDURES. If HALIS wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), HALIS shall
deliver to Compass a written notice stating that HALIS is terminating this
Agreement and setting forth a brief description of the basis on which HALIS is
terminating this Agreement. If Compass wishes to terminate this Agreement
pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f), Compass shall
deliver to HALIS a written notice stating that Compass is terminating this
Agreement and setting forth a brief description of the basis on which Compass is
terminating this Agreement.
31
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) no party shall be relieved of any
obligation or liability arising from any prior breach by such party of any
provision of this Agreement; (b) the parties shall, in all events, remain bound
by and continue to be subject to the provisions set forth in Section 11, as well
as paragraph 7 of the Letter of Intent.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Compass, the Shareholder, HALIS and the
Subsidiary contained in this Agreement shall survive the Closing and shall
continue for a period of two years following the Closing Date; except that
representations and warranties contained in Sections 2.6, 2.9, 2.14 and 2.15
shall survive until expiration of the applicable statutes of limitation for
breach of such representations and warranties. The expiration of any
representation or warranty shall not affect any party's right to claim
indemnification for a breach of such representation or warranty, provided such
party gives notice of such claim in accordance with the provisions of this
Section 9 prior to the expiration of such representation or warranty.
9.2 SHAREHOLDER'S INDEMNITY AGREEMENT. Subject to the provisions of
Section 9.6 hereof, the Shareholder shall defend, indemnify and hold harmless
HALIS and the Surviving Corporation (and their respective directors, officers,
employees, agents, affiliates, successors and assigns) from and against any and
all direct or indirect requests, demands, claims, payments, defenses,
obligations, recoveries, deficiencies, fines, penalties, interest, assessments,
actions, liens, causes of action, suits, proceedings, judgments, losses, Damages
(including without limitation punitive, exemplary or consequential damages, lost
income and profits, interruptions of business and diminution in the value of the
Stock), liabilities, costs, and expenses of any kind (including without
limitation (i) interest, penalties and reasonable attorneys' fees and expenses,
(ii) attorneys' fees and expenses necessary to enforce their rights to
indemnification hereunder, and (iii) consultants' fees and other costs of
defending or investigating any claim hereunder), and interest on any amount
payable as a result of the foregoing, whether accrued, absolute, contingent,
known, unknown, or otherwise as of the Closing Date or thereafter asserted
against, imposed upon or incurred by HALIS, the Surviving Corporation or any of
their respective directors, officers, employees, agents, affiliates, successors
or assigns (a "Loss of HALIS") by reason of, resulting from, arising out of,
based upon, awarded or asserted against or otherwise in respect of:
(a) any period or periods of Compass ending prior to the Closing and
which involve any claims against HALIS, Compass, the Surviving Corporation or
their respective properties or assets, relating to actions or inactions of
Compass or its respective officers, directors, shareholders, employees or agents
prior to Closing, or the operation of the business of Compass prior to the
Closing unless such liability was disclosed on the Company Financial Statements
and adequate reserves were established therefor;
32
(b) any breach of any representation and warranty contained in this
Agreement or any misrepresentation in or omission on the part of Compass or the
Shareholder contained in any certificate furnished or to be furnished to HALIS
by Compass or any of the Shareholder pursuant to this Agreement;
(c) any breach or nonfulfillment on the part of Compass or any of the
Shareholder of any covenant contained in this Agreement;
(d) the failure of Compass or the Shareholder to obtain, prior to the
Closing Date, any consents, approvals and waivers of governmental agencies or
entities, lessors, landlords, suppliers, and other third parties as may be
necessary to permit the consummation of the Merger and to permit the Surviving
Corporation to continue to operate the business of Compass in the manner
presently conducted after the Closing Date;
(e) the failure of the Surviving Corporation to collect any accounts
receivable of Compass existing on the Closing Date, net of reserve for bad debts
set forth in the Financial Statements, within 180 days following the Closing
Date; provided however, that upon receipt of full payment from Shareholder, the
Surviving Corporation shall reassign to the Shareholder any such account
receivable;
(f) any federal, state, local or foreign taxes, including any interest
and penalties thereon, due from Compass or the Shareholder with respect to any
period prior to the Closing Date, other than amounts accrued therefor on the
Financial Statements.
9.3 INDEMNITY AGREEMENT OF HALIS AND THE SURVIVING CORPORATION. HALIS and
the Surviving Corporation shall indemnify and hold harmless the Shareholder (and
her successors and assigns) from and against any and all direct or indirect
requests, demands, claims, payments, defenses, obligations, recoveries,
deficiencies, fines, penalties, interest, assessments, actions, liens, causes of
action, suits, proceedings, judgments, losses, Damages (including without
limitation punitive, exemplary or consequential damages and lost income and
profits and interruptions of business), liabilities, costs, and expenses of any
kind (including without limitation (i) interest, penalties and reasonable
attorneys' fees and expenses, (ii) attorneys' fees and expenses necessary to
enforce their rights to indemnification hereunder, and (iii) consultants' fees
and other costs of defending or investigating any claim hereunder, and interest
on any amount payable as a result of the foregoing) whether accrued, absolute,
contingent, known, unknown or otherwise as of the Closing Date or thereafter
asserted against, imposed upon or incurred by Shareholder or its respective
representatives or assigns, (a "Loss of Shareholder") by reason of, resulting
from, arising out of, based upon, awarded or asserted against in respect of or
otherwise in respect of:
(a) any period or periods of the Surviving Corporation beginning after
the Closing and which involve any claims against the Shareholder or their
respective assets relating to actions or inactions of HALIS or the Surviving
Corporation or their respective officers, directors, shareholders, employees or
agents after the Closing, or the operation of the Surviving Corporation
33
after the Closing (except to the extent any of the foregoing arise from the acts
or omissions of the Shareholder); and
(b) any breach of any representation and warranty or nonfulfillment of
any covenant or agreement on the part of HALIS or the Subsidiary contained in
this Agreement, or any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of the HALIS or the Subsidiary contained in any
certificate furnished or to be furnished to the Shareholder by HALIS or the
Subsidiary pursuant to this Agreement.
9.4 INDEMNIFICATION PROCEDURE.
(a) Upon obtaining knowledge thereof, the party to be indemnified
hereunder (the "Indemnitee") shall promptly notify the indemnifying party
hereunder (the "Indemnitor") in writing of any damage, claim, loss, liability or
expense or other matter which the Indemnitee has determined has given or could
give rise to a claim for which indemnification rights are granted hereunder
(such written notice referred to as the "Notice of Claim"). The Notice of Claim
shall specify, in all reasonable detail, the nature and estimated amount of any
such claim giving rise to a right of indemnification, to the extent the same can
reasonably be estimated. Any failure on the part of an Indemnitee to give
timely notice to the Indemnitor of a claim shall not affect the right of the
Indemnitee to obtain indemnification from the Indemnitor with respect to such
claim unless the Indemnitor is actually harmed by such failure to notify, and
only to the extent of such actual harm.
(b) With respect to any matter set forth in a Notice of Claim relating
to a third party claim the Indemnitor shall defend, in good faith and at its
expense, any such claim or demand, and the Indemnitee, at its expense, shall
have the right to participate in the defense of any such third party claim. So
long as Indemnitor is defending, in good faith, any such third party claim, the
Indemnitee shall not settle or compromise such third party claim. The
Indemnitee shall make available to the Indemnitor or its representatives all
records and other materials reasonably required by them for use in contesting
any third party claim and shall cooperate fully with the Indemnitor in the
defense of all such claims. If the Indemnitor does not defend any such third
party claim or if the Indemnitor does not provide the Indemnitee with prompt and
reasonable assurances that the Indemnitor will satisfy the third party claim,
the Indemnitee may, at its option, elect to defend any such third party claim,
at the Indemnitor's expense. An Indemnitor may not settle or compromise any
claim without obtaining a full and unconditional release of the Indemnitee,
unless the Indemnitee consents in writing to such settlement or compromise.
Notwithstanding the foregoing, if there is a reasonable probability that a third
party claim for which HALIS or the Surviving Corporation has indemnification
rights against the Shareholder hereunder will materially and adversely affect
HALIS or the Surviving Corporation other than as a result of money damages or
other payments, HALIS or the Surviving Corporation shall be entitled to conduct
the defense of such claim at the Shareholder's expense.
9.5 SET-OFF. HALIS and the Surviving Corporation shall have the right to
set-off and apply against any other amounts owing from HALIS or the Surviving
Corporation to the Shareholder under any other agreement between HALIS or the
Surviving Corporation and
34
Shareholder, all sums in respect of which the Shareholder may be liable pursuant
to Section 9.2 hereof, such right of set-off to be in addition to and not in
lieu of or an election against any and all other remedies available to HALIS and
the Surviving Corporation under this Agreement or at law or in equity.
9.6 LIMITATIONS ON LIABILITY OF SHAREHOLDER. Shareholder shall have no
liability with respect to Losses of HALIS arising under subparagraphs (a), (b),
or (d) of Section 9.2 until the total of all Losses of HALIS with respect
thereto exceeds $25,000. If the aggregate Losses of HALIS exceed such $25,000
threshold, Compass and the Shareholder shall be liable for all Losses of HALIS
to the extent (and only to the extent) Losses of HALIS exceed such $25,000
threshold.
SECTION 10. REGISTRATION OF SHARES
10.1 CERTAIN DEFINITIONS. As used in this Section 10, the following terms
shall have the following respective meanings:
"Registrable Securities" shall mean any of the HALIS Common Stock to be
----------------------
issued to the Shareholder in the Merger.
"Initiating Holders" shall mean any holder or holders who in the aggregate
------------------
own not less than 50% of the aggregate number of Registrable Securities then
existing, which have not previously been sold to the public.
The terms "register", "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by HALIS in
---------------------
complying with this Section 10, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for HALIS,
blue sky fees and expenses, and accountants' expenses including without
limitation any special audits or "comfort" letters incident to or required by
any such registration, and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding underwriting
discounts and commissions, and, as to any registration effected pursuant to
Section 10.3, the reasonable fees and disbursements of one special counsel
retained by the Holders of the Registrable Securities being registered.
10.2 REGISTRATION UNDER SECURITIES ACT, ETC.
Registration on Request.
-----------------------
(a) Request. At any time during the period commencing January 1, 1998
-------
and ending December 31, 1998, if HALIS has not made a registration of its own
equity securities subject to the provisions of Subsection 10.3 below, upon the
written request of one or more Initiating Holders, requesting that HALIS effect
the registration under the Securities Act of all or part of such
35
Initiating Holders' Registrable Securities (but not less than 25% of the
Registrable Securities outstanding) and specifying the intended method or
methods of disposition thereof, HALIS will promptly, but in any event within 10
business days, give written notice of such requested registration to all holders
of Registrable Securities and thereupon will use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which HALIS has been so requested to
register by such Initiating Holders, for disposition in accordance with the
intended method or methods of disposition stated in such request,
(ii) all other Registrable Securities which HALIS has been requested
to register by the holders thereof by written request delivered to HALIS
within 10 days after the giving of such written notice by HALIS (which
request shall specify the intended method or methods of disposition of such
Registrable Securities), and
(iii) all shares of HALIS Common Stock which HALIS may elect to
register for its own account in connection with the offering of Registrable
Securities pursuant to this Section 10.2, all to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, provided that
--------
HALIS shall not be required to effect more than one registration pursuant
to this Section 10.2.
(b) Registration Statement Form. Each registration requested pursuant
---------------------------
to this Section 10.2 shall be effected by the filing of a registration statement
on any form which HALIS is eligible to use, such form to be selected by HALIS,
after consultation with counsel and after notice of such selection of such form
is delivered to the holders of all Registrable Securities electing to
participate in such registration; provided, however, that if the holders of at
least a majority of the Registrable Securities as to which registration has been
requested pursuant to this Section 10.2 shall so request, HALIS shall file such
registration statement pursuant to the SEC's Rule 415, or any successor rule or
regulation thereto, so as to permit the continuous or delayed offering of the
Registrable Securities in accordance with the intended method of disposition
specified in the Initiating Holder's notice pursuant to sub-section (a) of this
Section 10.2, but in no event shall HALIS be required to maintain the
effectiveness of such registration beyond the period specified in Section
10.4(b).
(c) Expenses. Except as otherwise prohibited by applicable law, HALIS
--------
will pay all Registration Expenses in connection with the registration of
Registrable Securities requested pursuant to this Section 10.2.
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 10.2 shall not be deemed to be effected unless it has
been declared effective by the SEC or otherwise becomes effective, provided that
--------
a registration which does not become effective after HALIS has substantially
prepared and has filed or is in a position to file a registration statement with
36
respect thereto solely by reason of the refusal to proceed of all of the
Initiating Holders (other than any refusal to proceed based upon the advice of
their counsel that the registration statement, or the prospectus contained
therein, contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing) shall be
deemed to have been effected by HALIS pursuant to this Section 10.2.
(e) Registration Rights Exclusive. HALIS will not register securities
-----------------------------
for sale for the account of any person other than the holders of Registrable
Securities, and will not, in any event, register any securities other than
Registrable Securities, in any registration of Registrable Securities requested
by one or more holders pursuant to this Section 10.2 (except for shares to be
registered by or on behalf of HALIS where the underwriter, if any, does not
object to the inclusion of such Company shares in the registration), unless, in
each such case, permitted to do so by the written consent of such holders
representing at least 51% (by number of shares) of the Registrable Securities as
to which registration has been requested by such holders. HALIS will not grant
to any Person the right to request a registration of securities prohibited by
this subdivision (e).
(f) Separate Transferability of Demand Registration Rights. In
------------------------------------------------------
connection with the transfer of any portion or portions of the Registrable
Securities, any Shareholder may, at its sole election, transfer the demand
registration entitlement granted by this Section 10.2 to and for the exclusive
benefit of the Registrable Securities so transferred or may retain one or both
of such demand registration entitlements for the exclusive benefit of the
holders of the retained Registrable Securities. In such event, the terms
"Initiating Holders" and "Registrable Securities" shall, for the purposes of
this Section 10.2, refer exclusively to the Registrable Securities for whose
benefit such rights have been transferred or retained, as the case may be. Such
Shareholder shall effect the transfer or retention of demand registration rights
hereunder by giving notice to HALIS concurrently with any transfer of
Registrable Securities. Once the Shareholder has made a transfer of Registrable
Securities without retaining the exclusive benefit of such rights to its
retained Registrable Securities, it shall not thereafter, without the express
written consent of the subsequent holders of such transferred Registrable
Securities, purport to grant or retain demand registration rights to the
exclusive benefit of any subset of the Registrable Securities. Nothing
contained in this Section 10.2(f) shall be construed to require HALIS to effect
more than one such demand registration pursuant to Section 10.2.
10.3 INCIDENTAL REGISTRATION. (a) Right to Include Registrable Securities.
---------------------------------------
If, at any time on or prior to December 31, 1997, HALIS proposes to register any
of its equity securities under the Securities Act, whether or not for sale for
its own account, on a form and in a manner which would permit registration of
Registrable Securities held by any Shareholder for sale to the public under the
Securities Act, it will each such time give prompt written notice to all holders
of Registrable Securities of its intention to do so, describing such securities
and specifying the form and manner and the other relevant facts involved in such
proposed registration, and upon the written request of any such holder delivered
to HALIS within ten (10) business days after the giving of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such holder and the intended method or methods of disposition thereof),
HALIS will use its best efforts to effect the
37
registration under the Securities Act of all Registrable Securities which HALIS
has been so requested to register by the holders of Registrable Securities
(hereinafter "Requesting Holder"), to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered, provided that:
--------
(i) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective date
of the registration statement filed in connection with such registration,
HALIS shall determine for any reason not to register such securities, HALIS
may, at its election, give written notice of such determination to each
holder of Registrable Securities and thereupon shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
in connection therewith as provided in subdivision (b) of this Section
10.1);
(ii) if (A) the registration so proposed by HALIS involves an
underwritten offering of the securities so being registered, whether or not
for sale for the account of HALIS, to be distributed by or through one or
more underwriters of recognized standing under underwriting terms
appropriate for such a transaction, (B) HALIS proposes that the securities
to be registered in such underwritten offering will include all of the
Registrable Securities requested to be so included, and (C) the managing
underwriter of such underwritten offering shall advise HALIS in writing
that, in its judgment, the distribution of all or a specified portion of
such Registrable Securities concurrently with the securities being
distributed by such underwriters will materially adversely affect the
distribution of such securities by such underwriters (such written advice
to state the reasons therefor), then HALIS will promptly furnish each such
holder of Registrable Securities with a copy of such opinion and may
require, by written notice to each such holder accompanying such written
advice, that the distribution of all or a specified portion of such
Registrable Securities be excluded from such distribution (in case of an
exclusion of a portion of such Registrable Securities, such portion to be
allocated among such holders in proportion to the respective numbers of
shares of Registrable Securities so requested to be registered by such
holders); and
(iii) HALIS shall not be obligated to effect any registration of
Registrable Securities under this Section 10.1 incidental to the
registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans or stock option
or other employee benefit plans or incidental to the registration of any
non-equity securities not convertible into equity securities.
(b) Expenses. Except as otherwise prohibited by applicable law, HALIS will
--------
pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 10.
38
10.4 REGISTRATION PROCEDURES. If and whenever HALIS is required to use
its best efforts to effect the registration of any Registrable Securities under
the Securities Act as provided in Section 10.2, HALIS will promptly:
(a) prepare and (in any event within sixty (60) days of the last date
on which the holders of Registrable Securities may notify HALIS of their request
to include their Registrable Securities in such registration in accordance
herewith) file with the SEC a registration statement with respect to such
Registrable Securities and use its best efforts to cause such registration
statement to become effective;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities and other securities covered by such registration
statement until the earlier of such time as all of such Registrable Securities
and securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or the expiration of ninety (90) days after such registration
statement becomes effective; and will furnish, upon request, to each such seller
and each Requesting Holder prior to the filing thereof a copy of any amendment
or supplement to such registration statement or prospectus and shall not file
any such amendment or supplement to which any such seller or holder shall have
reasonably objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the Securities Act or
of the rules or regulations thereunder;
(c) furnish to each seller of such Registrable Securities and each
Requesting Holder such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such documents, if any,
incorporated by reference in such registration statement or prospectus, and such
other documents, as such seller or Requesting Holder may reasonably request;
(d) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities or blue sky laws of the states of the United States as
each seller shall reasonably request, to keep such registration or qualification
in effect for so long as such registration statement remains in effect, and do
any and all other acts and things which may be necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of its
Registrable Securities covered by such registration statement, except that HALIS
shall not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subsection (d) be obligated to be so qualified, or to
subject itself to taxation in any such jurisdiction, or to consent general
service of process in any such jurisdiction;
39
(e) upon request, furnish to each seller of Registrable Securities
and each Requesting Holder a signed counterpart, addressed to such seller and
such holder, of (i) an opinion of counsel for HALIS, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), and (ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have certified
HALIS's financial statements included in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of securities
and, in the case of the accountants' letter, such other financial matters, as
the principal underwriter for such sellers or such holders may reasonably
request;
(f) immediately notify each seller of Registrable Securities covered
by such registration statement and each Requesting Holder, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, which
untrue statement or omission requires amendment of the registration statement or
supplementation of the prospectus, and at the request of any such seller or
holder, prepare and furnish to such seller and holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing; provided, however, that each holder of Registrable
Securities registered pursuant to such registration statement agrees that he or
it will not sell any Registrable Securities pursuant to such registration
statement during the time that HALIS is preparing and filing with the SEC a
supplement to or an amendment of such prospectus or registration statement.
(g) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its securities holders,
as soon as reasonably practicable, an earnings statement covering the period of
at least twelve (12) months, but not more than eighteen (18) months, beginning
with the first month of the first fiscal quarter after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(h) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from and
after a date not later than the effective date of such registration statement;
and
40
(i) use its best efforts to list all Common Stock covered by such
registration statement on each securities exchange on which any of the HALIS
Common Stock is then listed or, if HALIS Common Stock is not then quoted on
NASDAQ or listed on any national securities exchange, use its best efforts to
have such HALIS Common Stock covered by such registration statement quoted on
NASDAQ or, at the option of HALIS, listed on a national securities exchange.
HALIS may require each seller of Registrable Securities as to which any
registration is being effected to furnish HALIS such information regarding such
seller and the distribution of such securities as HALIS may from time to time
reasonably request in writing and as shall be required by law or by the SEC in
connection therewith.
10.5 UNDERWRITTEN OFFERINGS.
(a) Underwritten Offerings Exclusive. Whenever a registration
--------------------------------
requested by one or more Holders pursuant to Section 10.2 is for an underwritten
offering, only shares of Registrable Securities which are to be distributed by
the underwriters designated by such holders may be included in such
registration, unless such holders shall have permitted other securities to be
included in such registration as provided in Section 10.2(e). If such holders
shall determine that the number of shares of Registrable Securities and any such
other securities to be sold in any such underwritten offering should be limited
due to market conditions or otherwise, HALIS shall include in such registration
to the extent of the number which HALIS is so advised can be sold in such
offering (i) first, Registrable Securities requested to be included in such
-
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares of such securities requested to be included by
such holders, and (ii) other securities of HALIS proposed to be included in such
--
registration, in accordance with the priorities, if any, then existing among
HALIS and the holders of such securities.
(b) Underwriting Agreement. If requested by the underwriters for any
----------------------
underwritten offering of Registrable Securities on behalf of a holder or holders
of Registrable Securities pursuant to a registration requested under Section
10.2, HALIS will enter into an underwriting agreement reasonably acceptable to
HALIS with such underwriters for such offering, such agreement to contain such
representations and warranties by HALIS and such other terms and provisions as
are customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities to the effect and to
the extent provided in Section 10.2. The holders of Registrable Securities on
whose behalf Registrable Securities are to be distributed by such underwriters
shall be parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, HALIS to and for the
benefit of such underwriters, shall also be made to and for the benefit of such
holders of Registrable Securities. Such holders of Registrable Securities shall
not be required by HALIS to make any representations or warranties to or
agreements with HALIS or the underwriters other than reasonable representations,
warranties or agreements (including indemnity agreements customary in secondary
offerings) regarding such holder, such holder's Registrable Securities and such
holder's intended method or methods of disposition and any other representation
required by law.
41
(c) Incidental Underwritten Offerings. If HALIS at any time proposes
---------------------------------
to register any of its securities under the Securities Act as contemplated by
Section 10.3 and such securities are to be distributed by or through one or more
underwriters, HALIS will use its best efforts, if requested by any holder of
Registrable Securities who requests incidental registration of Registrable
Securities in connection therewith pursuant to Section 10.3, to arrange for such
underwriters to include the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by or through such
underwriters, provided that, for purposes of this sentence, best efforts shall
--------
not require HALIS to reduce the amount or sale price of such securities proposed
to be distributed by or through such underwriters. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between HALIS and such underwriters and the
representations and warranties by, and the other agreements on the part of,
HALIS to and for the benefit of such underwriters, shall also be made to and for
the benefit of such holders of Registrable Securities, and HALIS will cooperate
with such holders of Registrable Securities to the end that the conditions
precedent to the obligations of such holders of Registrable Securities under
such underwriting agreement shall not include conditions that are not customary
in underwriting agreements with respect to combined primary and secondary
distributions and shall be otherwise satisfactory to such holders. Such holders
of Registrable Securities shall not be required by HALIS to make any
representations or warranties to or agreements with HALIS or the underwriters
other than reasonable representations, warranties or agreements (including
indemnity agreements customary in secondary offerings) regarding such holder,
such holder's Registrable Securities and such holder's intended method or
methods of distribution and any other representation required by law.
(d) Selection of Underwriters. Whenever a registration requested
-------------------------
pursuant to Section 10.2 is for an underwritten offering, the holders of a
majority of the Registrable Securities included in such registration shall have
the right to select the managing underwriter(s) to administer the offering,
after consulting with HALIS as to such selection and subject to the approval of
HALIS, which approval will not be unreasonably withheld. If HALIS at any time
proposes to register any of its securities under the Securities Act for sale for
its own account and such securities are to be distributed by or through one or
more underwriters, the selection of the managing underwriter(s) shall be made by
HALIS and notice of the selection thereof delivered to the holders of all
Registrable Securities eligible to participate in such registration.
(e) Holdback Agreements. (i) If any registration pursuant to Section
-------------------
10.2 or 10.3 shall be in connection with an underwritten public offering, each
holder of Registrable Securities agrees by acquisition of such Registrable
Securities, if so required by the managing underwriter, not to effect any public
sale or distribution of Registrable Securities (other than as part of such
underwritten public offering) within seven days prior to the effective date of
such registration statement or 120 days after the effective date of such
registration statement.
(ii) HALIS agrees (A) not to effect any public sale or distribution of
any of its equity securities or securities convertible into or exchangeable or
exercisable for any of such securities during the seven days prior to and the
earlier of 90 days after any underwritten registration pursuant to Section 10.2
or 10.3 has become effective and the date on which all securities under such
42
registration statement are sold, except as part of such underwritten
registration and except pursuant to registrations on Form S-8 or any successor
thereto, and (B) use its best efforts to cause each holder of its equity
securities or any securities convertible into or exchangeable or exercisable for
any of such securities, in each case purchased from HALIS at any time after the
date of this Agreement (other than in a public offering) to agree not to effect
any such public sale or distribution of such securities during such period.
10.6 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, HALIS will give the holders of Registrable
Securities on whose behalf such Registrable Securities are to be so registered
and their underwriters, if any, each Requesting Holder, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
SEC and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of HALIS with its officers and the independent public accountants who
have certified its financial statements as shall be necessary in the opinion of
such holders and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act. To minimize
disruption and expense to HALIS during the course of the registration process,
sellers of Registrable Securities to be covered by any such registration
statement shall coordinate their investigation and due diligence efforts
hereunder and, to the extent practicable, will act through a single set of
counsel and a single set of accountants.
10.7 INDEMNIFICATION.
(a) Indemnification by HALIS. In the event of any registration of
------------------------
any securities of HALIS under the Securities Act, HALIS will, and hereby does,
indemnify and hold harmless in the case of any registration statement filed
pursuant to Section 10.2 or 10.3, the seller of any Registrable Securities
covered by such registration statement, its directors, trustees and officers,
each other person who participates as an underwriter in the offering or sale of
such securities and each other person, if any, who controls such seller or any
such underwriter within the meaning of the Securities Act against any losses,
claims, damages, liabilities or expenses, joint or several, to which such seller
or Requesting Holder or any such director or officer or participating or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
document incorporated by reference therein, or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and HALIS will
reimburse such seller, Requesting Holder and each such director, trustee,
officer, participating person and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided that
--------
HALIS shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense (or action
43
or proceeding in respect thereof) arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to HALIS through an instrument duly executed
by such seller or such Requesting Holder or any such director, trustee, officer,
participating person or controlling person specifically stating that it is for
use in the preparation thereof. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such seller or
such Requesting Holder or any such director, officer, participating person or
controlling person and shall survive the transfer of such securities by such
seller. HALIS shall agree to make provision for contribution relating to such
indemnity as shall be reasonably requested by any seller of Registrable
Securities or the underwriters.
(b) Indemnification by the Sellers. HALIS may require, as a
------------------------------
condition to including any Registrable Securities in any registration statement
filed pursuant to sections 10.2 or 10.3, that HALIS shall have received an
undertaking satisfactory to it from the prospective seller of such securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this section 10.7) HALIS, each director of HALIS,
each officer of HALIS who shall sign such registration statement and each other
person, if any, who controls HALIS within the meaning of the Securities Act,
with respect to any statement in or omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus included
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with written information furnished
to HALIS through an instrument only executed by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of HALIS or any such director, officer or
controlling person and shall survive the transfer of such securities by such
seller.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this section 10.7, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
--------
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 10.7. In case any such action
is brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that it may
wish, with counsel reasonable satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
44
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding subdivisions of this section 10.7 (with appropriate
modifications) shall be given by HALIS and each seller of Registrable Securities
with respect to any required registration or other qualification of such
Registrable Securities under any federal or state law or regulation of
governmental authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
------------------------
section 10.7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
10.8 AMENDMENTS AND WAIVERS. The provisions of this Section may be
amended and HALIS may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if HALIS shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of 51% or more of the shares of Registrable Securities (and, in the case
of any amendment, action or omission to act which adversely affects any specific
holder of Registrable Securities or a specific group of holders of Registrable
Securities, the written consent of each such holder or holders of 51% or more of
the Registrable Securities held by such group). Each holder of any Registrable
Securities at the time shall be bound by any consent authorized by this section
10.8, whether or not such Registrable Securities shall have been marked to
indicate such consent.
10.9 NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects,
HALIS may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
SECTION 11. MISCELLANEOUS PROVISIONS
11.1 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
11.2 FEES AND EXPENSES. Subject to Section 9, all fees, costs and
expenses (including legal fees and accounting fees) that have been incurred or
that are incurred in the future by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) any
investigation and
45
review conducted by such party of the other parties' business (and the
furnishing of information in connection with such investigation and review), (b)
the negotiation, preparation and review of this Agreement (including the
Disclosure Schedule) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, (c) the preparation and submission
of any filing or notice required to be made or given in connection with any of
the transactions contemplated by this Agreement, and the obtaining of any
Consent required to be obtained in connection with any of such transactions, and
(d) the consummation of the Merger shall be paid: (i) by HALIS, if incurred by
HALIS or the Subsidiary; and (ii) by Compass, if incurred by Compass or the
Shareholder; provided, however, that Compass shall not incur any additional
debt, defer the payment of any expenses, or take any other action not in the
ordinary course of business for the purpose of providing funds for the payment
of such expenses.
11.3 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
11.4 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to HALIS:
HALIS, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxxx & Xxxxxxx
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
46
if to Compass:
The Compass Group, Inc.
0000 Xxxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
with a copy to:
X. Xxxxxxx Xxxxxxx, P.C.
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxx 0
Xxxxxxxx, Xxxxxxx 00000-0000
Facsimile: (000) 000-0000
if to the Shareholder:
Xxxxx X. York
0000 Xxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
11.5 CONFIDENTIALITY. On and at all times after the Closing Date,
Compass and Shareholder shall keep confidential, and shall not use or disclose
to any other Person, any non-public document or other non-public information in
Compass or such Shareholder's possession that relates to the business of HALIS
or the Subsidiary.
11.6 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
11.7 HEADINGS. The bold-faced Section headings contained in this
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
11.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
11.9 GOVERNING LAW; VENUE.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of Georgia (without
giving effect to principles of conflicts of laws).
47
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
to or otherwise commenced in any state or federal court located in Xxxx County,
Georgia. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in Xxxx County,
Georgia (and each appellate court located in the State of Georgia) in
connection with any such legal proceeding;
(ii) agrees that each state and federal court located in
Xxxx County, Georgia shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal
court located in Xxxx County, Georgia, any claim that such party is not
subject personally to the jurisdiction of such court, that such legal
proceeding has been brought in an inconvenient forum, that the venue of
such proceeding is improper or that this Agreement or the subject matter of
this Agreement may not be enforced in or by such court.
11.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon:
Compass and its successors and assigns (if any); the Shareholder and her
personal representatives, executors, administrators, estates, heirs, successors
and assigns (if any); HALIS and its successors and assigns (if any); and the
Subsidiary and its successors and assigns (if any). This Agreement shall inure
to the benefit of: Compass; the Shareholder; HALIS; the Subsidiary; and the
respective successors, heirs personal representatives and assigns (if any) of
the foregoing. Following the Merger, HALIS may freely assign any or all of its
rights under this Agreement (including its indemnification rights under Section
9), in whole or in part, to any other Person without obtaining the consent or
approval of any other party hereto or of any other Person.
11.11 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or threatened
breach by any party to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (b) an injunction restraining such breach or threatened
breach.
11.12 WAIVER.
(a) No failure on the part of any party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
48
(b) No party shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
11.13 AMENDMENTS. Subject to Section 10.9, this Agreement may not be
amended, modified, altered or supplemented other than by means of a written
instrument duly executed and delivered on behalf of all of the parties hereto.
11.14 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
11.15 PARTIES IN INTEREST. Except for the provisions of Sections 9 and
10, none of the provisions of this Agreement is intended to provide any rights
or remedies to any Person other than the parties hereto and their respective
successors, heirs, personal representatives and assigns (if any).
11.16 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof, including without limitation the Letter
of Intent (other than paragraph 7 thereof, which shall survive to the extent
provided herein).
11.17 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
49
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
The parties hereto have caused this Agreement to be executed and delivered
as of the date first above written.
"HALIS"
HALIS, INC., a Georgia corporation
By: /s/ Xxxxx Xxxxxx
--------------------------------
Xxxxx Xxxxxx, President
"SUBSIDIARY"
COMPASS ACQUISITION CO.,
a Georgia corporation
By: /s/ Xxxxx Xxxxxx
--------------------------------
Xxxxx Xxxxxx, President
"COMPASS"
THE COMPASS GROUP, INC.,
a Georgia corporation
By: /s/ Xxxxx X. York
--------------------------------
Xxxxx X. York, President
"THE SHAREHOLDER"
/s/ Xxxxx X. York (SEAL)
--------------------------------
Xxxxx X. York
50
EXHIBIT A
Shareholders of The Compass Group, Inc.
Names
-----
Xxxxx X. York
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a material
portion of Compass's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of Compass or HALIS, as the case may be; (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire, or otherwise relating to, any capital stock or other equity
security of Compass or HALIS, as the case may be; or (iii) any security,
instrument or obligation that is or may become convertible into or
exchangeable for any capital stock or other equity security of Compass or
HALIS, as the case may be; or
(c) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving Compass or HALIS, as the
case may be.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit B is attached (including the Disclosure
Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which Compass is a party; (b) by which Compass or any of its assets are or may
become bound or under which Compass has, or may become subject to, any
obligation; or (c) under which Compass has or may acquire any right or interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to Compass or otherwise used by Compass.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan, or legally binding commitment or undertaking of
any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
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DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to HALIS on behalf of Compass and the
Shareholder.
EMPLOYEE BENEFIT PLAN. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security), any restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ENVIRONMENTAL LAW. "Environmental Law" means any federal, state, local or
foreign Legal Requirement relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city, local or other political subdivision.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by
B-2
or before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitute, principle of common
law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on Compass if such violation or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement or in the
Shareholder's Closing Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications, in
such representations and warranties) would have a material adverse effect on
Compass's business, condition, assets, liabilities, operations, financial
performance or prospects.
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes, toxic substances, asbestos,
PCBs, petroleum and petroleum products and any other substance that is now or in
the future regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, source code, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; or (b) right to use or exploit
any of the foregoing.
REPRESENTATIVES "Representatives" shall mean officers, directors,
employees, agents, attorneys, accounts, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any
B-3
fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
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