AGREEMENT AND PLAN OF MERGER
Dated as of February 16, 2006
By and Among
FIRST ADVANTAGE CORPORATION,
ACCUFACTS ACQUISITION, LLC,
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC
AND OTHER NAME PARTIES
Table of Contents(1)
1. DEFINITIONS..............................................................1
2. THE MERGER; CLOSING......................................................5
2.1 THE MERGER........................................................5
2.2 EFFECTIVE TIME....................................................6
2.3 EFFECTS OF THE MERGER.............................................6
2.4 CERTIFICATE OF INCORPORATION......................................6
2.5 BY-LAWS...........................................................6
2.6 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION...................7
2.7 CONVERSION OR CANCELLATION OF SECURITIES..........................7
2.8 PURCHASE OF OPTIONS...............................................8
2.9 EXCHANGE OF COMPANY CAPITAL.......................................9
2.10 NO FURTHER RIGHTS; STOCK TRANSFER BOOKS..........................10
2.11 NO LIABILITY.....................................................10
2.12 WITHHOLDING RIGHTS...............................................11
2.13 SUBSEQUENT ACTIONS...............................................11
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................11
3.1 ORGANIZATION AND GOOD STANDING...................................11
3.2 AUTHORITY; NO CONFLICT...........................................12
3.3 CAPITALIZATION...................................................14
3.4 FINANCIAL STATEMENTS; SEC FILINGS................................14
3.5 NO UNDISCLOSED LIABILITIES.......................................16
3.6 TAXES............................................................16
3.7 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE............................19
3.8 NO MATERIAL ADVERSE CHANGE.......................................19
3.9 BOOKS AND RECORDS................................................19
3.10 TITLE TO PROPERTIES; ENCUMBRANCES................................20
3.11 CONDITION AND SUFFICIENCY OF ASSETS..............................20
3.12 EMPLOYEE BENEFITS................................................20
3.13 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS................21
3.14 LEGAL PROCEEDINGS................................................22
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS............................22
3.16 CONTRACTS; NO DEFAULTS...........................................24
3.17 INSURANCE........................................................26
3.18 ENVIRONMENTAL MATTERS............................................26
3.19 EMPLOYEES........................................................27
3.20 LABOR RELATIONS..................................................27
3.21 INTELLECTUAL PROPERTY............................................29
3.22 ABSENCE OF CERTAIN PAYMENTS......................................31
3.23 RELATIONSHIPS WITH RELATED PERSONS...............................31
3.24 BROKERS OR FINDERS...............................................31
3.25 DEPOSIT ACCOUNTS.................................................31
3.26 CONDUCT OF BUSINESS; USE OF NAME.................................32
3.27 RESTRICTIONS ON BUSINESS ACTIVITIES..............................32
3.28 OUTSTANDING INDEBTEDNESS.........................................32
- ----------
(1) This Table of Contents is for refence only and is not part of the
Agreement.
ii
3.29 CLIENTS AND CONTRACTORS..........................................32
3.30 FAIRNESS OPINION.................................................33
3.31 VOTING REQUIREMENTS..............................................33
3.32 EMPLOYEE STOCK PURCHASE PLAN.....................................33
3.33 PROXY STATEMENT..................................................33
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB..............33
4.1 ORGANIZATION AND GOOD STANDING...................................33
4.2 AUTHORITY........................................................33
4.3 LEGAL PROCEEDINGS................................................34
4.4 BROKERS OR FINDERS...............................................34
4.5 CONFIDENTIALITY AND NON-DISCLOSURE...............................34
4.6 INTENTIONALLY DELETED............................................34
4.7 NO TRANSACTIONS IN COMPANY STOCK.................................34
4.8 COMPLIANCE WITH SEC REGULATIONS..................................34
5. COVENANTS OF THE COMPANY................................................34
5.1 NORMAL COURSE....................................................35
5.2 CONDUCT OF BUSINESS..............................................35
5.3 PREPARATION OF THE PROXY STATEMENT...............................37
5.4 CERTAIN FILINGS..................................................39
5.5 CONSENTS AND APPROVALS...........................................39
5.6 BEST EFFORTS TO SATISFY CONDITIONS...............................39
5.7 INTERCOMPANY PAYMENTS............................................39
5.8 NOTIFICATION OF CERTAIN MATTERS..................................39
5.9 NO SOLICITATION..................................................39
5.10 TERMINATION OF STOCK OPTIONS.....................................43
6. COVENANTS OF PURCHASER AND MERGER SUB...................................43
6.1 CERTAIN FILINGS..................................................43
6.2 BEST EFFORTS TO SATISFY CONDITIONS...............................43
6.3 NOTIFICATION OF CERTAIN MATTERS..................................44
6.4 CERTIFICATIONS...................................................44
6.5 ASSIGNMENT AND ASSUMPTION OF AGREEMENTS..........................44
7. CONDITIONS TO OBLIGATIONS OF PURCHASER AND MERGER SUB...................44
7.1 REPRESENTATIONS AND WARRANTIES...................................44
7.2 PERFORMANCE OF COVENANTS.........................................45
7.3 LACK OF ADVERSE CHANGE...........................................45
7.4 UPDATE CERTIFICATE...............................................45
7.5 NO PROCEEDING....................................................45
7.6 APPROVALS AND CONSENTS...........................................45
7.7 INTENTIONALLY DELTED.............................................46
7.8 STOCKHOLDER APPROVAL; DISSENTERS.................................46
7.9 RESIGNATIONS.....................................................46
7.10 EFFECTIVENESS OF AGREEMENTS......................................46
7.11 FIRPTA CERTIFICATE...............................................46
7.12 PROVIDING COLD COMFORT LETTER....................................46
7.13 INTENTIONALLY DELETED............................................46
7.14 TERMINATION OF EMPLOYMENT AGREEMENTS.............................46
7.15 TERMINATION OF STOCK OPTIONS.....................................47
7.16 DISCHARGE OF INDEBTEDNESS........................................47
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY................................47
8.1 REPRESENTATIONS AND WARRANTIES...................................47
8.2 PERFORMANCE OF COVENANTS.........................................47
8.3 UPDATE CERTIFICATE...............................................47
8.4 NO PROCEEDING....................................................47
iii
9. TERMINATION.............................................................48
9.1 TERMINATION OF AGREEMENT.........................................48
9.2 EFFECT OF TERMINATION............................................49
9.3 TERMINATION FEES.................................................49
10. INDEMNIFICATION.........................................................50
10.1 RIGHT TO INDEMNIFICATION BY COMPANY..............................50
10.2 INTENTIONALLY DELETED............................................50
10.3 INSURANCE........................................................50
10.4 SUCCESSORS.......................................................51
10.5 SURVIVAL.........................................................51
11. GENERAL PROVISIONS......................................................51
11.1 EXPENSES.........................................................51
11.2 PUBLIC ANNOUNCEMENTS.............................................51
11.3 NOTICES..........................................................51
11.4 JURISDICTION; SERVICE OF PROCESS.................................52
11.5 FURTHER ASSURANCES...............................................52
11.6 WAIVER...........................................................53
11.7 ENTIRE AGREEMENT AND MODIFICATION................................53
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS...............53
11.9 SEVERABILITY.....................................................53
11.10 SECTION HEADINGS, CONSTRUCTION...................................53
11.11 GOVERNING LAW....................................................54
11.12 COUNTERPARTS.....................................................54
EXHIBIT A FORM OF EMPLOYMENT AGREEMENT
EXHIBIT B CONFIDENTIALITY AND NONDISCLOSURE AGREEMENT
EXHIBIT 5.10 OPTION CANCELLATION AGREEMENT
EXHIBIT 7.11 FIRPTA CERTIFICATE
EXHIBIT D FORM NONCOMPETE AND NONSOLICITATION AGREEMENT
iv
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 16, 2006, among
First Advantage Corporation ("PURCHASER"), a Delaware corporation and a party to
this Agreement but not a constituent corporation in the Merger (as hereinafter
defined), Accufacts Acquisition , LLC ("MERGER SUB"), a Delaware limited
liability company and wholly-owned subsidiary of Purchaser, and Accufacts
Pre-Employment Screening, Inc. (the "COMPANY"), a Delaware corporation.
WHEREAS, Purchaser, Merger Sub and the Company intend to effect a
merger of Merger Sub with and into the Company (the "MERGER") in accordance with
this Agreement and the General Corporation Law of the State of Delaware (the
"DGCL"); and
WHEREAS, upon consummation of the Merger, Merger Sub will cease to
exist, and the Company will become a wholly-owned subsidiary of Purchaser; and
WHEREAS, a special committee of the Board of Directors of the
Company constituted in connection with approving this Agreement and the Merger
unanimously determined to recommend to the Board of Directors of the Company and
to all of the Company's stockholders that this Agreement and the Merger be
approved and adopted; and
WHEREAS, the respective Boards of Directors of Purchaser, Merger Sub
and the Company have approved this Agreement and the all transactions
contemplated hereby, and deem it advisable and in the best interest of their
respective stockholders to consummate the Merger on the terms and conditions
hereinafter set forth; and
WHEREAS, Purchaser, Merger Sub and the Company desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE"--as defined in Section 3.7.
"ACQUISITION PROPOSAL"--as defined in Section 5.9(g).
"AFFILIATE"--with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such other
Person.
"AGREEMENT"--this Agreement and Plan of Merger by and among
Purchaser, Merger Sub and the Company.
-1-
"BRINGDOWN CERTIFICATE"--as defined in Section 7.4.
"BUSINESS DAY"--any day other than a Saturday or Sunday or a day on
which banking institutions in the State of Florida are authorized or obligated
by law to be closed.
"CERTIFICATE"--as defined in Section 2.7(c).
"CERTIFICATE OF MERGER"--as defined in Section 2.2.
"CLOSING"--as defined in Section 2.1(b).
"CLOSING DATE"--the date and time as of which the Closing actually
takes place.
"CODE"--the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder and successor laws or regulations.
"COMPANY"--as defined in the first paragraph of this Agreement.
"COMPANY COMMON STOCK"--as defined in Section 2.7(a).
"COMPANY SEC DOCUMENTS"--as defined in Section 3.4(c).
"CONTRACT"--any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"CONVERTIBLE SECURITIES"--as defined in Section 3.3.
"COPYRIGHTS"--as defined in Section 3.21(a).
"DGCL"--as defined in the first paragraph of this Agreement.
"DISCLOSURE SCHEDULE"--the disclosure schedule to this Agreement
delivered by the Company to Purchaser and Merger Sub concurrently with the
execution and delivery of this Agreement.
"DISSENTING STOCKHOLDERS"--as defined in Section 2.7(g).
"EFFECTIVE TIME"--as defined in Section 2.2.
"EMPLOYEE BENEFIT PLAN"--as defined in Section 3.12(a).
"EMPLOYMENT AGREEMENT"--is the employment agreement to be enterered
into between Philip Luizzo and Purchaser, or an Affiliate of Purchaser
substantially in the form set forth in Exhibit A.
"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
-2-
"ENVIRONMENTAL CLAIMS"--as defined in Section 3.18.
"ENVIRONMENTAL LAWS"--as defined in Section 3.18.
"ENVIRONMENTAL PERMITS"--as defined in Section 3.18.
"ERISA"--the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"ERISA AFFILIATE"--as defined in Section 3.12(a).
"EXCHANGE ACT"--the Securities Exchange Act of 1934, as amended, or
any successor law.
"FINANCIAL STATEMENTS"--as defined in Section 3.4(a).
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Financial Statements
were prepared.
"GOVERNMENTAL AUTHORITY"--any court, tribunal, authority, agency,
commission, bureau, department, official or other instrumentality of the United
States, any foreign country or any domestic, foreign, state, local, county, city
or other political subdivision.
"GOVERNMENTAL ORDER"--any order, ordinance, injunction, judgment,
decree or writ issued by any Governmental Authority.
"GROUP" as defined in Section 5.9(g).
"INTELLECTUAL PROPERTY ASSETS"--as defined in Section 3.21(a).
"INTERIM FINANCIAL STATEMENTS"--as defined in Section 3.4(a).
"IRS"--the United States Internal Revenue Service or any successor
agency and, to the extent relevant, the United States Department of the
Treasury.
"MARKS"--as defined in Section 3.21(a).
"MATCHING BID" as defined in Section 5.9d(iii).
"MATERIAL ADVERSE EFFECT"--as defined in Section 3.8.
"MERGER"--as defined in the first paragraph of this Agreement.
"MERGER CONSIDERATION"--as defined in Section 2.9(a).
"MERGER SUB"--as defined in the first paragraph of this Agreement.
-3-
"NON-COMPETE AGREEMENT" is the non-compete and non-solicatation
agreement to be entered into between Purchaser and Phillip Luizzo in
substantially the form attached hereto as Exhibit D.
"NOTICE OF SUPERIOR PROPOSAL" as defined in Section 5.9(d).
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any legal or governmental
requirement or obligation relating to safe and healthful working conditions and
to reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.
"OPTION"--as defined in Section 2.8.
"OPTION CANCELLATION AGREEMENT"--as defined in Section 5.10.
"OPTION CONSIDERATION"--as defined in Section 2.8.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws or code of regulations of a corporation; (b) the
certificate of formation and operating agreement of a limited liability company;
(c) the partnership agreement of a partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of any other Person; and (e) any amendment to any of the foregoing.
"PURCHASER"--as defined in the first paragraph of this Agreement.
"PATENTS"--as defined in Section 3.21(a).
"PAYING AGENT"--as defined in Section 2.9(a).
"PERMITTED ENCUMBRANCES"--all (a) liens for current taxes not yet
due, (b) workman's, common carrier and other similar liens arising in the
ordinary course of business, and (c) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of the Company or the appropriate Subsidiary,
and (ii) zoning laws and other land use restrictions that do not impair the
present or anticipated use of the property subject thereto.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body.
"PRE-CLOSING PERIOD"--as defined in Section 3.6(b).
"PRICE PER SHARE"--as defined in Section 2.7(a).
"PROCEEDING"--as defined in Section 3.14.
-4-
"PROXY STATEMENT"--as defined in Section 5.3(a).
"RELATED PERSON"--as defined in Section 3.23.
"SARBANES-OXLEY ACT"--as defined in Section 3.4(d).
"SEC"--the United States Securities and Exchange Commission.
"SECURITIES ACT"--the Securities Act of 1933, as amended, or any
successor law.
"SPECIAL COMMITTEE"--as defined in Section 3.2(a).
"SUBSIDIARY"--means any corporation, joint venture, limited
liability company, partnership, association or other business entity of which
more than 50% of the total voting power of stock or other equity entitled to
vote in the election of directors or managers thereof is owned or controlled,
directly or indirectly, by the Company or Purchaser, as the case may be.
"SUPERIOR PROPOSAL"--as defined in Section 5.9(g).
"SURVIVING CORPORATION"--as defined in Section 2.1(a).
"TAX"--as defined in Section 3.6.
"TERMINATION EXPENSES"--as defined in Section 9.3(b).
"TERMINATION FEE"--as defined in Section 9.3(a).
"TRADE SECRETS"--as defined in Section 3.21(a).
2. THE MERGER; CLOSING
2.1 THE MERGER
(a) Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the DGCL,
Merger Sub shall be merged with and into the Company at
the Effective Time. Following the Merger, the separate
corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation (the
"SURVIVING CORPORATION").
(b) Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been
abandoned pursuant to Section 9.1 and subject to the
satisfaction or waiver of the conditions set forth in
Sections 7 and 8, the consummation of the Merger will
take place as promptly as practicable (and in any event
within two Business Days) after stockholder approval
pursuant to Section 5.3(d) and satisfaction or waiver of
the conditions set forth in Sections 8 and 9 (the
"CLOSING"), unless another date, time or place is agreed
to in writing by the parties hereto.
-5-
2.2 EFFECTIVE TIME
As soon as practicable following the Closing, the parties shall (i)
file a certificate of merger (the "CERTIFICATE OF MERGER") in such form as is
required by and executed in accordance with the relevant provisions of the DGCL,
and (ii) make all other filings or recordings required under the DGCL. The
Merger shall become effective at such time as the Certificate of Merger is filed
with the Secretary of State of the State of Delaware pursuant to Section 103 of
the DGCL or at such subsequent time as the Company and Purchaser shall agree and
be specified in the Certificate of Merger (the date and time the Merger becomes
effective being the "EFFECTIVE TIME").
2.3 EFFECTS OF THE MERGER
At and after the Effective Time, the Merger will have the effects
set forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, the Surviving Corporation shall
thereupon and thereafter possess all the rights, privileges, powers and
franchises as well of a public as of a private nature, and being subject to all
the restrictions, disabilities and duties of each of the Company and Merger Sub;
and all and singular, the rights, privileges, powers and franchises of each of
the Company and Merger Sub on whatever account, as well for stock subscriptions
as all other things in action or belonging to each of the Company and Merger Sub
shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and Merger Sub, and the title to any real estate vested by deed
or otherwise, under the laws of the State of Delaware, in the Company or Merger
Sub, shall not revert or be in any way impaired by reason of the Merger, but all
rights of creditors and all liens upon any property of the Company or Merger Sub
shall be preserved unimpaired, and all debts, liabilities and duties of the
Company and Merger Sub shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
2.4 CERTIFICATE OF INCORPORATION
The certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law, except that Article I thereof shall be
amended in its entirety to read as follows: "The name of the corporation is
First Advantage Accufacts Pre-Employment Screening, Inc. (hereinafter called the
"Corporation")."
2.5 BY-LAWS
The by-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
-6-
2.6 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
The officers and directors of Merger Sub immediately prior to the
Effective Time shall become, from and after the Effective Time, the officers and
directors of the Surviving Corporation, until the earlier of their resignation
or removal or otherwise ceasing to be an officer or director or until their
respective successors are duly elected and qualified.
2.7 CONVERSION OR CANCELLATION OF SECURITIES
At the Effective Time of the Merger, by virtue of the Merger and
without any action on the part of any holder thereof:
(a) Subject to the provisions of Section 2.7(g), each share
of the Company's Common Stock, par value $0.01 per share
(the "COMPANY COMMON STOCK"), issued and outstanding
immediately prior to the Effective Time (other than
shares canceled in accordance with Section 2.7(d)) shall
be converted into the right to receive an amount in cash
equal to $.75 per share (the "PRICE PER SHARE") payable
to the holder thereof, without interest thereon, upon
surrender of the certificate formerly representing such
share of Company Common Stock.
(b) INTENTIONALLY DELETED
(c) If any certificate (a "CERTIFICATE") formerly
representing shares of Company Common Stock converted
into the right to receive cash in an amount per share
equal to the Price Per Share pursuant to Section 2.7(a)
shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or
destroyed and, if required by Purchaser, the posting by
such Person of a bond, in such reasonable amount as
Purchaser's transfer agent may direct, as indemnity
against any claim that may be made against it with
respect to such Certificate, Purchaser will pay, in
exchange for such lost, stolen or destroyed Certificate,
the Price Per Share to be paid in respect of the shares
represented by such Certificate pursuant to Section
2.7(a).
(d) Each share of Company Common Stock held in the Company's
treasury immediately prior to the Effective Time, if
any, shall, by virtue of the Merger, automatically be
canceled and retired and cease to exist and no
consideration shall be delivered in exchange therefor.
(e) Each authorized but unissued share of Company Common
Stock shall be canceled and retired and shall cease to
exist.
-7-
(f) Each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time
shall be converted into one (1) share of common stock,
par value $0.01 per share, of the Surviving Corporation,
which shares of the common stock of the Surviving
Corporation shall constitute all of the issued and
outstanding capital stock of the Surviving Corporation
and shall be owned by Purchaser.
(g) Shares of Company Common Stock owned by a holder who (i)
shall not have voted in favor of the Merger, and (ii)
shall have delivered to the Company a written notice of
his, her or its intent to demand payment for his, her or
its shares if the Merger is effectuated in the manner
provided in Section 262 of the DGCL (collectively, the
"DISSENTING STOCKHOLDERS"), shall not be converted into
or exchangeable for the right to receive the Price Per
Share but shall be entitled to receive such
consideration as shall be determined pursuant to Section
262 of the DGCL, except that shares of any Dissenting
Stockholder who shall thereafter not perfect his, her or
its right to appraisal as provided in Section 262 of the
DGCL shall thereupon be deemed to have been converted,
as of the Effective Time of the Merger, into and to have
become exchangeable for the right to receive from
Purchaser, the Price Per Share pursuant to Section
2.7(a). The Company shall notify Purchaser in writing of
the details of the Dissenting Stockholders and the
number of shares of Company Common Stock that they own
and shall provide Purchaser the opportunity to direct
all negotiations and proceedings with respect to demands
for appraisals under the DGCL. The Company shall not
voluntarily make any payment, admission or statement
with respect to any demands for appraisal, settlement or
offer to settle or enter into any agreement or
settlement with any Dissenting Stockholder without the
prior written consent of Purchaser.
2.8 PURCHASE OF OPTIONS.
At the Effective Time, by virtue of the Merger and without any
further action on the part of the holders thereof, each option (each, an
"OPTION") set forth in Schedule 2.8 which is outstanding immediately prior to
the Effective Time, whether then vested or unvested, shall automatically become
vested and exercisable and shall be entitled to receive from the Surviving
Corporation in accordance with this Section 2.8, in settlement and cancellation
of such Option, an amount in cash equal to the product of (i) the excess of the
Price Per Share over the exercise price of each such Option, multiplied by (ii)
the number of shares of Company Common Stock covered by such Option, subject to
any applicable federal, state and local withholding taxes in connection with the
cash payments made in settlement and cancellation of such Option (the "OPTION
CONSIDERATION"). In addition, the Company shall cause all option plans or other
-8-
stock compensation plans to be terminated as of the Effective Time. After the
Effective Time, the Surviving Corporation shall pay all applicable federal,
state and local withholding taxes due in connection with the settlement and
cancellation of all such Options. From and after the Effective Time, neither the
Company nor Purchaser shall have any obligation with respect to any Option
except for Purchaser's cash payment under this Section 2.8. In accordance with
Section 5.10, Purchaser shall deliver to each holder of an Option an Option
Cancellation Agreement together with instructions for use in effecting surrender
of the Options. Upon surrender of an Option together with a duly executed Option
Cancellation Agreement, the holder of such Option shall be entitled to receive
from the Surviving Corporation the Option Consideration at the later of 30 days
after the Surviving Corporation's receipt of the applicable Option Cancellation
Agreement or the Effective Time.
2.9 EXCHANGE OF COMPANY CAPITAL
(a) Prior to the Closing Date, Purchaser shall designate a
bank or trust company reasonably acceptable to the
Company to act as agent (the "PAYING AGENT") for the
payment of all amounts payable as a result of the Merger
to the holders of Certificates (the aggregate amount
payable to holders of Certificates is referred to as the
"MERGER CONSIDERATION"). On the Closing Date, Purchaser
or its Affiliate shall transfer by wire transfer of
immediately available funds to an account or accounts
established by the Paying Agent for the purposes of
paying the Merger Consideration, an amount equal to all
Merger Consideration which will be payable following the
Effective Time to the holders of Certificates pursuant
to Section 2.7(a). Any and all interest or income earned
on funds made available to the Paying Agent pursuant to
this Agreement shall be turned over to Purchaser.
Purchaser shall pay the fees and expenses of the Paying
Agent.
(b) As soon as reasonably practicable after the Effective
Time, the Paying Agent shall mail to each holder of
record of a Certificate (i) a form of letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates
held by such person shall pass, only upon proper
delivery of the Certificates to the Paying Agent and
shall be in customary form and have such other
provisions as Purchaser may reasonably specify) and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be
appointed by Purchaser, together with such letter of
transmittal, duly completed and validly executed, and
such other documents as may reasonably be required by
the Paying Agent or Purchaser, the holder of such
Certificate shall be entitled to receive in exchange
therefor the amount of cash into which the shares
formerly represented by such Certificate shall have been
converted pursuant to Section 2.7(a) into the right to
receive, and the Certificate so surrendered shall
forthwith be cancelled.
-9-
(c) Promptly following the date which is six (6) months
after the Effective Time, the Paying Agent shall deliver
to Purchaser the remaining amount of the Merger
Consideration, Certificates and other documents in its
possession relating to the conversion of Certificates
pursuant to Section 2.7(a), and Paying Agent's duties
shall terminate as to such conversion of Certificates
and the payment of the Merger Consideration. Thereafter,
each holder of a Certificate not yet surrendered may
surrender the same to the Surviving Corporation and upon
such surrender (subject to any applicable abandoned
property, escheat or similar law) shall receive in
consideration therefor that portion of the Merger
Consideration entitled to such Holder pursuant to
Section 2.7(a), without any interest thereon.
(d) INTENTIONALLY DELETED
(e) In the event of a transfer of ownership of Company
Common Stock pursuant to Section 2.9(b) that is not
registered in the stock transfer books of the Company,
the proper amount of cash may be paid in exchange
therefor to a Person other than the Person in whose name
the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be
in proper form for transfer and the Person requesting
such payment shall pay any transfer or other Taxes
required by reason of the payment to a Person other than
the registered holder of such Certificate or establish
to the satisfaction of Purchaser that such Tax has been
paid or is not applicable. No interest shall be paid or
shall accrue on the cash payable upon surrender of any
Certificate.
2.10 NO FURTHER RIGHTS; STOCK TRANSFER BOOKS
All cash paid upon the cancellation of the Options in accordance
with Section 2.8 or upon the surrender of a Certificate in accordance with
Section 2.9 shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Options or shares of Company Common Stock formerly represented
by a Certificate. At the close of business on the day prior to the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
Company Common Stock shall thereafter be made on such stock transfer books.
2.11 NO LIABILITY
Neither Merger Sub, or the Company or the Paying Agent shall be
liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. Purchaser
agrees to be responsible for paying all administrative costs incurred with the
deposit of funds with the respective abandoned property funds of any state or
jurisdiction, and to assure that all procedures of the various state abandoned
property funds are complied with.
-10-
2.12 WITHHOLDING RIGHTS
Subject to applicable law, Purchaser, the Surviving Corporation or
the Paying Agent shall be entitled to deduct and withhold any applicable taxes
from the consideration otherwise payable pursuant to this Agreement to any
holder of Certificates or to any holder of Options.
2.13 SUBSEQUENT ACTIONS
If at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments, or
assurances or any other acts or things are necessary, desirable or proper (a) to
vest, perfect or confirm, of record or otherwise, in the Surviving Corporation
its right, title or interest in, to or under any of the rights, privileges,
immunities, powers, franchises, properties, permits, licenses or assets of
either of the Company or Purchaser acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or (b) otherwise
to carry out the purposes of this Agreement, the Surviving Corporation and its
proper officers and directors or their designees shall be authorized to execute
and deliver, in the name and on behalf of either the Company or Purchaser, all
such deeds, bills of sale, instruments of conveyance, assignments and assurances
and to take and do, in the name and on behalf of each of such corporations or
otherwise, all such other acts and things as may be necessary, desirable or
proper to vest, perfect or confirm any and all right, title and interest in, to
and under such rights, privileges, powers, franchises, properties, permits,
licenses or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser and Merger
Sub as follows.
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware. The Company has full corporate power
and authority to own its properties and to carry on its
business as it is now being conducted. The Company is
duly qualified to transact business and is in good
standing in each jurisdiction wherein the nature of the
business done or the property owned, leased or operated
by it requires such qualification, except where the
failure to be so qualified would not have a Material
Adverse Effect. True, correct and complete copies of the
certificate of incorporation and by-laws of the Company
and all amendments thereto have been delivered to
Purchaser and Merger Sub. The corporate minutes and
corporate records of the Company that have been made
available to Purchaser and Merger Sub and are true,
correct and complete in all material respects. Except
for its Subsidiaries, listed in Section 3.1(b) of the
Disclosure Schedule, the Company does not own any equity
interest in any Person whatsoever.
-11-
(b) Section 3.1(b) of the Disclosure Schedule sets forth a
true, correct and complete list of each Subsidiary of
the Company. Each Subsidiary is a corporation or other
entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of
incorporation or organization indicated in Section
3.1(b) of the Disclosure Schedule. Each such Subsidiary
has full corporate or other power and authority to own
its properties and to carry on its business as it is now
being conducted. Each Subsidiary is duly qualified to
transact business and is in good standing in each
jurisdiction wherein the nature of the business done or
the property owned, leased or operated by it requires
such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect.
True, correct and complete copies of the certificate of
incorporation and by-laws (or other Organizational
Documents) of each such Subsidiary and all amendments
thereto have been delivered to Purchaser and Merger Sub.
The corporate minutes, corporate records and stock
register and transfer records of each Subsidiary of the
Company have been made available to Purchaser and Merger
Sub and are true, correct and complete in all material
respects.
3.2 AUTHORITY; NO CONFLICT
(a) Subject to shareholder approval, the Company has the
right, power, authority and capacity to execute and
deliver this Agreement, to consummate the Merger and to
perform its obligations under this Agreement. The Board
of Directors of the Company has appointed a special
committee consisting of a director and an independent
financial consultant (the "SPECIAL COMMITTEE") to
consider and approve this Agreement and the transactions
contemplated hereby, and the Merger. The Special
Committee, at a meeting duly called and held, has
unanimously determined (i) that the Agreement and the
Merger are advisable to and in the best interests of,
the Company and its stockholders, (ii) approved the
Agreement, the Merger and the other transactions
contemplated under this Agreement, and (iii) resolved to
recommend that the full Board of Directors and the
stockholders of the Company adopt this Agreement and
approve the Merger. The Board of Directors of the
Company at a meeting duly called and held, has
unanimously determined (i) that the Agreement and the
Merger are advisable to and in the best interests of,
-12-
the Company and its stockholders, (ii) approved the
Agreement, the Merger and the other transactions
contemplated under this Agreement, and (iii) resolved to
recommend that the stockholders of the Company adopt
this Agreement and approve the Merger. The Company's
Board of Directors has, to the extent such statute is
applicable, taken all action (including appropriate
approvals of the Board) necessary to exempt the Company,
its Subsidiaries and affiliates, this Agreement, the
Merger and the transactions contemplated hereby from
Section 203 of the Delaware General Corporation Law. No
other take over statutes are applicable to the
Agreement, the Merger or the transactions contemplated
hereby. This Agreement has been duly executed and
delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(b) Neither the execution, delivery or performance of this
Agreement by the Company nor the consummation by the
Company of the Merger or any of the other transactions
contemplated hereby will, directly or indirectly (with
or without notice or lapse of time or both):
(i) contravene, conflict with or result in a violation or breach of
(A) any provision of the Organizational Documents of the Company or
any of its Subsidiaries, (B) any resolution adopted by the Board of
Directors, or any committee thereof, or the stockholders of the
Company, (C) any legal requirement or any Governmental Order to
which the Company or any of its Subsidiaries or any of the
properties or assets owned or used by the Company or any of its
Subsidiaries may be subject, or (D) any authorization, license or
permit of any Governmental Authority, including any private
investigatory license or other similar license, which is held by the
Company or any of its Subsidiaries or that otherwise relates to the
business of, or any of the assets owned or used by, the Company or
any of its Subsidiaries;
(ii) result in a violation or breach of or constitute a default,
give rise to a right of termination, cancellation or acceleration,
create any entitlement to any payment or benefit or require the
consent or approval of or any notice to or filing with any third
party under any Contract to which the Company or any of its
Subsidiaries is a party or to which they or their respective
properties or assets may be bound, or require the consent or
approval of or any notice to or filing with any Governmental
Authority to which either the Company or any of its Subsidiaries or
their respective properties or assets may be subject; or
(iii) result in the imposition or creation of any Encumbrance (other
than Permitted Encumbrances) upon or with respect to any of the
properties or assets owned or used by the Company or any of its
Subsidiaries;
except, with respect to clauses (i)(C) or (D), (ii) or (iii) of this
Section 3.2, where any such contravention, conflict, violation, breach,
default, termination right, cancellation or acceleration right or
Encumbrance would not have a Material Adverse Effect or would not
adversely affect the ability of the Company to consummate the Merger or
the other transactions contemplated by this Agreement.
-13-
3.3 CAPITALIZATION
The authorized equity securities of the Company consist solely of
50,000,000 shares of common stock, par value $0.01 per share, of which 6,721,913
shares are issued and outstanding, and 5,000,000 shares of preferred stock, par
value $0.01 per share, none of which shares are issued and outstanding. All of
the outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. The authorized, issued and
outstanding shares of each class of capital stock or other ownership or equity
interests of each Subsidiary of the Company are accurately and completely set
forth in Section 3.3(a) of the Disclosure Schedule. All of the outstanding
shares of capital stock or other ownership or equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable and owned beneficially and of record by the Company free and clear
of any and all Encumbrances. Section 3.3(b) of the Disclosure Schedule sets
forth a complete and correct list of all Options, including as to each holder
thereof, the number of shares of Company Common Stock subject thereto and the
exercisability, exercise price and termination date thereof. Except as set forth
in Section 3.3(c) of the Disclosure Schedule, there are no voting trusts or
other agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the transfer, voting, issuance,
purchase, redemption, repurchase or registration of the capital stock of the
Company or any such Subsidiary. There are no Contracts relating to the issuance,
sale or transfer of any equity securities or other securities of the Company or
any of its Subsidiaries, and there are not outstanding any options, warrants or
other securities exercisable or exchangeable for or convertible into any shares
of equity securities of the Company or any of its Subsidiaries ("CONVERTIBLE
SECURITIES"). None of the outstanding equity securities or other securities of
the Company or any of its Subsidiaries that was issued since May 1, 1998 was
issued in violation of the Securities Act or any other legal requirement.
Neither the Company nor any of its Subsidiaries owns or has any Contract to
acquire, any equity securities or other securities of any Person (other than a
Subsidiary) or any, direct or indirect, equity or ownership interest in any
other business. No Person has any pre-emptive rights with respect to any
security of the Company or any Subsidiary of the Company.
3.4 FINANCIAL STATEMENTS; SEC FILINGS
(a) For purposes of this Agreement: "FINANCIAL STATEMENTS"
shall mean the audited consolidated balance sheets of
the Company and its Subsidiaries as of December 31,
2002, December 31, 2003 and December 31, 2004, and the
audited consolidated statements of income, stockholders'
equity and cash flows for the three years ended December
31, 2002, December 31, 2003 and December 31, 2004, and
the unaudited consolidated balance sheet of the Company
and its Subsidiaries dated as of December 31, 2005 and
the related unaudited consolidated statements of income,
stockholders' equity and cash flows for the twelve
months then ended (the "INTERIM FINANCIAL STATEMENTS").
To the best of its knowledge, the Company has delivered
to Purchaser true, correct and complete copies of the
Financial Statements and the Interim Financial
Statements.
-14-
(b) The Financial Statements (i) have been prepared from the
books and records of the Company and its Subsidiaries in
accordance with GAAP, (ii) fully reflect all liabilities
and contingent liabilities of the Company and its
Subsidiaries required to be reflected therein on such
basis as at the date thereof, and (iii) fairly present
in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the
dates of the balance sheets included in the Financial
Statements and the consolidated results of its
operations and cash flows for the periods indicated. The
Interim Financial Statements for the twelve months ended
December 31, 2005, (i) have been prepared from the books
and records of the Company and its Subsidiaries in
accordance with GAAP, on a basis consistent with the
Financial Statements, for the nine months ended
September, 2002, and (ii) fairly present in all material
respects the consolidated financial position of the
Company and its Subsidiaries as of the date of the
balance sheet included therein and the consolidated
results of its operations and cash flows for the period
indicated; provided, however, the Interim Financial
Statements (x) are subject to normal year-end
adjustments and (y) do not include all footnotes
required by GAAP.
(c) The Company has made available to Purchaser a true and
complete copy of each report, schedule, registration
statement and definitive proxy statement filed by the
Company with the SEC after January 1, 2001 and prior to
or on the date of this Agreement (the "COMPANY SEC
DOCUMENTS"), which are all the documents (other than
preliminary material) that the Company was required to
file with the SEC after January 1, 2001 and prior to the
date of this Agreement. Notwithstanding the foregoing,
the Company has not held an annual meeting of
shareholders nor has it filed a Schedule 14A Proxy or
Schedule 14C Information Statement with the SEC since
its annual meeting of shareholders held June 20, 2001.
As of their respective dates, each of the Company SEC
Documents, as amended, complied as to form in all
material respects to the best of its knowledge with the
applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such
Company SEC Documents, and none of the Company SEC
Documents contained, when filed or, if amended prior to
the date of this Agreement, as of the date of such
amendment, any untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made,
not misleading.
-15-
(d) To the best of its knowledge, the Company and its
Subsidiaries are and have been since July 31, 2002, in
compliance in all material respects with the applicable
provisions of the Sarbanes-Oxley Act of 2002 and the
related rules and regulations promulgated thereunder and
under the Exchange Act (the "SARBANES-OXLEY ACT").
3.5 NO UNDISCLOSED LIABILITIES
To the best of its knowledge and except as set forth in Section 3.5
of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has
any material liabilities or obligations of any nature (whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Financial Statements and the Interim
Financial Statements and current liabilities incurred in the ordinary course of
business since the date of the Interim Financial Statements, which current
liabilities are consistent with the representations and warranties contained in
this Agreement and will not, individually or in the aggregate, have a Material
Adverse Effect.
3.6 TAXES
(a) Tax Returns. To the best of the Company's knowledge and
except as set forth on Section 3.6(a) of the Disclosure
Schedule, the Company and each of its Subsidiaries have
timely filed or caused to be filed with the appropriate
taxing authorities all returns, statements, forms and
reports (including elections, declarations, disclosures,
schedules, estimates and information tax returns) for
Taxes that are required to be filed by, or with respect
to, the Company or such Subsidiary on or prior to the
Closing Date. The returns have accurately reflected in
all material respects and will accurately reflect in all
material respects all liability for Taxes of the Company
and such Subsidiaries for the periods covered thereby.
(b) Payment of Taxes. Except as set forth on Section 3.6(a)
of the Disclosure Schedule, all material Taxes and Tax
liabilities due by or with respect to the income, assets
or operations of the Company and each of its
Subsidiaries for all taxable years or other taxable
periods that end on or before the Closing Date and, with
respect to any taxable year or other taxable period
beginning before and ending after the Closing Date, the
portion of such taxable year or period ending on and
including the Closing Date (the "PRE-CLOSING PERIOD")
have been (or by the Closing Date will be) timely paid
in full on or prior to the Closing Date or adequately
accrued and disclosed and fully provided for in the
Company Financial Statements in accordance with GAAP.
-16-
(c) Other Tax Matters.
(i) Except as set forth on Section 3.6(c) of the
Disclosure Schedule, (A) neither the Company nor
any of its Subsidiaries has been the subject of
an audit or other examination of Taxes by the tax
authorities of any nation, state or locality; (B)
no such audit is pending or, to the Company's
knowledge, contemplated; and (C) neither the
Company nor any of its Subsidiaries has received
any written notices from any taxing authority
relating to any issue which could affect the Tax
liability of the Company or any of its
Subsidiaries;
(ii) neither the Company nor any of its Subsidiaries
(A) has, as of the Closing Date, entered into an
agreement or waiver or been requested to enter
into an agreement or waiver extending any statute
of limitations relating to the payment or
collection of Taxes of the Company and (B) is, as
of the Closing Date, currently contesting the Tax
liability of the Company or any of its
Subsidiaries before any court, tribunal or
agency;
(iii) neither the Company nor any of its Subsidiaries
has been included in any "consolidated,"
"unitary" or "combined" Return, other than the
consolidated, unified or combined returns of the
Company's Subsidiaries filed with other
Subsidiaries of the Company and/or the Company,
provided for under the laws of the United States,
any foreign jurisdiction or any state or locality
with respect to Taxes for any taxable period for
which the statute of limitations has not expired;
(iv) all Taxes which either the Company or any of its
Subsidiaries is (or was) required by law to
withhold or collect in connection with amounts
paid or owing to any employee, independent
contractor, creditor, stockholder or other third
party have been duly withheld or collected, and
have been timely paid over to the proper
authorities to the extent due and payable;
(v) neither the Company nor any of its Subsidiaries
has been a "United States real property holding
corporation" within the meaning of Section
897(c)(2) of the Code at any time during the
five-year period ending on the date hereof;
(vi) there are no tax sharing, allocation,
indemnification or similar agreements in effect
as between (A) the Company or any predecessor,
Subsidiary or other affiliate thereof and (B) any
other party under which Purchaser, the Company,
any Subsidiary or any of their respective
Affiliates (before and after giving effect to the
Merger) could be liable for any Taxes or other
claims of any party;
(vii) neither the Company nor any of its Subsidiaries
has applied for, been granted, or agreed to any
accounting method change for which it will be
required to take into account any adjustment
under Section 481 of the Code or any similar
provision of the Code or the corresponding tax
laws of any nation, state or locality;
-17-
(viii) no election under Section 341(f) of the Code has
been made or shall be made prior to the Closing
Date to treat the Company or any of its
Subsidiaries as a consenting corporation, as
defined in Section 341 of the Code;
(ix) no claim has ever been made by any taxing
authority in a jurisdiction where the Company or
any of its Subsidiaries does not file returns
that the Company or any of its Subsidiaries is or
may be subject to taxation by that jurisdiction;
(x) neither the Company nor any of its Subsidiaries
is a party to any agreement that would require
the Company or any of its Subsidiaries or any
affiliate thereof to make any payment that would
constitute an "excess parachute payment" for
purposes of Sections 280G and 4999 of the Code;
(xi) (A) there are no deferred intercompany
transactions between the Company and any of its
Subsidiaries or between its Subsidiaries and
there is no excess loss account (within the
meaning of Treasury Regulations Section 1.1502-19
with respect to the stock of the Company or any
of its Subsidiaries) which will or may result in
the recognition of income upon the consummation
of the transactions contemplated by this
Agreement, and (B) there are no other
transactions or facts existing with respect to
the Company and/or its Subsidiaries which by
reason of the consummation of the transactions
contemplated by this Agreement will result in the
Company and/or its Subsidiaries recognizing
income; and
(xii) no indebtedness of the Company or any of its
Subsidiaries consists of "corporate acquisition
indebtedness" within the meaning of Section 279
of the Code.
For purposes of this Agreement, the term "TAX(ES)" shall mean any
United States federal, national, state, provincial, local or other
jurisdictional income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, estimated, alternative or add-on minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge imposed by any Governmental Authority,
together with any interest or penalty imposed thereon.
(xiii) Purchaser agrees to file all final federal, state
and municipal tax returns for the Company upon
completion of the Merger
(xiv) In the event of any tax audit or claim made by
any taxing authority against the Company
following the completion of the Merger, the
Company agrees to cooperate with Purchaser in
providing information as may be required, subject
to Purchaser making payment of all of said
assessments if any, of additional taxes, interest
or penalties.
-18-
3.7 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE
(a) All accounts receivable of the Company and its
Subsidiaries that are reflected on the Financial
Statements, the Interim Financial Statements or on the
accounts receivable ledgers of the Company and its
Subsidiaries (collectively, the "ACCOUNTS RECEIVABLE")
represent valid obligations arising from sales actually
made or services actually performed in the ordinary
course of business. All of the Accounts Receivable are
or will be current and to the best of the Company's
knowledge collectible at the full recorded amount
thereof, less any applicable reserves established in
accordance with GAAP in the ordinary course of business
without resort to litigation, except for such Accounts
Receivable, the failure of which to collect would not
have a Material Adverse Effect.
(b) All accounts payable of the Company and its Subsidiaries
that are reflected on the Financial Statements, the
Interim Financial Statements or on the accounts payable
ledgers of the Company and its Subsidiaries arose in the
ordinary course of business. All material items which
are required by GAAP to be reflected as payables on the
Financial Statements and on the Interim Financial
Statements and in the books and records of the Company
and its Subsidiaries are so reflected and have been
recorded in accordance with GAAP in a manner consistent
with past practice. There has been no adverse change
since the date of the Interim Financial Statements in
the amount or delinquency of accounts payable of the
Company and its Subsidiaries (either individually or in
the aggregate) which would have a Material Adverse
Effect.
3.8 NO MATERIAL ADVERSE CHANGE
Since the date of the Financial Statements, there has not been any
material adverse change in the business, operations, properties, prospects,
liabilities, results of operations, assets or condition (financial or otherwise)
of the Company and its Subsidiaries taken as a whole (a "MATERIAL ADVERSE
EFFECT").
3.9 BOOKS AND RECORDS
Except as disclosed in Section 3.9of the Disclosure Schedule, the
books of account and other records of the Company and its Subsidiaries, all of
which have been made available to Purchaser, are true, correct and complete.
Except as disclosed in Section 3.9 of the Disclosure Schedule, the minute books
of the Company and its Subsidiaries contain true, correct and complete records
of all meetings held of, and corporate action taken by, the stockholders, the
Boards of Directors, and committees of the Boards of Directors of the Company
and its Subsidiaries. The stock books of the Company are true, correct and
complete. At the Closing, all of those books and records will be in the
possession of the Company or its legal counsel.
-19-
3.10 TITLE TO PROPERTIES; ENCUMBRANCES
Section 3.10 of the Disclosure Schedule contains a complete and
accurate list of all real property leaseholds or other interests therein held by
the Company and its Subsidiaries. Neither the Company nor any of its
Subsidiaries owns, or has owned, any real property. The Company has delivered or
made available to Purchaser true, correct and complete copies of the real
property leases to which the Company or any of its Subsidiaries is a party or
pursuant to which any of them uses or occupies any real property. Section 3.10
of the Disclosure Schedule also contains a complete and accurate list of all
licensed vehicles owned or leased by the Company or any of its Subsidiaries and
the fixed assets used in the business of the Company or any of its Subsidiaries
and carried on their books for tax purposes. Except as set forth in Section 3.10
of the Disclosure Schedule, the Company and each of its Subsidiaries has good
title to, or a valid leasehold, license or other interest in, all of the real
and personal properties and assets, tangible and intangible, they own or purport
to own, hold or use in their respective businesses, including those reflected on
their books and records and in the Financial Statements and Interim Financial
Statements (except for accounts receivable collected and materials and supplies
used or disposed of in the ordinary course of business consistent with past
practice after the date of the Interim Financial Statements), free and clear of
all Encumbrances, except Permitted Encumbrances.
3.11 CONDITION AND SUFFICIENCY OF ASSETS
To the best of the Company's knowledge, the buildings, vehicles,
furniture, fixtures and equipment and other personal property owned, held or
used by the Company and its Subsidiaries are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, vehicles, furniture, fixtures or
equipment or other personal property is in need of maintenance or repairs except
for ordinary, routine maintenance and repairs that are not material in nature or
cost. The buildings, vehicles, furniture, fixtures and equipment or other
personal property of the Company and its Subsidiaries are sufficient for the
continued conduct of their respective businesses after the Closing in
substantially the same manner as conducted prior to the Closing. Purchaser
agrees to accept the assets on Closing, "as is", subject to normal wear and tear
and usage by the Company in the normal course of its business.
3.12 EMPLOYEE BENEFITS
(a) Neither the Company nor any ERISA Affiliate maintains
any Employee Benefit Plans. "EMPLOYEE BENEFIT Plan"
means (other than workers' compensation required by any
state or subdivision thereof) any "employee benefit
plan" as defined in Section 3(3) of ERISA and any other
plan, policy, program, practice, agreement,
understanding or arrangement (whether written or oral)
providing benefits to any current or former director,
employee or independent contractor (or to any dependent
or beneficiary thereof) of the Company or any ERISA
Affiliate, which are now or have ever been maintained by
the Company or any ERISA Affiliate or under which the
Company or any ERISA Affiliate has any obligation or
-20-
liability, whether actual or contingent, including all
incentive, bonus, deferred compensation, vacation,
holiday, medical, disability, stock appreciation rights,
stock option, stock purchase or other similar plans,
policies, programs, practices, agreements,
understandings or arrangements. "ERISA AFFILIATE" means
any entity (whether or not incorporated) other than the
Company that, together with the Company, is or was a
member of (i) a controlled group of corporations within
the meaning of Section 414(b) of the Code, (ii) a group
of trades or businesses under common control within the
meaning of Section 414(c), or (iii) an affiliated
service group within the meaning of Section 414(m) of
the Code.
(b) Neither the Company nor any ERISA Affiliate has proposed
or agreed to the creation of any new Employee Benefit
Plan.
(c) The Company is not, and will not be, obligated to pay
any severance or retention amounts to any employee in
connection with the Merger under any employment
agreement, employee benefit plan or otherwise, except
for the Company's President and Chief Executive Officer.
3.13 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth on Schedule 3.13(a) hereto, the
Company and its Subsidiaries are, and have been since
January 1, 2002, in compliance with all federal, state
and local laws, authorizations, licenses and permits of
any Governmental Authority and all Governmental Orders
applicable to or affecting the business, operations,
properties or assets of the Company and its
Subsidiaries, including, federal, state and local: (i)
Occupational Safety and Health Laws; (ii) private
investigatory and other similar laws, including the
Investigative Credit Reporting Act; (iii) securities
laws; (iv) the Fair Credit Reporting Act and similar
state and local laws; and (v) laws regarding or relating
to trespass or violation of privacy rights. Neither the
Company nor any of its Subsidiaries has been charged
with violating, nor to the knowledge of the Company,
threatened with a charge of violating, nor, to the
knowledge of the Company, is the Company or any of its
Subsidiaries under investigation with respect to a
possible violation of, any provision of any federal,
state or local law relating to any of their respective
businesses, operations, properties or assets and no
facts or circumstances have occurred that could be
reasonably be expended to give rise to any
investigation.
-21-
(b) Each of the Company and its Subsidiaries has all
governmental licenses, permits, franchises, approvals,
permits and other authorizations of, and have made all
registrations and/or filings with, all governmental
entities necessary to own, lease and operate its
properties and to enable it to carry on its respective
business as presently conducted, except where the
failure to have such licenses would not, individually or
in the aggregate, have a Material Adverse Effect on the
Company. All licenses held by the Company and each of
its Subsidiaries, are in full force and effect, except
where the failure of such licenses to be in full force
and effect would not have a Material Adverse Effect on
the Company. No such License is the subject of a
proceeding for suspension or revocation or similar
proceedings. No jurisdiction has demanded or requested
that the Company or any of its Subsidiaries qualify or
become licensed as a foreign corporation.
3.14 LEGAL PROCEEDINGS
Except as set forth in Section 3.14 of the Disclosure Schedule,
there is no pending claim, action, investigation, arbitration, litigation, suit
or other proceeding ("PROCEEDING"):
(i) that has been commenced by or against the Company or any of
its Subsidiaries or that otherwise relates to or may affect
the business of, or any of the properties or assets owned,
held or used by, the Company or its Subsidiaries; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any
of the transactions contemplated hereby.
To the knowledge of the Company, (A) no such Proceeding has been
threatened, and (B) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding. The
Company has made available to Purchaser true, correct and complete copies of all
pleadings, correspondence and other documents relating to each Proceeding listed
in Section 3.14 of the Disclosure Schedule. The Proceedings listed in Section
4.14 of the Disclosure Schedule, if decided adversely to the Company or any
Subsidiary, individually or in the aggregate, would not have a Material Adverse
Effect.
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Section 3.15 of the Disclosure Schedule,
since the date of the Financial Statements, the Company and its Subsidiaries
have conducted their respective businesses only in the ordinary course of
business consistent with past practice. Without limiting the generality of the
immediately preceding sentence, since December 31, 2005, there has not been any
of the following on the part of the Company or any of its Subsidiaries:
-22-
(a) declaration or payment of any dividend or other
distribution or redemption or repurchase or other
acquisition, directly or indirectly, in respect of
shares of capital stock or Convertible Securities;
(b) issuance or sale or authorization for issuance or sale,
or grant of any options or other agreements with respect
to, any shares of its capital stock or Convertible
Securities, or any change in its outstanding shares of
capital stock or other ownership interests or its
capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange
or readjustment of shares, stock dividend or otherwise;
(c) payment or increase of any bonuses, salaries or other
compensation to any stockholder, director, officer,
consultant or employee except for increases in bonus
compensation, accrued or to be paid, to employees in the
ordinary course of business or entry into any
employment, severance or similar Contract with any
director, officer or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation,
severance, savings, insurance, pension, retirement or
other employee benefit plan for or with any employees;
(e) damage to or destruction or loss of any property or
asset, whether or not covered by insurance, which may
have a Material Adverse Effect;
(f) entry into, termination of, or receipt of notice of
termination of, any Contract or transaction involving a
total remaining commitment by or to the Company or any
Subsidiary of at least $50,000, including the entry into
(i) any document evidencing any indebtedness; (ii) any
capital or other lease; or (iii) any guaranty (including
"take-or-pay" or "keepwell" agreements);
(g) sale, lease or other disposition (other than in the
ordinary course of business consistent with past
practice) of any asset or property or mortgage, pledge,
or imposition of any Encumbrance (other than Permitted
Encumbrances) on any material property or asset;
(h) cancellation, compromise or waiver of any claims or
rights with a value to the Company or any Subsidiary in
excess of $50,000;
(i) material change in the method of accounting of the
accounting principles or practices used by the Company
in the preparation of the Financial Statements or the
Interim Financial Statements, except as required by
GAAP;
(j) amendment or other modification of its respective
Organizational Documents;
-23-
(k) loss of services of any key employee or consultant or
any loss of a material client;
(l) loan or advance to any Person other than travel and
other similar routine advances to employees in the
ordinary course of business consistent with past
practice; or
(m) agreement or commitment, whether oral or written, by the
Company to do any of the foregoing.
3.16 CONTRACTS; NO DEFAULTS
(a) Section 3.16(a) of the Disclosure Schedule contains a
complete and accurate list, and the Company has
delivered to Purchaser true, correct and complete
copies, of:
i. each Contract that involves performance of
services or delivery of goods or materials by the
Company or any Subsidiary of the Company of an
amount or value in excess of $50,000;
ii. each Contract that involves performance of
services or delivery of goods or materials to the
Company or any Subsidiary of the Company of an
amount or value in excess of $50,000;
iii. each lease, license and other Contract affecting
any leasehold or other interest in, any real or
personal property;
iv. each licensing Contract with respect to Patents,
Marks, Copyrights, trade secrets or other
Intellectual Property Assets, including Contracts
with current or former employees, consultants or
contractors regarding the appropriation or the
non-disclosure of any Intellectual Property
Assets;
v. each collective bargaining Contract to or with any
labor union or other employee representative of a
group of employees;
vi. each joint venture, partnership and other Contract
involving a sharing of profits, losses, costs or
liabilities by the Company or any of its
Subsidiaries with any other Person or requiring
the Company or any of its Subsidiaries to make a
capital contribution;
vii. each Contract containing covenants that in any way
purport to restrict the business activity of the
Company or any of its Subsidiaries or limit the
freedom of the Company or any of its Subsidiaries
to engage in any line of business or to compete
with any Person or hire any Person;
viii. each employment Contract providing for
compensation, severance or a fixed term of
employment in respect of services performed by any
employees of the Company or any of its
Subsidiaries and each consulting Contract with an
independent contractor;
-24-
ix. each stock option, purchase or benefit plan for
employees;
x. each power of attorney that is currently effective
and outstanding;
xi. each Contract for capital expenditures in excess
of $50,000;
xii. each Contract with an officer or director of the
Company or any of its Subsidiaries or with any
Affiliate of any of the foregoing;
xiii. each Contract under which any money has been or
may be borrowed or loaned or any note, bond,
factoring agreement, indenture or other evidence
of indebtedness has been issued or assumed (other
than those under which there remain no ongoing
obligations of the Company or any Subsidiary), and
each guaranty (including "take-or-pay" and
"keepwell" agreements) of any evidence of
indebtedness or other obligation, or of the net
worth, of any Person (other than endorsements for
the purpose of collection in the ordinary course
of business);
xiv. each Contract containing restrictions with respect
to the payment of dividends or other distributions
in respect of the Company's or any Subsidiary's
capital stock;
xv. each Contract containing a change of control
provision;
xvi. each other Contract having an indefinite term or a
fixed term of more than one (1) year (other than
those that are terminable at will or upon not more
than thirty (30) days' notice by the Company or
any of its Subsidiaries without penalty) or
requiring payments by the Company or any of the
Company's Subsidiaries of more than $50,000 per
year; and
xvii. each standard form of Contract pursuant to which
the Company or any Subsidiary provides services to
clients.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, each Contract identified or required to be
identified in Section 3.16(a) of the Disclosure Schedule
is in full force and effect and is valid and enforceable
against the Company or a Subsidiary of the Company and,
to the knowledge of the Company, against the other
parties thereto in accordance with its terms.
(c) Except as set forth in Section 3.16(c) of the Disclosure
Schedule:
(i) the Company and its Subsidiaries are in full
compliance with all applicable terms and
requirements of each Contract under which the
Company and its Subsidiaries have any obligation
or liability or by which the Company or any of its
Subsidiaries or any of the properties or assets
owned, held or used by the Company or any of its
Subsidiaries is bound.
-25-
(ii) to the knowledge of the Company, each other Person
that has or had any obligation or liability under
any Contract under which the Company or any of its
Subsidiaries has any rights is in compliance in
all material respects with all applicable terms
and requirements of such Contract; and
(iii) no event has occurred or, to the knowledge of the
Company, circumstance exists that (with or without
notice or lapse of time or both) may result in a
material violation or breach of any Contract.
3.17 INSURANCE
Section 3.17 of the Disclosure Schedule sets forth the premium
payments and describes all the insurance policies of the Company and its
Subsidiaries, which policies are now in full force and effect in accordance with
their terms and expire on the dates shown on Section 3.17 of the Disclosure
Schedule. Such insurance policies comply in all respects with the requirements
of any leases to which the Company is a party, including, real property leases.
There has been no default in the payment of premiums on any of such policies,
and, to the knowledge of the Company, there is no ground for cancellation or
avoidance of any such policies, or any increase in the premiums thereof, or for
reduction of the coverage provided thereby. Such policies insure the Company and
its Subsidiaries in amounts and against losses and risks customary and
sufficient for businesses similar to that of the Company and its Subsidiaries,
and, to the knowledge of the Company, such policies shall continue in full force
and effect until the expiration dates shown in Section 3.17 of the Disclosure
Schedule. There are no pending claims with respect to the Company or any
Subsidiary or their properties or assets under any such insurance policy. True,
correct and complete copies of all insurance policies listed in Section3.17 have
been previously furnished to Purchaser.
3.18 ENVIRONMENTAL MATTERS
To the best of the Company's knowledge, the Company and its
Subsidiaries have at all times operated their businesses in material compliance
with all Environmental Laws and all permits, licenses and registrations required
under applicable Environmental Laws ("ENVIRONMENTAL PERMITS") and, to the
Company's knowledge, no material expenditures are or will be required by the
Company or its Subsidiaries in order to comply with such Environmental Laws.
Neither the Company nor any of its Subsidiaries has received any written
communication from any Governmental Authority or other Person that alleges that
the Company or its Subsidiaries has violated or is, or may be, liable under any
Environmental Law. There are no material Environmental Claims pending or, to the
knowledge of the Company, threatened (a) against the Company or any of its
Subsidiaries, or (b) against any Person whose liability for any Environmental
Claim the Company or any of its Subsidiaries has retained or assumed, either
contractually or by operation of law. Neither the Company nor any of its
Subsidiaries has contractually retained or assumed any liabilities or
obligations that could reasonably be expected to provide the basis for any
material Environmental Claim.
-26-
"ENVIRONMENTAL LAWS" means-all applicable statutes, rules,
regulations, ordinances, orders, decrees, judgments, permits, licenses,
consents, approvals, authorizations, and governmental requirements or directives
or other obligations lawfully imposed by governmental authority under federal,
state or local law pertaining to the protection of the environment, protection
of public health, protection of worker health and safety, the treatment,
emission and/or discharge of gaseous, particulate and/or effluent pollutants,
and/or the handling of hazardous materials including without limitation, the
Clean Air Act, 42 U.S.C. ss. 7401, et seq., the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. ss. 9601,
et seq., the Federal Water Pollution Control Act, 33 U.S.C. ss. 1321, et seq.,
the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq. ("RCRA"),
and the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq. "ENVIRONMENTAL
CLAIMS" means any and all, actions, orders, decrees, suits, demands, directives,
claims, liens, investigations, proceedings or notices of violation by any
Governmental Authority or other Person alleging potential responsibility or
liability arising out of, based on or related to (a) the presence, release or
threatened release of, or exposure to, any Hazardous Materials (as defined under
applicable Environmental Laws) or (b) circumstances forming the basis of any
violation or alleged violation of any Environmental Law.
3.19 EMPLOYEES
(a) Section 3.19 of the Disclosure Schedule contains a
complete and accurate list of the following information
for each employee of the Company and its Subsidiaries:
name; job title; current compensation; vacation accrued;
and service credited for purposes of vesting and
eligibility to participate under any employee benefit
plan of any nature.
(b) No employee or director of the Company or any of its
Subsidiaries is a party to, or is otherwise bound by,
any agreement or arrangement, including any
confidentiality, non-competition or proprietary rights
agreement, between such employee or director and any
other Person that in any way adversely affects or will
affect (i) the performance of his or her duties as an
employee or officer of the Company or any of its
Subsidiaries, or (ii) the ability of the Company or any
of its Subsidiaries to conduct its business. To the
knowledge of the Company, no officer or other key
employee of the Company or any of its Subsidiaries
intends to terminate his or her employment with the
Company.
(c) On the Effective Time of the merger Purchaser agrees to
assume all accrued obligations of Company to employees.
3.20 LABOR RELATIONS
Except as set forth in Section 3.20 of the Disclosure Schedule:
-27-
(a) The Company and its Subsidiaries have satisfactory
relationships with their respective employees.
(b) No condition or state of facts or circumstances exists
which could materially adversely affect the Company's or
any of the Subsidiary's relations with its employees,
including, to the best of the Company's knowledge, the
consummation of the transactions contemplated by this
Agreement.
(c) The Company and its Subsidiaries are in compliance in
all material respects with all applicable laws
respecting employment and employment practices, terms
and conditions of employment and wages and hours and
none of them is engaged in any unfair labor practice.
(d) No collective bargaining agreement with respect to the
business of the Company or any of its Subsidiaries is
currently in effect or being negotiated. Neither the
Company nor any of its Subsidiaries has encountered any
labor union or collective bargaining organizing activity
with respect to its employees. Neither the Company nor
any of its Subsidiaries has any obligation to negotiate
any such collective bargaining agreement, and, to the
knowledge of the Company, there is no indication that
the employees of the Company or any of its Subsidiaries
desire to be covered by a collective bargaining
agreement.
(e) There are no strikes, slowdowns, work stoppages or other
labor trouble pending or, to the knowledge of the
Company, threatened with respect to the employees of the
Company or any of its Subsidiaries, nor has any or the
above occurred or, to the knowledge of the Company, been
threatened.
(f) There is no representation claim or petition pending
before the National Labor Relations Board or any state
or local labor agency and, to the knowledge of the
Company, no question concerning representation has been
raised or threatened respecting the employees of the
Company or any of its Subsidiaries.
(g) There are no complaints or charges against the Company
or any of its Subsidiaries pending before the National
Labor Relations Board or any state or local labor agency
and, to the knowledge of the Company, no complaints or
charges have been filed or threatened to be filed
against the Company or any of its Subsidiaries with any
such board or agency.
(h) To the knowledge of the Company, no charges with respect
to or relating to the business of the Company or any of
its Subsidiaries are pending before the Equal Employment
Opportunity Commission or any state or local agency
responsible for the prevention of unlawful employment
practices.
-28-
(i) Section 3.20 of the Disclosure Schedule accurately sets
forth all unpaid severance which, as of the date hereof,
is due or claimed, in writing, to be due from the
Company or any Subsidiary to any Person whose employment
with the Company or any of its Subsidiaries was
terminated.
(j) Neither the Company nor any of its Subsidiaries has
received notice of the intent of any Governmental
Authority responsible for the enforcement of labor or
employment laws to conduct an investigation of the
Company or any of its Subsidiaries and no such
investigation is in progress.
(k) Neither the Company nor any of its Subsidiaries, or to
the knowledge of the Company, any employee of the
Company or any of its Subsidiaries, is in violation of
any term of any employment agreement, non-disclosure
agreement, non-compete agreement or any other Contract
regarding an employee's employment with the Company or
any of its Subsidiaries.
(l) The Company and its Subsidiaries have paid all wages
which are due and payable to each employee and each
independent contractor.
3.21 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "INTELLECTUAL
PROPERTY ASSETS" includes: The Company's rights to (i)
the name "Accufacts Pre-Employment Screening, Inc.," all
fictional business names, trade names, registered and
unregistered trademarks, service marks and applications
(collectively, "MARKS"); (ii) all patents, patent
applications and inventions and discoveries that may be
patentable (collectively, "PATENTS"); (iii) all
copyrights in both published works and unpublished
works, including software, training manuals and videos
(collectively, "COPYRIGHTS"); and (iv) all know-how,
trade secrets, confidential information, client lists,
software, technical information, data, plans, drawings
and blue prints (collectively, "TRADE SECRETS") owned,
used or licensed by the Company and its Subsidiaries as
licensee or licensor.
(b) Agreements--Section 3.21(b) of the Disclosure Schedule
contains a true, correct and complete list and summary
description, including any royalties paid or received by
the Company and its Subsidiaries, of all Contracts
relating to the Intellectual Property Assets to which
the Company and its Subsidiaries are a party or by which
the Company and its Subsidiaries are bound.
(c) Know-How Necessary for the Business--The Intellectual
Property Assets are all those used in, or related to,
the operation of the business of the Company and its
Subsidiaries as it is currently conducted and proposed
to be conducted. The Company and its Subsidiaries are
the owners of all right, title and interest in and to
the Intellectual Property Assets, free and clear of all
Encumbrances and have the right to use without payment
to a third party all of the Intellectual Property
-29-
Assets. The Company and its Subsidiaries are the owners
of all right, title and interest in and to any (i)
business application software and (ii) proprietary
management information systems used in, or related to,
the operation of the business of the Company and its
Subsidiaries as it is currently conducted and proposed
to be conducted, free and clear of all Encumbrances, and
have a right to use such software and systems without
payment to a third party.
(d) Trademarks--(i) Section 3.21(d) of the Disclosure
Schedule contains a true, correct and complete list of
all Marks; (ii) the Company and its Subsidiaries are the
owners of all right, title and interest in and to the
Marks, free and clear of all Encumbrances; (iii) all
Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance
with all formal legal requirements and are valid and
enforceable; (iv) no Mark is infringed or, to the
knowledge of the Company, has been challenged or
threatened in any way. None of the Marks used by the
Company or any of its Subsidiaries infringes or is
alleged to infringe any trade name, trademark or service
mark of any Person.
(e) Copyrights--(i) Section 3.21(e) of the Disclosure
Schedule contains a true, correct and complete list of
all Copyrights; (ii) the Company and its Subsidiaries
are the owners of all right, title and interest in and
to the Copyrights, free and clear of all Encumbrances;
(iii) all the Copyrights have been registered and are
currently in compliance with formal legal requirements,
and are valid and enforceable; (iv) no Copyright is
infringed or, to the knowledge of the Company, has been
challenged or threatened in any way; (v) none of the
subject matter of any of the Copyrights infringes or is
alleged to infringe any copyright of any Person or is a
derivative work based on the work of a third Person; and
(vi) all works encompassed by the Copyrights have been
marked with the proper copyright notice.
(f) Trade Secrets--(i) The Company and its Subsidiaries have
taken all reasonable precautions to protect the secrecy,
confidentiality and value of their Trade Secrets; and
(ii) the Company and its Subsidiaries have good title
and an absolute right to use the Trade Secrets. The
Trade Secrets, to the knowledge of the Company, have not
been used, divulged or appropriated either for the
benefit of any Person (other than the Company and its
Subsidiaries) or to the detriment of the Company. No
Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
-30-
3.22 ABSENCE OF CERTAIN PAYMENTS
Neither the Company or any of its Subsidiaries nor any director,
officer, agent or employee of the Company or any of its Subsidiaries or, to the
knowledge of the Company, any other Person associated with or acting for or on
behalf of the Company or any of its Subsidiaries, has directly or indirectly (a)
made any contribution, gift, bribe, rebate, payoff, influence payment, kickback
or other payment to any Person, private or public, regardless of form, whether
in money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Company or any Affiliate of the Company, or (iv) in violation
of any legal requirement, or (b) established or maintained any fund or asset
that has not been recorded in the books and records of the Company.
3.23 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Section 3.23 of the Disclosure Schedule, no
officer, director or employee of the Company or any Subsidiary, nor any spouse
or child of any of them or any Affiliate of, or any Person associated with, any
of them ("RELATED PERSON"), has any interest in any property or asset used in or
pertaining to the business of the Company or any of its Subsidiaries. Except as
set forth in Section 3.23 of the Disclosure Schedule, no Related Person has
owned or presently owns an equity interest or any other financial or profit
interest in a Person that has (i) had business dealings with the Company or any
of its Subsidiaries, or (ii) engaged in competition with the Company or any of
its Subsidiaries. Except as set forth in Section 3.23 of the Disclosure
Schedule, no Related Person is a party to any Contract with, or has any claim or
right against, the Company or any of its Subsidiaries, except for employment
agreements listed in Section 3.16 of the Disclosure Schedule.
3.24 BROKERS OR FINDERS
Neither the Company nor any Subsidiary nor any of their respective
directors, officers or agents on their behalf has incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or financial advisory services or other similar payment in
connection with this Agreement, except as listed in Section 3.24 of the
Disclosure Schedule. Purchaser, Merger Sub and the Company agree to hold
harmless and indemnify each other for any claims for brokerage or finder's fees
inclusive of legal fees.
3.25 DEPOSIT ACCOUNTS
Section 3.25 of the Disclosure Schedule contains a true, correct and
complete list of (a) the name of each financial institution in which the Company
has an account or safe deposit box, (b) the names in which each account or box
is held, (c) the type of account, and (d) the name of each Person authorized to
draw on or have access to each account or box. No Person holds any power of
attorney from the Company or any Subsidiary, except as listed in Section 3.25 of
the Disclosure Schedule.
-31-
3.26 CONDUCT OF BUSINESS; USE OF NAME
The business carried on by the Company and its Subsidiaries has been
conducted by the Company or such Subsidiary directly and not through any
Affiliate or associate of any stockholder, officer, director or employee of the
Company or through any other Person. To the best of the Company's knowledge, the
Company owns and has the exclusive right, title and interest in and to the name
"Accufacts Pre-Employment Screening, Inc." and no other Person has the right to
use the same, or any confusing derivative thereof, as its corporate name or
otherwise in connection with the operation of any business similar or related to
the business conducted by the Company.
3.27 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no Contract or Governmental Order binding upon the Company
or any Subsidiary or, to the knowledge of the Company, threatened that has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of the Company or any Subsidiary or the Company
(either individually or in the aggregate), any acquisition of property by the
Company or any Subsidiary or the Company (either individually or in the
aggregate), providing of any service by the Company or any Subsidiary of the
Company or the hiring of employees or the conduct of business by the Company or
any Subsidiary of the Company (either individually or in the aggregate) as
currently conducted or proposed to be conducted.
3.28 OUTSTANDING INDEBTEDNESS
Section 3.28 of the Disclosure Schedule sets forth as of the date of
this Agreement (a) the amount of all indebtedness of the Company and its
Subsidiaries then outstanding and the interest rate applicable thereto, (b) any
Encumbrances which relate to such indebtedness, and (c) the name of the lender
or the other payee of each such indebtedness. Company will provide Purchaser an
updated Schedule 3.28, three (3) days prior to Closing, and that said Schedule
of Liabilities will not increase, except for liabilities in the ordinary course
of business. The Company agrees that all indebtedness set forth on Section 3.28
of the Disclosure Schedule will be satisfied in full as of the Closing Date and
that all Encumbrances as set forth on Section 3.28 of the Disclosure Schedule
shall be released or removed.
3.29 CLIENTS AND CONTRACTORS
To the best of the Company's knowledge, Section 3.29 of the Company
Disclosure Schedule contains a complete list of all the material clients of the
Company and its Subsidiaries, including the amounts they paid to the Company and
its Subsidiaries since January 1, 2002. Section 3.29 of the Disclosure Schedule
contains a complete list of all material contractors and subcontractors used by
the Company and its Subsidiaries. there are no facts or circumstances, including
the consummation of the transactions contemplated by this Agreement, that are
likely to result in the loss of any material client of the Company or a material
change in the relationship of the Company with such a client.
-32-
3.30 FAIRNESS OPINION
The Company's Board of Directors and Special Committee has received
a true, correct and complete copy of an opinion from PCE Valuations LLC, dated
as of the date hereof, to the effect that, as of the date hereof, the
transactions contemplated by this Agreement and the consideration to be received
by the Company's stockholders in the Merger is fair to the Company's
stockholders, including from a financial point of view.
3.31 VOTING REQUIREMENTS
The affirmative vote of a majority of the outstanding shares of
Company Common Stock as required under Delaware law and is the only vote or
consent of the holders of any class or series of equity securities of the
Company necessary to adopt this Agreement and approve the Merger and the other
transactions contemplated by this Agreement.
3.32 EMPLOYEE STOCK PURCHASE PLAN
The Company's 2001 Employee Stock Purchase Plan has been terminated.
3.33 PROXY STATEMENT
The Proxy Statement will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, that no
representation is being made by the Company hereby with respect to any
information supplied by Purchaser or Merger Sub for inclusion in the Proxy
Statement. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub each represents and warrants to Seller as
follows:
4.1 ORGANIZATION AND GOOD STANDING
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Purchaser and Merger Sub has full corporate
power and authority to conduct its business as it is now being conducted and to
own or use the properties and assets that it purports to own or use in its
business.
4.2 AUTHORITY
Each of Purchaser and Merger Sub has the right, power, authority and
capacity to execute and deliver this Agreement, to consummate the Merger and to
perform their respective obligations under this Agreement. This Agreement has
been duly executed and delivered by Purchaser and Merger Sub and constitutes the
legal, valid and binding obligation of Purchaser and Merger Sub, enforcement
against each in accordance with its terms. Purchaser and Merger Sub have taken
the necessary corporate action required to adopt, ratify and confirm the Plan of
Merger, and will provide certified copies of all Board Minutes to the Company.
-33-
4.3 LEGAL PROCEEDINGS
There is no Proceeding pending against Purchaser or Merger Sub that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the transactions contemplated hereby.
4.4 BROKERS OR FINDERS
Neither Purchaser nor Merger Sub nor any of their respective
directors, officers or agents has incurred on their behalf any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or financial advisory services or other similar payment in
connection with this Agreement.
4.5 CONFIDENTIALITY AND NON-DISCLOSURE Purchaser and Merger Sub
represent that the Confidentiality and Non-Disclosure Agreement, executed by the
parties, annexed as Exhibit "B", will be binding on Purchaser, Merger Sub, and
the Company for a period of one (1) year from the date that the Merger is
completed or terminated.
4.6 INTENTIONALLY DELETED
4.7 NO TRANSACTIONS IN COMPANY STOCK
Purchaser and Merger Sub and their respective Officers, Directors,
Affiliates and/or Principal Stockholders, or their Affiliates, have not
purchased or sold any shares of the Company during the course of negotiations
related to this Agreement and will not undertake any transaction in the
Company's stock prior to the Closing of the proposed transaction, and that all
ownership in the Company by Purchaser and Merger Sub, their Officers and
Directors or Affiliates will be disclosed to the Company upon execution of the
Agreement.
4.8 COMPLIANCE WITH SEC REGULATIONS
Purchaser and Merger Sub represent that all information provided to
the Company for inclusion in the Proxy filed in accordance with Section 4.33 of
this Agreement will be true and accurate.
5. COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
-34-
5.1 NORMAL COURSE
From the date hereof until the Closing, the Company and each of its
Subsidiaries will: (a) maintain its corporate existence in good standing; (b)
maintain the general character of its business; (c) use all reasonable best
efforts to maintain in effect all of its presently existing insurance coverage
(or substantially equivalent insurance coverage), preserve its business
organization substantially intact, keep the services of its present principal
employees and preserve its present business relationships with its material
suppliers and clients; (d) permit Purchaser, its accountants, its legal counsel
and its other representatives full access to its management, minute books and
stock transfer records, other books and records, Contracts, properties and
operations at all reasonable times and upon reasonable notice; and (e) in all
respects conduct its business in the usual and ordinary manner consistent with
past practice and perform in all material respects all Contracts with banks,
clients, suppliers, employees and others.
5.2 CONDUCT OF BUSINESS
Without limiting the provisions of Section 5.1, from the date hereof
until the Closing, unless required by applicable law neither the Company nor any
of its Subsidiaries will take any action as set forth below, without the prior
written consent of Purchaser, which consent shall not be unreasonably withheld.
(a) amend or otherwise modify its Organizational Documents;
(b) issue or sell or authorize for issuance or sale, or
grant any options or make other agreements of the type
referred to in Section 3.3 with respect to, any shares
of its capital stock or Convertible Securities, or alter
any term of any of its outstanding securities or make
any change in its outstanding shares of capital stock,
Convertible Securities or other ownership interests or
its capitalization, whether by reason of a
reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, stock
dividend or otherwise;
(c) mortgage, pledge or grant any security interest in any
of its assets, except security interests solely in
tangible personal property granted pursuant to any
purchase money agreement, conditional sales contract or
capital lease under which there exists an aggregate
future liability not in excess of $50,000 (which amount
is not more than the purchase price for such personal
property and which security interest does not extend to
any other item or items of personal property);
(d) declare, set aside, make or pay any dividend or other
distribution (in cash or stock) to any stockholder with
respect to its capital stock;
(e) redeem, purchase or otherwise acquire, directly or
indirectly, any capital stock;
-35-
(f) increase the bonus, salary or other compensation of any
of its employees who hold management positions or any
director or consultant, except for amounts accrued as of
December 31, 2005 and reflected in the Interim Financial
Statements and except for increases in the ordinary
course of business, consistent with past practice, for
employees;
(g) adopt or (except as otherwise required by law) amend any
employee benefit plan or severance plan or enter into
any collective bargaining agreement;
(h) except for in the ordinary course of business, amend,
extend, terminate or modify any Contract, except for
terminations of Contracts upon their expiration during
such period in accordance with their terms;
(i) incur or assume any indebtedness for borrowed money or
guarantee any obligation or the net worth (either
directly or through a "take-or-pay" or "keepwell"
agreement) of any Person in an aggregate amount in
excess of $25,000, except for endorsements of negotiable
instruments for collection in the ordinary course of
business;
(j) discharge or satisfy any Encumbrance other than those
which are required to be discharged or satisfied during
such period in accordance with their original terms or
pursuant to Section 3.28 of this Agreement;
(k) pay any material obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to
become due, except for any current liabilities, and the
current portion of any long term liabilities, shown on
the Financial Statements (or not required as of the date
thereof to be shown thereon in accordance with GAAP) or
incurred since December 31, 2005 in the ordinary course
of business consistent with past practice;
(l) sell, transfer, lease to others or otherwise dispose of
any of its properties or assets having a fair market
value in the aggregate in excess of $25,000, except in
the ordinary course of business consistent with past
practice;
(m) cancel, compromise or waive any material debt or claim;
(n) make any loan or advance to any Person other than travel
and other similar routine advances in the ordinary
course of business consistent with past practice, or
acquire any capital stock or other securities of any
other corporation or any ownership interest in any other
business enterprise;
(o) make any capital expenditure or capital addition or
betterment in an amounts which exceed $50,000, except as
contemplated in capital budgets in effect on the date of
this Agreement;
-36-
(p) change its method of accounting or the accounting
principles or practices utilized in the preparation of
the Financial Statements, other than as required by
GAAP;
(q) settle any litigation or any legal, administrative or
arbitration action or proceeding before any Governmental
Authority relating to it or its property;
(r) except in the ordinary course of business consistent
with past practice, commit to provide services for an
indefinite period or a period of more than twelve
months;
(s) make any tax election inconsistent with past practice or
settle or compromise any material Tax liability, except
to discharge any Tax liabilities set forth in Section
3.6 of the Disclosure Schedule;
(t) enter into any arrangement with any Affiliate other than
any Subsidiary of the Company;
(u) fail to maintain with financially responsible insurance
companies insurance in at least such amounts and against
at least such risks and losses as are consistent with
past practice;
(v) waive or write off or compromise any account receivable
other than in the ordinary course of business consistent
with past practice in excess of $25,000 individually, or
$50,000 in the aggregate;
(w) take any action or omit to take any action which could
reasonably be expected to result in a breach of any of
the Company's covenants under this Agreement or cause
any of the Company's representations or warranties to
become inaccurate on or before the Effective Time; or
(x) enter into any commitment to do any of the foregoing.
5.3 PREPARATION OF THE PROXY STATEMENT
(a) As promptly as practicable following the execution of
this Agreement, the Company shall prepare and the
Company shall file with the SEC a proxy statement
meeting the requirements of Section 14A under the
Exchange Act relating to a meeting of the holders of
Company Common Stock to adopt this Agreement and to
approve the Merger (such proxy statement as amended or
supplemented from time to time being hereafter referred
to as the "PROXY STATEMENT"). The Company, acting
through its Board of Directors, or the Special
Committee, shall include in the Proxy Statement the
recommendation of its Board of Directors, or the Special
Committee, that the stockholders of the Company vote in
favor of the adoption of this Agreement and the approval
of the Merger.
-37-
(b) The Company shall use its best efforts to respond to all
SEC comments with respect to the Proxy Statement and to
cause the Proxy Statement to be mailed to the Company's
stockholders at the earliest practicable date. The
Company shall promptly notify Purchaser of the receipt
of any SEC comments or any request from the SEC for
amendments or supplements to the Proxy Statement and
shall promptly provide Purchaser with copies of all
correspondence between it and its representatives, on
the one hand, and the SEC and its staff, on the other
hand.
(c) Notwithstanding the foregoing, prior to filing or
mailing the Proxy Statement (or any amendment or
supplement thereto) or responding to any comments of the
SEC with respect thereto, the Company (i) shall provide
Purchaser with a reasonable opportunity to review and
comment on such document or response, and (ii) shall
include in such document or response all comments
reasonably proposed by Purchaser.
(d) The Company shall ensure that the Proxy Statement does
not contain an untrue statement of material fact or omit
to state a material fact required to be stated therein
or necessary in order to make the statement made, under
the circumstances under which it is made, not
misleading. If at any time prior to the Effective Time
any event or information should be discovered by the
Company that should be set forth in an amendment or a
supplement to the Proxy Statement, the Company shall
promptly inform Purchaser of such discovery.
(e) The Company shall use its reasonable best efforts to
obtain the requisite approval of the stockholders of the
Company, which approval shall be in accordance with the
applicable requirements of the DGCL and the
Organizational Documents of the Company, to enable the
Merger to be effective on the Closing Date (determined
without regard to the condition to Closing in the first
sentence of Section 7.8) by holding a special meeting of
stockholders as promptly as practicable, but in no event
later than four (4) weeks following the final review and
clearance by the SEC of the Proxy Statement.
(f) Without limiting the generality of Section 11.1 the
Company agrees that it shall bear all expenses incurred
in connection with the preparation of the Proxy
Statement, including all fees and expenses of agents,
representatives, counsel and accountants.
(g) Notwithstanding the foregoing, the Company will provide
a draft of the Preliminary Proxy and Definitive Proxy to
Purchaser for review and comment; however, it is
understood that the Company will have the responsibility
of approving the disclosure contained in the Proxy
Statement as filed with the SEC.
-38-
5.4 CERTAIN FILINGS
The Company agrees to cooperate with Purchaser with respect to all
filings with regulatory authorities that are required to be made by the Company
to carry out the transactions contemplated by this Agreement, including the
timely filing of the Notice and FIRPTA certificate as set forth in Section 7.11,
with the IRS pursuant to Treasury Regulation section 1.897-2(h)(2).
5.5 CONSENTS AND APPROVALS
The Company shall use its reasonable best efforts to obtain as
promptly as practicable all consents, authorizations, approvals and waivers
required in connection with the consummation of the transactions contemplated by
this Agreement.
5.6 BEST EFFORTS TO SATISFY CONDITIONS
The Company shall use its reasonable best efforts to cooperate with
Purchaser for purposes of satisfying the conditions set forth in Sections 7 and
8 that are within its control.
5.7 INTERCOMPANY PAYMENTS
All loans, payables and other amounts due to or from the Company and
its Affiliates as listed in Section 5.7 of the Disclosure Schedule and as listed
on Section 3.28 of the Disclosure Schedule shall be paid in full, written off or
adjusted to zero balances at or prior to the Closing.
5.8 NOTIFICATION OF CERTAIN MATTERS
From the date hereof until the Closing, the Company shall promptly
notify Purchaser of (a) the occurrence or non-occurrence of any fact or event of
which the Company has knowledge which would be reasonably likely (i) to cause
any representation or warranty of the Company contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Closing Date or (ii) to cause any covenant, condition or agreement of the
Company in this Agreement not to be complied with or satisfied in any material
respect and (b) any failure of the Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect; provided, however, that no such notification
shall affect the other representations or warranties of the Company, or the
right of Purchaser to rely thereon, or the conditions to the obligations of
Purchaser. The Company shall give prompt notice to Purchaser of any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement.
5.9 NO SOLICITATION
Consistent with the Board of Directors' fiduciary duty to
stockholders and applicable law,
-39-
(a) From and after the date of this Agreement, the Company
agrees that it and its Subsidiaries and their respective
officers, directors and employees will not, and will
direct its Affiliates, agents, accountants, consultants,
financial advisors, attorneys and other representatives
or those of any of its Subsidiaries to not, directly or
indirectly, (i) solicit, initiate, facilitate or
encourage any invitation or submission of any inquiries,
proposals or offers or any other efforts or attempts
that constitute, or may reasonably be expected to lead
to, any Acquisition Proposal (as defined below) from any
person, (ii) participate or engage in any discussions or
negotiations concerning, or furnish to any person
nonpublic information or afford access to the business,
properties, assets, books or records of the Company or
any of its Subsidiaries, with respect to, any
Acquisition Proposal, (iii) withdraw, modify or amend in
a manner adverse to Purchaser the Company's Special
Committee and Board of Directors recommendations
described in Section 3.3,(iv) approve, endorse or
recommend any Acquisition Proposal, (v) grant any waiver
or release under any standstill or similar agreement
with respect to any class of securities of the Company,
or (vi) enter into any agreement in principle,
arrangement, understanding or contract relating to an
Acquisition Proposal, except in the case of clauses (ii)
through (vi), as set forth in and subject to Section
5.9(c) and Section 5.9(d).
(b) The Company shall notify Purchaser promptly (and in any
event within 24 hours) upon receipt by the Company or
any of its advisors or representatives of any
Acquisition Proposal, any indication that any Person is
considering making an Acquisition Proposal, any request
for information relating to the Company or any of its
Subsidiaries by any person that may be considering
making, or has made, an Acquisition Proposal, or any
inquiry or request for discussions or negotiations
regarding any Acquisition Proposal. The Company shall
provide to Purchaser promptly (and in any event within
24 hours), orally and in writing, the identity of such
person, the material terms and conditions of such
Acquisition Proposal, request or inquiry and a copy of
such Acquisition Proposal, request or inquiry, if
written. The Company shall inform Purchaser promptly
(and in any event within 24 hours) of any changes in the
material terms or conditions to any Acquisition Proposal
received, and the Company shall keep Purchaser
reasonably informed on a prompt basis of the status of
any such Acquisition Proposal, request or inquiry.
(c) Notwithstanding anything to the contrary contained in
this Section 5.9, in the event that, prior to the
approval of this Agreement and the Merger by the
stockholders of the Company as provided herein, the
Company receives an unsolicited, bona fide, written
Acquisition Proposal with respect to itself from a third
party (under circumstances in which the Company has
complied with its obligations under this Section 5.9)
that its Board of Directors has in good faith concluded
(following the receipt of the advice of its outside
legal counsel and its financial advisor) is, or is
reasonably likely to result in, a Superior Proposal, it
may then take the following actions, provided, that
-40-
prior to taking any such action, the Company's Board of
Directors, determines in good faith that the failure to
take such action would be a violation of its fiduciary
obligations to the Company's stockholders under
applicable law: (i) furnish nonpublic information to the
third party making such Acquisition Proposal, provided
that (A) at least 24 hours prior to furnishing any such
nonpublic information to such party, it gives Purchaser
written notice of its intention to furnish such
nonpublic information, (B) it receives from the third
party an executed confidentiality agreement containing
customary limitations on the use and disclosure of all
nonpublic information furnished to such third party on
its behalf, the terms of which are at least as
restrictive as the terms contained in any
confidentiality agreement between Purchaser and the
Company (and containing additional provisions that
expressly permit the Company to comply with the
provisions of this Section 5.9) and (C)
contemporaneously with furnishing any nonpublic
information to such third party, it furnishes such
nonpublic information to Purchaser (to the extent such
nonpublic information has not been previously so
furnished); (ii) engage in negotiations with the third
party with respect to the Acquisition Proposal, provided
that at least 24 hours prior to entering into
negotiations with such third party, it gives Purchaser
written notice of its intention to enter into
negotiations with such third party; and (iii) grant a
waiver or release with respect to the third party making
the Acquisition Proposal under a standstill or similar
agreement to allow the third party making such
Acquisition Proposal to engage in negotiations with the
Company with respect to such proposal (but not allow
such third party to acquire any class of securities of
the Company).
(d) Notwithstanding anything in this Agreement to the
contrary, the Company's Board of Directors shall be
permitted, at any time prior to approval of this
Agreement and the Merger by the stockholders of the
Company, in response to an unsolicited, bona fide,
written Acquisition Proposal, to approve or recommend,
or propose to approve or recommend, any such Acquisition
Proposal and, in connection therewith, to withdraw,
modify or change in a manner adverse to Purchaser the
Recommendations, but only if:
(i) the Board of Directors of the Company concludes in
good faith after consultation with its financial
advisors that such Acquisition Proposal
constitutes a Superior Proposal, and following the
receipt of advice of its outside legal counsel,
determines in good faith that the failure to take
such action would be a violation of its fiduciary
obligations to the Company's stockholders under
applicable law,
-41-
(ii) the Company has delivered to Purchaser a written
notice (a "NOTICE OF SUPERIOR PROPOSAL") that
advises Purchaser that the Company has received a
Superior Proposal, summarizes the material terms
and conditions of such Superior Proposal and
attaches a complete copy of such Superior
Proposal, and identifies the person making such
Superior Proposal (it being agreed and understood
that any subsequent amendments or modifications to
such Superior Proposal shall again be subject to
the provisions of this subparagraph), and
(iii) either (x) on or before the expiration of the
three business day period or such shorter period
as reasonably determined by the Board, following
the delivery to Purchaser of any Notice of
Superior Proposal, Purchaser does not make a
written offer (a "MATCHING BID") in response to
such Superior Proposal, or (y) following receipt
of a Matching Bid within the three business day
period following delivery to Purchaser of any
Notice of Superior Proposal, the Board of
Directors of the Company determines in good faith,
after consultation with its financial advisors and
outside legal counsel, after taking into
consideration the Matching Bid, that the Superior
Proposal to which the Notice of Superior Proposal
relates continues to be a Superior Proposal.
Any action pursuant to this Section 5.9(d) shall not constitute a breach of the
Company's representations, warranties, covenants or agreements contained in this
Agreement.
(e) Nothing contained in this Agreement shall prohibit the
Company or its Board of Directors from taking and
disclosing to its stockholders a position with respect
to a tender or exchange offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act to the extent required by applicable law.
(f) The Company shall immediately cease and cause to be
terminated any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with
any parties conducted heretofore by the Company or any
of its representatives with respect to any Acquisition
Proposal. The Company shall promptly request that each
person who has received confidential information about
the Company in connection with that person's
consideration of an Acquisition Proposal return or
destroy all such information.
(g) For purposes of this Agreement, the following terms
shall have the following meanings: (i) "ACQUISITION
PROPOSAL" shall mean any inquiry, offer or proposal
relating to any transaction or series of related
transactions involving: (A) any purchase from the
Company or acquisition by any person, entity or "GROUP"
(as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of more than a
five percent (5%) interest in the total outstanding
voting securities of the Company or any tender offer or
exchange offer that if consummated would result in any
person, entity or Group beneficially owning five percent
-42-
(5%) or more of the total outstanding voting securities
of the Company or any merger, consolidation, business
combination or similar transaction involving the
Company, (B) any sale, lease (other than in the ordinary
course of business), exchange, transfer, license (other
than in the ordinary course of business), acquisition or
disposition of more than twenty percent (20%) of the
assets of the Company and its Subsidiaries, taken as a
whole, or (C) any liquidation or dissolution of the
Company or any of its Subsidiaries; and (ii) "SUPERIOR
PROPOSAL" shall mean a written Acquisition Proposal for
more than ten percent (10%) of the equity interest in,
or more than ten percent (10%) of the consolidated
assets of, the Company and its Subsidiaries, that the
Board of Directors of the Company has in good faith
concluded (following the receipt of advice of its
outside legal counsel and its financial adviser), taking
into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and the
person, entity or Group making the proposal, to be more
favorable, from a financial point of view, to the
Company's stockholders (in their capacities as
stockholders) than the terms of the Merger and is
reasonably capable of being consummated. In the event of
the acceptance of a superior proposal by the Company, it
is understood and agreed that there will be no liability
to the Company, Purchaser or Merger Sub for any costs,
expenses or damages under the written agreement except
as otherwise set forth in Section 9.3.
5.10 TERMINATION OF STOCK OPTIONS
The Company shall use its best efforts to send to each holder of
Options a written agreement substantially in the form attached hereto as Exhibit
5.10 (the "OPTION CANCELLATION AGREEMENT").
6. COVENANTS OF PURCHASER AND MERGER SUB
Each of Purchaser and Merger Sub, jointly and severally, hereby
covenants and agrees as follows:
6.1 CERTAIN FILINGS
Purchaser and Merger Sub agree to make or cause to be made all
filings with regulatory authorities that are required to be made by Purchaser
and Merger Sub or their respective Affiliates to carry out the transactions
contemplated by this Agreement.
6.2 BEST EFFORTS TO SATISFY CONDITIONS
Each of Purchaser and Merger Sub agrees to use its reasonable best
efforts to satisfy the conditions set forth in Sections 7 and 8 that are within
their control.
-43-
6.3 NOTIFICATION OF CERTAIN MATTERS
From the date hereof until the Closing, Purchaser and Merger Sub
shall promptly notify the Company of (a) the occurrence or non-occurrence of any
fact or event of which Purchaser or Merger Sub has knowledge which would be
reasonably likely (i) to cause any representation or warranty of Purchaser or
Merger Sub contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Closing Date or (ii) to
cause any covenant, condition or agreement of Purchaser or Merger Sub in this
Agreement not to be complied with or satisfied in any material respect and (b)
any failure of Purchaser or Merger Sub to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder in any
material respect; provided, however, that no such notification shall affect the
representations or warranties of Purchaser or Merger Sub, or the right of the
Company to rely thereon, or the conditions to the obligations of the Company.
Purchaser and Merger Sub shall give prompt notice to the Company of any notice
or other communication from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement.
6.4 CERTIFICATIONS
Purchaser and Merger Sub will provide favorable certificates dated
the Closing Date signed by their President and Chief Executive Officer as to
covenants and representations of Purchaser and Merger Sub as provided for in the
written agreement.
6.5 ASSIGNMENT AND ASSUMPTION OF AGREEMENTS
Purchaser agrees that any contract or agreement that the Company may
be a party to that is unable to be assigned will be assumed by Merger Sub and
Purchaser.
7. CONDITIONS TO OBLIGATIONS OF PURCHASER AND MERGER SUB
The obligations of Purchaser and Merger Sub under this Agreement to
consummate the Merger shall be subject to the satisfaction, on or before the
Closing Date, of each of the following conditions, any of which may be waived by
Purchaser in its sole discretion subject to applicable law:
7.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company and its
Subsidiaries contained in this Agreement or in the Disclosure Schedule or any
certificate delivered pursuant hereto which are not qualified as to materiality
shall be complete and correct as of the date when made, shall be deemed repeated
at and as of the Closing Date as if made on the Closing Date and, shall then be
complete and correct in all material respects. The representations and
warranties of the Company and its Subsidiaries contained in this Agreement or in
the Disclosure Schedule or any certificate delivered pursuant hereto which are
qualified as to materiality shall be complete and correct as of the date when
made, shall be deemed repeated at and as of the Closing Date as if made on the
Closing Date and shall then be complete and correct in all respects.
-44-
7.2 PERFORMANCE OF COVENANTS
The Company shall have performed and complied in all material
respects with each covenant, agreement and condition required by this Agreement
to be performed or complied with by it prior to or on the Closing Date.
7.3 LACK OF ADVERSE CHANGE
There shall not have occurred any event or circumstance which,
individually or in the aggregate, has had or may result in a Material Adverse
Effect, including the loss of significant business from any of clients of the
Company or any of its Subsidiaries or the loss of any significant clients of the
Company or any of its Subsidiaries.
7.4 UPDATE CERTIFICATE
Purchaser and Merger Sub shall have received favorable certificates
otherwise known as a Bringdown Certificate, dated the Closing Date, signed by
the president and chief executive officer of the Company as to the matters set
forth in Sections 7.1, 7.2, 7.3 and the Disclosure Schedules.
7.5 NO PROCEEDING
No order of any Governmental Authority shall be in effect that
restrains or prohibits any transaction contemplated hereby or that would limit
or affect Purchaser's ownership or operation of the business of the Company; no
Proceeding by any Governmental Authority or any other Person shall be pending or
threatened against Purchaser, Merger Sub or the Company that challenges the
validity or legality, or that seeks to restrain the consummation, of the
transactions contemplated hereby or that seeks to limit or otherwise affect
Purchaser, Merger Sub or the Company's right to own or operate the business of
the Company; and no written advice shall have been received by Purchaser, Merger
Sub or the Company or by any of their respective counsel from any Governmental
Authority, and remain in effect, stating that a Proceeding will, if the Merger
is consummated or sought to be consummated, be filed seeking to invalidate or
restrain the Merger or limit or otherwise affect Purchaser's ownership or
operation of the business of the Company.
7.6 APPROVALS AND CONSENTS
All consents, waivers, approvals, authorizations or orders required
to be obtained, and all filings required to be made, by the Company for the
authorization, execution and delivery of this Agreement, the consummation by it
of the transactions contemplated hereby and the continuation in full force and
effect of any and all rights, documents, agreements or instruments of the
Company shall have been obtained and made by the Company.
-45-
7.7 INTENTIONALLY DELTED
7.8 STOCKHOLDER APPROVAL; DISSENTERS
This Agreement shall have been duly adopted at or prior to the
Effective Time by the requisite vote of a majority of the holders of Company
Common Stock entitled to vote thereon. Notwithstanding the foregoing Holders of
not more than ten percent (10%) of the issued and outstanding Company Common
Stock shall have exercised appraisal rights with respect to the Merger
7.9 RESIGNATIONS
Purchaser and Merger Sub shall have received form the Company the
resignations of all officers and directors of the Company and its Subsidiaries
from their positions with the Company and its Subsidiaries.
7.10 EFFECTIVENESS OF AGREEMENTS
The Non-Compete Agreement, dated as of the date hereof, by and
between Purchaser and Philip Luizzo and the Employment Agreement, dated as of
the date hereof, by and between Purchaser and Philip Luizzo shall each be in
full force and effect.
7.11 FIRPTA CERTIFICATE
Purchaser shall have received from the Company an executed copy of a
certification and notice, meeting the requirements of Sections 897 and 1445 of
the Code and the treasury regulations promulgated thereunder, substantially in
the form attached hereto as Exhibit 7.11,dated as of the Closing Date, that the
Company has not been a United States real property holding corporation at any
time during the five year period prior to the Closing Date, and the stock of the
Company is not a United States real property interest.
7.12 PROVIDING COLD COMFORT LETTER
The Company shall have delivered a comfort letter from its
accounting firm as to any change that may a Material Adverse Effect to the
Company's Financial Statements.
7.13 INTENTIONALLY DELETED
7.14 TERMINATION OF EMPLOYMENT AGREEMENTS
Effective as of the Closing Date, that certain Employment Agreement,
dated as of December 1, 2003, by and between the Company and Philip Luizzo,
shall each have been terminated at no cost or expense to the Company, and the
Company shall have no further obligation or liability under either such
agreement. Purchaser shall have been furnished evidence of each such
termination.
-46-
7.15 TERMINATION OF STOCK OPTIONS
The Company shall have satisfied in full its obligations under
Section 5.10, and Purchaser shall have been furnished evidence of such
satisfaction.
7.16 DISCHARGE OF INDEBTEDNESS
The Company shall have satisfied in full its obligations under
Section 5.7 and Section 3.28 and Purchaser shall have been furnished evidence of
such satisfaction.
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement to consummate
the Merger shall be subject to the satisfaction, on or before the Closing Date,
of each of the following conditions, any of which may be waived by the Company
in its sole discretion:
8.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of Purchaser and Merger Sub
contained in this Agreement or in the Disclosure Schedule or any certificate
delivered pursuant hereto which are not qualified as to materiality shall be
complete and correct as of the date when made, shall be deemed repeated at and
as of the Closing Date as if made on the Closing Date and shall then be complete
and correct in all material respects. The representations and warranties of
Purchaser and Merger Sub contained in this Agreement or in the Disclosure
Schedule or any certificate delivered pursuant hereto which are qualified as to
materiality shall be complete and correct as of the date when made, shall be
deemed repeated at and as of the Closing Date as if made on the Closing Date and
shall then be complete and correct in all respects.
8.2 PERFORMANCE OF COVENANTS
Purchaser and Merger Sub shall have performed and complied in all
material respects with each covenant, agreement and condition required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date.
8.3 UPDATE CERTIFICATE
The Company shall have received favorable certificates, dated the
Closing Date, signed by an officer of each of Purchaser and Merger Sub as to the
matters set forth in Sections 8.1 and 8.2.
8.4 NO PROCEEDING
No order of any Governmental Authority shall be in effect that
restrains or prohibits the Merger; and no written advice shall have been
received by Purchaser, Merger Sub or the Company or by any of their respective
counsel from any Governmental Authority, and remain in effect, stating that a
Proceeding will, if the Merger is consummated or sought to be consummated, be
filed seeking to invalidate or restrain the Merger.
-47-
9. TERMINATION
9.1 TERMINATION OF AGREEMENT
This Agreement may be terminated:
(a) At any any time prior to the Effective Time, by mutual
consent of Purchaser and the Company, without any
liability on the part of the Company or Purchaser.
(b) By Purchaser or Merger Sub or the Company if the
Effective Time shall not have occurred by June 30, 2006,
unless such failure shall be due to a material breach of
any representation or warranty, or the nonfulfillment in
a material respect, and failure to cure such
nonfulfillment within ten (10) Business Days following
receipt by such party of notice of such breach or
nonfulfillment, of any covenants or agreement contained
herein on the part of the party or parties seeking to
terminate this Agreement.
(c) By Purchaser alone, by means of a written notice to the
Company, if there has been a material misrepresentation
by the Company, or a material breach on the part of the
Company of any of its warranties, covenants or
agreements set forth herein, or a material failure on
the part of the Company to comply with any of its other
obligations hereunder. By the Company alone, by means of
a written notice to Purchaser if there has been a
material misrepresentation by Purchaser or Merger Sub,
or a material breach on the part of Purchaser or Merger
Sub of any of their warranties, covenants or agreements
set forth herein, or a material failure on the part of
Purchaser or Merger Sub to comply with any of their
other obligations hereunder. No such termination shall
relieve any party of the consequences of any such
misrepresentation, breach or failure.
(d) By either Purchaser or the Company if a Governmental
Authority shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final
action, in any case, having the effect of permanently
restraining, enjoining or otherwise prohibiting the
Merger.
-48-
(e) By either Purchaser or the Company if the requisite vote
of the stockholders of the Company as set forth in
Section 7.8, in favor of the Merger shall not have been
obtained; provided, that, the right to terminate this
Agreement under this Section 9.1(e) shall not be
available to the Company where the failure to obtain
such stockholder approval shall have been caused by the
action or failure to act of the Company and such action
or failure to act constitutes a material breach by the
Company of this Agreement.
(f) By the Company if it accepts a Superior Proposal;
provided, that, simultaneously with such termination the
Company complies with Section 9.3(a).
(g) By Purchaser if the Board of Directors, or the Special
Committee, of the Company shall have withdrawn or
modified its approval or recommendation of the Merger or
the adoption of this Agreement; provided, that,
simultaneously with such termination the Company
complies with Section 9.3(b).
(h) By Purchaser if it elects in its sole discretion to
exercise termination and the Purchaser complies with
Section 9.3(b)
9.2 EFFECT OF TERMINATION
In the event of termination of this Agreement as provided in Section
9.1, this Agreement shall forthwith become void, the Merger shall be abandoned
and there shall be no liability or obligation on the part of Purchaser, Merger
Sub or the Company or their respective officers, directors, stockholders or
Affiliates, except as otherwise set forth in Section 9.3 and except to the
extent that such termination results from the breach by a party hereto of any of
its representations, warranties, covenants or agreements set forth in this
Agreement or in the Disclosure Schedule (in which case the non-breaching party
may seek any and all remedies available to it under applicable law); provided,
that, the provision of Sections 9.3,11.1, 11.2, 11.3, 11.4, and 11.5and this
Section 9.2 shall remain in full force and effect and survive any termination of
this Agreement.
9.3 TERMINATION FEES
(a) The Company shall pay Purchaser a termination fee of
$900,000.00 ("TERMINATION FEE") in immediately available
funds simultaneously with the termination of this
Agreement pursuant only to Section 9.1(f).
(b) The Company or Purchaser (as the case may be) shall pay
the other party's out-of-pocket expenses incurred in
connection with this Agreement (and the transactions
contemplated hereby), including the fees and expenses of
financial advisors, accountants and legal counsel and
printing and filing and mailing fees and expenses
(collectively, "TERMINATION EXPENSES") in immediately
available funds within five (5) Business Days following
termination of this agreement by Section 9.1(f), (g) or
(h). Notwithstanding the foregoing, in no event shall
Termination Expenses payable by Company or Purchaser to
the other party (as the case may be) pursuant to this
Section 9.3(b) be in an amount exceeding $100,000.00.
-49-
(c) The provisions of this Section 9.3 are exclusive.
10. INDEMNIFICATION
10.1 RIGHT TO INDEMNIFICATION BY COMPANY
The Bylaws and Certificate of Incorporation of the Surviving
Corporation shall contain the same provisions with respect to indemnification of
present and former directors and officers of the Company as those set forth in
the Company's Bylaws and Certificate of Incorporation on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of three (3) years from the Effective Time in any manner that would
adversely affect the rights thereunder as of the Effective Time of individuals
who at the Effective Time are present or former directors or officers of the
Company, unless such modification is required after the Effective Time by
applicable law.
10.2 INTENTIONALLY DELETED
10.3 INSURANCE
For a period of three (3) years after the Effective Time, Purchaser
and the Surviving Corporation shall cause to be maintained in effect directors
and officers liability insurance covering those persons who are on the date
hereof covered by directors and officers liability insurance policies maintained
by the Company on terms substantially similar to those applicable under such
current policies with respect to claims arising from and related to facts or
events which occurred at or before the Effective Time; provided, however, that
in no event will Purchaser or the Surviving Corporation be required to expend in
excess of 100% of the annual premiums currently paid by the Company and its
Subsidiaries for such insurance. Notwithstanding the foregoing, Purchaser may
substitute therefore policies of substantially the same coverage containing
terms and conditions which are no less advantageous, in any material respect, to
the Indemnified Parties. Additionally, errors and omission and Liability
Insurance will be maintained by Purchaser in favor of the Company for the period
of the Statute of Limitations that claims can be made against the Company as a
result of the operation of its business.
-50-
10.4 SUCCESSORS
In the event Purchaser, the Surviving Corporation or any successor
to Purchaser or the Surviving Corporation (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving corporation or
entity in such consolidation or merger or (ii) transfers all or substantially
all of its properties or assets to any Person, then, and in each case, proper
provision shall be made so that the successors of the Purchaser or the Surviving
Corporation honor the obligations of the Purchaser and the Surviving Corporation
set forth in this Section 11.
10.5 SURVIVAL
The provisions of this Section 10 shall survive the consummation of
the Merger and expressly are intended to benefit each director and officer of
the Company contemplated by this Section 10.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection with
the preparation, execution and performance of this Agreement, including all fees
and expenses of agents, representatives, counsel and accountants.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement, the Closing or the transactions contemplated hereby will be issued at
such time and in such manner as Purchaser and the Company agree in writing and
shall be made in accordance with Regulation FD promulgated by the SEC. The
Company and Purchaser will in good faith consult with each other concerning the
means by which the Company's employees, clients and suppliers and others having
dealings with the Company will be informed of this Agreement, the Closing and
the transactions contemplated hereby, and representatives of Purchaser may at
its option be present for any such communication.
11.3 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by fax (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and fax numbers set forth below (or to
such other address, person's attention or fax number as a party may designate by
notice to the other parties given in accordance with this Section 12.3):
-51-
(a) If to Purchaser or Merger Sub:
First Advantage Corporation
One Progress Plaza, Ste 2400
St. Petersburg, FL 33701
Attention: Julie Waters, General Counsel
If to the Company:
Accufacts Pre-Employment Screening, Inc.
2180 State Road
Route 434 West Suite 4150
Longwood, Fla 32779
Attention: President
With a copy to:
Baratta & Goldstein
597 Fifth Avenue
New York, NY 10017
11.4 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this Agreement may be brought against any of
the parties in the courts of the State of Delaware, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Service of process or any other papers in any such action or procedure
may be made by registered or certified mail, return receipt requested, pursuant
to the provisions of Section 12.3.
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
-52-
11.6 WAIVER
Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power or privilege.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties
with respect to its subject matter (including any correspondence, written and
oral among Purchaser, Merger Sub and the Company and constitutes (along with the
documents referred to in this Agreement) the entire agreement among the parties
with respect to its subject matter. This Agreement may not be amended, nor may
any provision hereof or default hereunder be waived, except by a written
agreement executed by the party to be charged with the amendment or waiver.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights under this Agreement without
the prior written consent of the other parties except that Purchaser may assign
any of its rights, but not its obligations, under this Agreement to any direct
wholly owned Subsidiary of Purchaser. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement and the Persons contemplated by Article
11 any legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part will remain in full force and effect to
the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. In this
Agreement (i) words denoting the singular include the plural and vice versa,
(ii) "it" or "its" or words denoting any gender include all genders, (iii) the
word "including" shall mean "including without limitation," whether or not
expressed, (iv) any reference to a law shall mean the statute and any rules and
regulations thereunder in force as of the date of this Agreement or the Closing
Date, as applicable, unless otherwise expressly provided, (v) any reference
herein to a Section, Article, Schedule or Exhibit refers to a Section or Article
of or a Schedule or Exhibit to this Agreement, unless otherwise stated, and (vi)
when calculating the period of time within or following which any act is to be
done or steps taken, the date which is the reference day in calculating such
period shall be excluded and if the last day of such period is not a Business
Day, then the period shall end on the next day which is a Business Day. Each
party acknowledges that it has been advised and represented by counsel in the
negotiation, execution and delivery of this Agreement and accordingly agrees
that if an ambiguity exists with respect to any provision of this Agreement,
such provision shall not be construed against any party because such party or
its representatives drafted such provision.
-53-
11.11 GOVERNING LAW
This Agreement will be governed by the internal laws of the State of
Florida without regard to principles of conflict of laws, except to the extent
the DGCL governs the provisions hereof relating to the Merger.
11.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
{SIGNATURE PAGES FOLLOW]
-54-
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
FIRST ADVANTAGE CORPORATION
By:
----------------------------------------------
Name:
Title:
ACCUFACTS ACQUISITION, LLC
By:
----------------------------------------------
Name:
Title:
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
By:
----------------------------------------------
Name:
Title:
-55-