SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
common stock, $0.01 par value
(2) Aggregate number of securities to which transaction applies:
6,721,913
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
$0.75 - Arms length negotiated price
(4) Proposed maximum aggregate value of transaction: $5,041,434.75
(5) Total fee paid: $1,008.30
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
(Accufacts Letterhead)
April 24, 2006
To Our Stockholders,
You are cordially invited to attend the special meeting of Stockholders of
Accufacts Pre-Employment Screening, Inc. ("Accufacts" or the "Company") to be
held at 11:00 a.m. Eastern Daylight Time, on Wednesday, May 31, 2006, at
the offices of the Company located at 2180 State Road 434, Longwood, Florida.
At the special meeting, you will be asked to consider and vote upon an Agreement
and Plan of Merger, dated as of February 16, 2006, among Accufacts, First
Advantage Corporation ("FAC") and Accufacts Acquisition LLC, a wholly-owned
subsidiary of FAC. Pursuant to the merger agreement, (i) the subsidiary of FAC
will be merged with and into Accufacts, and Accufacts will become a wholly-owned
subsidiary of FAC, and (ii) each holder of the outstanding shares of Accufacts
common stock will receive in cash $0.75 per share. As a result of the merger,
Accufacts will become a wholly-owned subsidiary of FAC.
Before we can complete this transaction, Accufacts stockholders must adopt the
merger agreement and approve the merger and the other transactions contemplated
by the merger agreement. The affirmative vote of stockholders entitled to
exercise a majority of the voting power of Accufacts is required to adopt the
merger agreement and approve the merger and the other transactions contemplated
by the merger agreement.
This document describes the merger agreement and the proposal we are asking you
to approve. WE URGE YOU TO READ AND CONSIDER CAREFULLY THE INFORMATION
PRESENTED.
Because I am the controlling shareholder of Accufacts, our board of directors
formed an independent special committee to evaluate the proposed transaction.
The special committee unanimously determined that the merger is fair to and in
the best interests of the company and its shareholders and unanimously
recommended that the full board of directors adopt the merger agreement,
approve the merger and other transactions contemplated by the merger agreement
and recommend that the stockholders approve the proposal.
All members of Accufacts' board of directors (other than myself), acting on the
unanimous recommendation of a special committee, believe that the agreement, the
merger, and the other transactions contemplated by the merger agreement are fair
to and in your best interest and unanimously recommend that you vote FOR the
adoption of the merger agreement and approval of the merger and the
transactions contemplated by the merger agreement.
This proxy statement provides you with detailed information about the merger
agreement and the proposed merger. You may also obtain information about
Accufacts from documents filed with the Securities and Exchange Commission. We
encourage you to read this entire document, including the appendices, completely
and carefully.
Whether or not you plan to attend this special meeting, please complete, sign,
date and return the proxy promptly in the enclosed envelope. If you attend this
special meeting, you may vote your shares in person even if you have previously
submitted a proxy. EVERY VOTE IS IMPORTANT. I look forward to your participation
at the special meeting.
Sincerely yours,
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
/s/ PHILIP LUIZZO
- -----------------
Philip Luizzo
Chairman, Chief Executive Officer and President
This proxy statement is dated April 24, 2006 and is being first mailed to the
stockholders of Accufacts on or about April 26, 2006.
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
2180 STATE ROAD 434, SUITE 4150
LONGWOOD, FL 32779
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Accufacts Pre-Employment Screening, Inc. will hold a special meeting of
stockholders of Accufacts Pre-Employment Screening, Inc. at 11:00 a.m. Eastern
Daylight Time, on Wednesday, May 31, 2006, at the offices of the Company located
at 2180 State Road 434, Longwood, Florida for the following purpose:
1. To consider and vote upon a proposal to adopt an Agreement and Plan
of Merger, dated as of February 16, 2006, among Accufacts, First
Advantage Corporation and Accufacts Acquisition, LLC, a wholly-owned
subsidiary of First Advantage Corporation and approve the merger of
Accufacts Acquisition, LLC with and into Accufacts Pre-Employment
Screening, Inc. and the other transactions contemplated by the
merger agreement. On the completion of the merger, Accufacts will
become a wholly-owned subsidiary of First Advantage Corporation,
each share of Accufacts common stock will be cancelled, and each
holder of the outstanding shares of Accufacts common stock will
receive in cash $0.75 per share.
2. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
A copy of the merger agreement is attached as Appendix A to the proxy statement
accompanying this notice. Please review the proxy statement accompanying this
notice for more complete information regarding the proposal.
All stockholders are cordially invited to attend the meeting, although only
those stockholders who were stockholders of record at the close of business on
April 21, 2006 will be entitled to notice of, and to vote at the meeting or any
adjournment thereof. If a stockholder does not return a signed proxy card or
does not attend the special meeting and vote in person, his or her shares will
not be voted. Stockholders are urged to mark the boxes on the proxy card to
indicate how their shares are to be voted. If a stockholder returns a signed
proxy card but does not mark the boxes, the shares represented by the proxy card
will be voted as recommended by the board of directors. Accufacts' board of
directors solicits proxies so each stockholder has the opportunity to vote on
the proposals to be considered at the special meeting.
After careful consideration, a special committee and your board of directors has
determined that the merger is fair to, and in the best interest of, Accufacts
and its stockholders. All members of the special committee adopted the merger
agreement and approved the merger and other transactions contemplated by the
merger agreement. All members of Accufacts' board of directors voting on the
proposal have adopted the merger agreement and approved the merger and other
transactions contemplated by the merger agreement, and recommend that you vote
"FOR" adoption of the merger agreement and approval of the merger and the other
transactions contemplated by the merger agreement at the special meeting.
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE WHICH HAS BEEN PROVIDED.
IN THE EVENT YOU ARE ABLE TO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND
VOTE YOUR SHARES IN PERSON.
By Order of the board of directors
/s/ Anthony Luizzo
------------------
Anthony Luizzo, Secretary
April 24, 2006
Longwood, Florida
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of this transaction, or passed upon the
fairness or merits of this transaction or the adequacy or accuracy of this proxy
statement. Any representation to the contrary is a criminal offense.
We have not authorized anyone to give any information or make any representation
about the merger or Accufacts that differs from or adds to the information in
this proxy statement or in our documents that are publicly filed with the
Securities and Exchange Commission. Therefore, if anyone does give you different
or additional information, you should not rely on it.
The information contained in this proxy statement speaks only as of its date
unless the information specifically indicates that another date applies.
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS ABOUT THE MERGER.........................................1
SUMMARY TERM SHEET.............................................................4
The Parties To The Transaction...........................................4
First Advantage Corporation's Reasons For The Merger.....................5
Accufacts' Reasons For The Merger........................................6
The Special Meeting......................................................6
Stockholder Vote Required................................................6
Recommendations To Stockholders..........................................6
The Merger...............................................................6
What Accufacts' Stockholders Will Receive In The Merger..................6
Following The Merger.....................................................7
Important Federal Income Tax Consequences................................7
Conditions To Completion Of The Merger...................................7
No Solicitation By Accufacts.............................................7
Termination Of The Merger Agreement......................................7
Termination Fees And Expenses............................................8
Opinion And Evaluation Of Financial Advisor..............................8
Percentage Of Shares Held By Directors And Executive Officers............9
Interests Of Certain Persons In The Merger...............................9
Governmental and Regulatory Approvals....................................9
Dissenting Shareholders Rights of Appraisal..............................9
THE SPECIAL MEETING...........................................................10
OUTSTANDING SHARES AND VOTING RIGHTS..........................................10
Votes Required; Quorum..................................................10
Revocability of Proxies.................................................11
Expenses of Solicitation................................................11
THE MERGER....................................................................11
Background of the Merger................................................11
Accufacts' Reasons for Engaging in the Merger...........................12
First Advantage Corporation's Reasons for Engaging in the Merger........13
Recommendation of the Board of Directors of Accufacts...................14
Fairness of the Transaction - Opinion and Evaluation of Financial
Advisor..............................................................14
Important Federal Income Tax Consequences...............................16
Interest of Certain Persons in the Merger...............................16
Delisting and Deregistration of Accufacts Common Stock after
the Merger...........................................................17
THE AGREEMENT AND PLAN OF MERGER..............................................17
Effective Time of the Merger............................................17
Effect of the Merger....................................................18
Consideration Offered to Securityholders................................18
Representations and Warranties..........................................18
Vote Required for Approval of the Transaction...........................19
Closing of the Merger...................................................19
Certain Covenants of Accufacts..........................................19
Certain Covenants of First Advantage Corporation and Accufacts
Acquisition LLC......................................................21
No Solicitation by Accufacts............................................21
Conditions to Completion of the Merger..................................22
Termination.............................................................23
Termination Fees and Expenses...........................................24
Indemnification ........................................................22
Amendment and Modification..............................................24
DESCRIPTION OF FIRST ADVANTAGE CORPORATION....................................25
DESCRIPTION OF ACCUFACTS......................................................25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................27
DISSENTING STOCKHOLDERS RIGHTS OF APPRAISAL...................................28
GOVERNMENTAL AND REGULATORY APPROVALS.........................................30
OTHER MATTERS.................................................................31
APPENDICES
A. Agreement and Plan of Merger
B. Fairness Opinion of PCE Valuations LLC
C. Delaware General Corporation Law - Section 262
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why did Accufacts seek to be acquired by First Advantage Corporation?
A: The purpose of the merger is to allow for the products and services
offered by Accufacts to be assimilated into the current business of First
Advantage Corporation to create a more diversified background screening company
able to compete effectively in the changing marketplace.
Q: Why am I receiving these materials?
A: The board of directors of Accufacts Pre-Employment Screening, Inc. is
providing these proxy materials to give you information to determine how to vote
at a special meeting of Accufacts stockholders regarding the merger agreement
and the merger. The special meeting will take place on Wednesday, May 31, 2006.
Q: What will be voted on at the special meeting?
A: There will be a vote on whether to adopt a merger agreement and approve
the merger and other transactions contemplated by the merger agreement. In the
merger, Accufacts Acquisition LLC, a wholly-owned subsidiary of First Advantage
Corporation, will merge with and into Accufacts Pre-Employment Screening, Inc.
After the merger, Accufacts will become a wholly-owned subsidiary of First
Advantage Corporation.
Q: What will I receive in the merger?
A: If the merger is completed and you have not properly asserted statutory
dissenters' rights under Delaware law, you will receive $0.75 in cash for each
share of Accufacts common stock that you own.
Q: What are the federal income tax consequences of the merger to
Accufacts' stockholders?
A: Generally, you will recognize a gain or a loss with respect to the
receipt of cash in exchange for your shares of Accufacts common stock. Tax
matters can be complicated and the tax consequences of the merger to you will
depend on the facts of your own situation. You should consult your own tax
advisors to understand fully the tax consequences of the merger to you.
Q: Will any be voted on at the special meeting?
A: Any other business that properly comes before the special meeting or
any adjournment or postponement of the special meeting may also be voted on.
However, we are currently not aware of any other business.
Q: Who can vote?
A: All stockholders of record as of the close of business on April 21,
2006.
Q: What should I do now?
A: After carefully reading and considering the information contained in
this document, please vote. You are invited to attend the special meeting.
However, you should fill out and mail your signed and dated proxy card in the
enclosed envelope as soon as possible, so that your shares will be represented
at the special meeting in case you are unable to attend. No postage is required
if the proxy card is returned in the enclosed postage prepaid envelope and
mailed in the United States.
Q: Why did the Accufacts board of directors form a special committee to
review the transactions contemplated by the merger agreement?
A: The special committee was formed to provide an independent evaluation
of the proposed transactions.
Q: What does the special committee recommend?
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A: The special committee has determined that the merger is fair to and in
the best interest of the stockholders and adopted the merger and other
transactions contemplated by the merger agreement. The special committee
unanimously recommended to the full Accufacts board of directors that it
recommend the merger to the stockholders. In addition, the special committee
unanimously recommends that you vote for the proposal.
Q: What did the special committee rely upon in making its recommendation?
A: The special committee reviewed the business consideration associated
with the proposed transaction as well as an independent valuation of the
proposed transaction from a financial view point.
Q: What does the Accufacts board of directors recommend?
A: The Accufacts board of directors has determined that the merger is fair
to and in the best interest of stockholders and adopted the merger agreement and
approved the merger and other transactions contemplated by the merger agreement.
The Board has recommended that you vote FOR the proposal to adopt the merger
agreement and approve the merger and other transactions contemplated by the
merger agreement.
Q: Did Accufacts take any special steps in considering the merger
agreement, the merger and the other transactions contemplated in the merger
agreement?
A: Yes. Because Philip Luizzo is our controlling stockholder, our board
created a special committee to evaluate the merger agreement, the merger and the
other transactions contemplated in the merger agreement. The special committee
engaged PCE Valuations LLC as its financial advisor. The special committee
determined that the merger is fair to, and in the best interests of, Accufacts
and its stockholders (other than Mr. Luizzo) and unanimously approved the merger
agreement, the merger and the other transactions contemplated in the merger
agreement. The special committee unanimously recommended to our full board of
directors that it approve the merger agreement, the merger and the other
transactions contemplated in the merger agreement. After receiving this
recommendation, our full board approved the merger agreement, the merger and the
other transactions contemplated in the merger agreement
Q: What factors did the special committee consider in evaluating the
merger agreement, the merger and the other transactions contemplated in the
merger agreement?
A: In evaluating the proposed merger, the members of the special committee
considered a number of factors and risks relating to the transactions described
in this proxy statement (as further described in "Reasons of the Special
Committee for its Approval" beginning on page 12) including:
o Accufacts' current financial condition, its business as well as its
short and long term prospects in the marketplace.
o Continuing Accufacts as a publicly-owned entity.
o First Advantage's business, financial condition and results of
operation.
o The 53% premium represented by the merger consideration of $0.75 per
share.
o The written opinion of PCE Valuations LLC that the cash merger
consideration to be received by shareholders is fair from a
financial point of view.
Q: What does it mean if I receive more than one proxy or voting
instruction card?
A: It means your shares are registered differently or are held in more
than one account. Please provide voting instructions for each proxy card that
you receive in the space provided for that on each proxy card.
Q: How can I vote shares held in my broker's name?
A: If your broker holds your shares in its name (or in what is commonly
called "street name"), then you should give your broker instructions on how to
vote. You should follow the directions provided by your broker regarding how to
instruct your broker to vote your shares. Without instructions, your broker is
not entitled to vote your shares and your shares will not be voted.
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Q: Can I change my vote?
A: You may change your proxy instructions at any time prior to the vote at
the special meeting. For shares held directly in your name, you may accomplish
this by completing a new proxy or by attending the special meeting and voting in
person. Attendance at the special meeting alone will not cause your previously
granted proxy to be revoked unless you vote in person. For shares held in
"street name," you may accomplish this by submitting new voting instructions to
your broker or nominee.
Q: Should I send in my stock certificates now?
A: No. Do not send in your stock certificates now. After the merger is
completed, you will receive written instructions for exchanging your Accufacts
stock certificates for cash.
Q: What vote is required to approve the merger agreement?
A: The affirmative vote of a majority of all issued and outstanding shares
of Accufacts as of the record date (April 21, 2006) is required to adopt the
merger agreement and approve the merger. On the record date, Philip Luizzo owned
and had the right to vote a total of 3,770,000 shares of Accufacts common stock,
or approximately 56.1% of the total shares outstanding. In addition, on the
record date, directors and executive officers of Accufacts and their affiliates
(inclusive of Philip Luizzo), owned or had the right to vote 3,791,508 shares of
Accufacts common stock, or approximately 56.4% of the shares of Accufacts common
stock then outstanding. We expect that they will vote all of their shares in
favor of the merger agreement and approve the merger and other transactions
contemplated by the merger agreement.
Q: When do you expect the merger to be completed?
A: We expect that the proposed merger will be completed promptly after all
conditions in the merger agreement have been satisfied or waived. Provided that
the required conditions are satisfied (including approval by shareholders), we
hope to complete the merger prior to the end of June 2006.
Q: Will I have rights of appraisal?
A: Yes. You will be entitled to appraisal rights under Delaware law as a
result of the merger.
Q: Who can help answer any questions I have?
A: If you have any questions about the merger, please contact:
Accufacts Pre-Employment Screening, Inc.
Attn: Corporate Secretary
2180 State Road 434, West - Suite 4150
Longwood, Florida 32779
(407) 682-5051
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SUMMARY TERM SHEET
This summary, together with the "Questions and Answers About the Merger"
on the preceding pages, highlights important selected information from this
proxy statement and does not contain all of the information that may be
important to you. To understand the merger agreement and the merger fully and
for a more complete description of the terms of the merger agreement and the
merger, you should read carefully this entire proxy statement, the appendices
attached to the proxy statement and the documents to which we have referred you.
THE PARTIES TO THE TRANSACTION
Accufacts Pre-Employment Screening, Inc.
2180 State Road 434, West - Suite 4150
Longwood, Florida 32779
(407) 682-5051
Accufacts Pre-Employment Screening, Inc. was incorporated in the State of New
York on October 6, 1996. On August 31, 1998, Accufacts effected a merger into
Southern Cargo Company, Inc., a public shell incorporated in the State of
Florida in 1993. Simultaneously with the merger, Southern Cargo changed the name
of the company to Accufacts Pre-Employment Screening, Inc., and shortly
thereafter reincorporated under the same name in the State of Delaware.
Accufacts provides pre-employment screenings and background checks.
First Advantage Corporation
100 Carillon Parkway
St. Petersburg, FL 33716
(727) 214-3411
First Advantage Corporation, a Delaware corporation (NASDAQ: FADV), is a global
risk mitigation and business solutions provider. First Advantage's operations
are divided into six business segments:
o LENDER SERVICES -- First Advantage's Lender Services segment
provides specialized credit reports for mortgage lenders throughout
the United States. First Advantage believes that it is the largest
provider of credit reports to the United States mortgage lending
industry, based on the number of credit reports issued. In preparing
its merged credit reports for mortgage lenders, First Advantage
obtains credit reports from at least two of the three United States
primary credit bureaus, merges and summarizes the credit reports and
delivers its report in a standard format acceptable to mortgage loan
originators and secondary mortgage purchasers.
o DATA SERVICES -- First Advantage's Data Services segment offers
motor vehicle records, transportation industry credit reporting,
fleet management, supply chain theft and damage mitigation
consulting, consumer location, criminal records reselling, subprime
credit reporting, consumer credit reporting services and lead
generation.
o DEALER SERVICES -- The Dealer Services segment provides specialized
credit reports, credit automation software, and lead generation
services to auto dealers and lenders. These reports may be derived
from credit reports obtained from one or more of the three United
States credit bureaus and may be specially formatted for ease of use
by the creditor or to facilitate interpretation by a consumer. The
segment provides comprehensive solutions that help organizations
meet their lending, leasing and other consumer credit automation
needs. By delivering innovative systems, services and data
solutions, First Advantage helps companies reduce risk, decrease
costs and improve service.
o EMPLOYER SERVICES -- First Advantage's Employer Services segment
helps thousands of companies in the United States and abroad manage
risk with our employment screening, occupational health, tax
incentive and services hiring solutions.
o MULTIFAMILY SERVICES -- First Advantage's Multifamily Services
segment helps thousands of companies in the United States manage
risk with resident screening services.
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o INVESTIGATIVE AND LITIGATION SUPPORT SERVICES -- The Investigative
and Litigation Support Services segment provides corporate
litigation and investigative services. Products and services
provided by the segment include: surveillance services, field
interviews, computer forensics, electronic discovery, due diligence
reports and other high level investigations.
First Advantage's principal executive office is located at One Progress Plaza,
Suite 2400, St. Petersburg, Florida 33701. Its telephone number is (727)
214-3411. You may obtain additional information about First Advantage on its
website at www.fadv.com or in its various filings with the Securities and
Exchange Commission.
Accufacts Acquisition, LLC
100 Carillon Parkway
St. Petersburg, FL 33716
(727) 214-3411
Accufacts Acquisition, LLC was formed in the State of Delaware on February 16,
2006 as a limited liability company for the sole purpose of effecting the
merger. Accufacts Acquisition LLC is a wholly-owned subsidiary of First
Advantage Corporation and has not conducted any business since its formation,
and at the effective time of the merger, will merge with and into Accufacts and
cease to exist.
FIRST ADVANTAGE CORPORATION'S REASONS FOR THE MERGER
First Advantage Corporation believes it will derive a number of potential
benefits from the merger, including the following:
o Increase revenues in First Advantage Corporation's employee and
vendor background investigation business through the acquisition of
Accufacts' customer base;
o Reduce First Advantage Corporation's unit cost of purchasing
information due to greater volumes of customer orders in certain
markets;
o Grow First Advantage's overall revenue through cross-selling other
First Advantage services into the Accufacts client base;
o Strengthen First Advantage Corporation's business development team
by adding proven talent in key markets;
o Diversify First Advantage Corporation's customer base across a wider
base of industries after adding the Accufacts customer base; and
o Increase First Advantage's shareholder value by adding accretive
earnings at a reasonable price.
ACTIONS OF SPECIAL COMMITTEE WITH RESPECT TO THE PROPOSAL
The special committee has determined that the merger is fair to, and in the best
interests of, Accufacts and its stockholders and has unanimously adopted the
merger agreement and approved the merger and other transactions contemplated
under the merger agreement. The special committee unanimously recommended to the
full Accufacts board of directors that it recommend the merger to our
stockholders. In addition, the special committee unanimously recommends that you
vote FOR the adoption of the merger agreement and approval of the merger and
other transactions contemplated by the merger agreement.
REASONS OF THE SPECIAL COMMITTEE FOR THE MERGER
In evaluating and adopting the merger agreement and approving the merger and
other transactions contemplated by the merger agreement, the members of the
special committee relied upon Accufacts' current financial condition, its
business as well as its short and long term prospects in the marketplace. The
cost and potential disadvantage of associated with continuing Accufacts as a
publicly-owned entity, First Advantage's business, financial condition and
results of operation, the 53% premium represented by the merger consideration of
$0.75 per share and the written opinion of PCE Valuations LLC that the cash
merger consideration to be received by shareholders is fair from a financial
point of view.
5
ACCUFACTS' REASONS FOR THE MERGER
Our board of directors believes, as a result of various factors relating to,
among other things, Accufacts and the background screening industry generally,
the value of Accufacts' common stock will be maximized by converting shares of
Accufacts common stock into the right to receive the cash merger consideration.
THE SPECIAL MEETING (Page 10)
The special meeting of Accufacts stockholders will be held on Wednesday, May 31,
2006 at 11:00 a.m. Eastern Daylight Time at the offices of the Company.
At the special meeting, Accufacts stockholders will be asked to adopt the merger
agreement and approve the merger and the other transactions contemplated by the
merger agreement.
The record date for Accufacts stockholders entitled to receive notice of and to
vote at the special meeting is April 21, 2006. At the close of business on that
date, there were 6,721,913 shares of Accufacts common stock outstanding.
STOCKHOLDER VOTE REQUIRED (Page 10)
A quorum, which is more than 50% of the outstanding shares of Accufacts common
stock, must be present in person or represented by proxy at the special meeting
before the proposal may be considered. Assuming a quorum is present (which will
be met if Mr. Luizzo is present), the affirmative vote of stockholders entitled
to exercise a majority of the voting power of Accufacts is required to adopt the
merger agreement and approve the merger and the other transactions contemplated
by the merger agreement. Because the adoption of the merger agreement and
approval of the merger and the other transactions contemplated by the merger
agreement requires the affirmative vote of a majority of the outstanding shares
of common stock of Accufacts, abstentions and broker "non-votes" will have the
same effect as a vote against adoption of the merger agreement and against
approval of the merger and the transactions contemplated by the merger
agreement.
RECOMMENDATIONS TO STOCKHOLDERS (Page 14)
Our special committee and our board of directors believe the proposed merger is
fair to and in the best interest of Accufacts and its stockholders in light of
the cash consideration to be paid to Accufacts stockholders in the merger. The
special committee and the board of directors recommend that you vote FOR
adoption of the merger agreement and approval of the merger and the other
transactions contemplated by the merger agreement. Philip Luizzo, Chairman of
the Board abstained from the board consideration of the proposed merger
agreement due to his ownership interest as a stockholder. "See Security
Ownership of Certain Beneficial Owners"
THE MERGER (Page 11)
The legal document that governs the proposed merger is the Agreement and Plan of
Merger dated as of February 16, 2006 among Accufacts Pre-Employment Screening,
Inc., First Advantage Corporation and Accufacts Acquisition LLC. The merger
agreement is attached to this proxy statement as Appendix A. We encourage you to
read the merger agreement carefully.
If the merger agreement is adopted and the merger and the transactions
contemplated by the merger agreement are approved by Accufacts stockholders, and
the other conditions to the merger are satisfied or, where possible, waived,
Accufacts will merge into Accufacts Acquisition LLC whereby Accufacts will be
the surviving entity and will become a wholly owned subsidiary of First
Advantage Corporation.
WHAT ACCUFACTS' STOCKHOLDERS WILL RECEIVE IN THE MERGER (Page 18)
At the completion of the merger, each holder of outstanding shares of Accufacts
common stock, other than shares held by persons who have properly asserted
statutory appraisal rights under Delaware law will receive $0.75 in cash for
each share of Accufacts held by him, her or it as of immediately prior to the
effective time of the merger.
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FOLLOWING THE MERGER (Page 17)
Upon the completion of the merger, the surviving entity will be Accufacts
Pre-Employment Screening, Inc. which will become a wholly owned subsidiary of
First Advantage Corporation. At the effective time of the merger, the current
executive officers and board members of Accufacts will resign and the officers
and directors of Accufacts Acquisition LLC will become the officers and
directors of the surviving entity. In addition, upon completion of the merger,
Accufacts will file a certification under section 12(g)(4) of the Securities and
Exchange Act of 1934, as amended, with the Securities and Exchange Commission to
discontinue its periodic reporting obligations under the Exchange Act. It is
also anticipated that there will cease to be a trading market for the common
stock of Accufacts following the merger transaction.
IMPORTANT FEDERAL INCOME TAX CONSEQUENCES (Page 16)
The merger will be taxable to you. No opinions are being issued and no rulings
from the Internal Revenue Service are being sought concerning the tax treatment
of the merger.
Tax matters can be complicated and the tax consequences of the merger to you
will depend on the facts of your own situation. You should consult you own tax
advisors to understand fully the tax consequences of the merger to you.
CONDITIONS TO COMPLETION OF THE MERGER (Page 22)
Consummation of the merger depends upon satisfaction of a number of conditions,
including:
1. Accufacts stockholders holding a majority of the outstanding shares of
Accufacts entitled to vote must adopt the merger agreement and approve the
merger and the other transactions contemplated by the merger agreement;
2. Holders of not more than 10% of the issued and outstanding shares of
common stock of Accufacts will have exercised appraisal rights with respect to
the merger;
3. There must be no governmental order or other legal restraint or
prohibition preventing the merger; and
4. Other customary contractual conditions specified in the merger
agreement.
Unless prohibited by law, the party entitled to assert a condition could elect
to waive a condition that has not been satisfied and complete the merger. We
cannot be certain whether or when any of these conditions will be satisfied, or,
where permissible, waived, or that we will complete the merger. For further
details, see "Description and Purpose of Merger and Merger Agreement."
NO SOLICITATION BY ACCUFACTS (Page 21)
Accufacts has agreed that it will not solicit, encourage, initiate or
participate in any discussion regarding a business combination of Accufacts with
any party other than First Advantage Corporation.
TERMINATION OF THE MERGER AGREEMENT (Page 23)
Any of Accufacts, First Advantage Corporation or Accufacts Acquisition, LLC may
terminate the merger agreement if the merger has not occurred on or before June
30, 2006.
Either Accufacts or First Advantage Corporation may terminate the merger
agreement under the following conditions at any time prior to the merger:
1. Accufacts stockholders do not adopt the merger agreement or approve the
merger and the transactions contemplated by the merger agreement, except that
Accufacts may not terminate the merger agreement if the failure to obtain
stockholder approval was caused by Accufacts' action or failure to act;
2. A governmental authority shall have issued a nonappealable final order,
decree or ruling, or taken any other nonappealable action, permanently
restraining or prohibiting the merger; or
7
3. By the mutual consent of Accufacts and First Advantage Corporation.
First Advantage Corporation alone may terminate the merger agreement under the
following conditions at any time prior to the merger:
1. Accufacts' board of directors or its special committee has withdrawn or
modified its approval or recommendation of the merger or the adoption of the
merger agreement;
2. Accufacts has made a material misrepresentation or is in material
breach of any of its warranties, covenants or agreements under the merger
agreement or there is a material failure by Accufacts to comply with any of its
obligations under the merger agreement; or
3. If it elects in its sole discretion to terminate the merger agreement.
Accufacts alone may terminate the merger agreement under the following
conditions at any time prior to the merger:
1. Accufacts' board of directors decides to accept a proposal or offer for
a merger or sale of Accufacts from a third-party because the third-party's
proposal is more favorable to Accufacts' stockholders from a financial point of
view than the merger contemplated in the merger agreement; or
2. Either First Advantage or Accufacts Acquisition, LLC has made a
material misrepresentation or is in material breach of any of its warranties,
covenants or agreements under the merger agreement or there is a material
failure by either First Advantage Corporation or Accufacts Acquisition, LLC to
comply with any of its obligations under the merger agreement.
TERMINATION FEES AND EXPENSES (Page 24)
Accufacts has agreed to pay First Advantage:
1. A termination fee of $900,000 in immediately available funds, in the
event the merger agreement is terminated because Accufacts' board of directors
decides to accept a proposal or offer for a merger or sale of Accufacts from a
third-party because the third-party's proposal is more favorable to Accufacts'
stockholders from a financial point of view than the merger contemplated in the
merger agreement;
2. Up to $100,000 of the expenses incurred by First Advantage and
Accufacts Acquisition, LLC in connection with the merger within five (5)
business days following termination of the merger agreement by First Advantage
for any of the following reasons:
a. Accufacts' board of directors or special committee has withdrawn
or modified its approval or recommendation of the merger or the adoption of the
merger agreement; or
b. Accufacts' board of directors has decided to accept a proposal or
offer for a merger of sale of Accufacts from a third party because the third
party's proposal is more favorable to Accufacts' stockholders from a financial
point of view than the merger contemplated in the merger agreement.
In addition, First Advantage has agreed to pay Accufacts up to $100,000 of the
expenses incurred by Accufacts in connection with the merger within five (5)
business days following termination of the merger agreement by Accufacts because
First Advantage has unilaterally elected to terminate the merger agreement.
OPINION AND EVALUATION OF FINANCIAL ADVISOR (Page 14)
In deciding to approve and recommend the merger and the transactions
contemplated by the merger agreement, the special committee and the board of
directors of Accufacts reviewed and considered a written evaluation and opinion
of PCE Valuations, LLC delivered on February 14, 2006, which stated that as of
that date and based on and subject to the matters described in the written
opinion, the cash merger consideration of $0.75 per share to be received in the
merger by the holders of Accufacts common stock, was fair, from a financial
point of view, to those holders. We have included this opinion as Appendix B to
this proxy statement. We urge you to read the opinion of PCE Valuations, LLC
carefully in its entirety. This evaluation and opinion was based upon and
limited by the important factors and assumptions that are described in the
written opinion. This opinion is directed to the board of directors of Accufacts
and is not a recommendation to any Accufacts stockholder regarding any matter
relating to the merger.
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PERCENTAGE OF SHARES HELD BY DIRECTORS AND EXECUTIVE OFFICERS (Page 28)
As of the record date, directors and executive officers of Accufacts and their
affiliates owned or had the right to vote 3,791,508 shares of Accufacts common
stock, or approximately 56.19% of the shares of Accufacts common stock then
outstanding. As of the record date, Mr. Philip Luizzo owned and had the right to
vote a total of 3,770,000 shares of Accufacts common stock, or approximately
56.4% of the total shares outstanding on the record date. Mr. Luizzo and the
directors and officers of Accufacts have indicated that they intend to vote
their shares in favor of adopting the merger agreement and approving the merger
and other transactions contemplated in the merger agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (Page 17)
In considering the recommendation of the Accufacts board of directors to adopt
the merger agreement and to approve the merger and the other transactions
contemplated by the merger agreement, you should be aware that certain executive
officers, directors and stockholders of Accufacts have interests in the merger
that are different from your interests as stockholders. Some of these interests
are listed below.
1. Philip Luizzo, the Chairman, President and Chief Executive Officer of
Accufacts, will receive a change of control payment from Accufacts following
closing of the merger under his current employment agreement of $1.1 million due
to a change in ownership of Accufacts.
2. In connection with the merger, Mr. Philip Luizzo will be entering into
a non-compete agreement and an employment agreement with First Advantage, which
will be effective upon closing of the merger.
For more information about these and other interests, see "Special
Factors--Interests of Certain Persons."
GOVERNMENTAL AND REGULATORY APPROVALS (Page 31)
Accufacts does not believe that any federal or state regulatory requirements or
approvals must be complied with or obtained for completion of the merger, other
than compliance with the Delaware General Corporation Law.
DISSENTING STOCKHOLDER"S RIGHTS OF APPRAISAL (Page 28)
Under the Delaware General Corporation Law you will have certain appraisal
rights as a result of the merger. You are entitled to evaluate the rights
provided by law and if you wish, elect to exercise appraisal rights. To do this,
you must follow required procedures set forth in Section 262 of the Delaware
General Corporations Law, a copy of which is attached as Appendix C. These
procedures include filing a notice with Accufacts and either abstaining from or
voting against adoption of the merger agreement and against approval of the
merger and the transactions contemplated by the merger agreement. If you dissent
from the merger and follow the required procedures, you will not receive the
$0.75 per share cash price as the cash merger consideration. Instead, your only
right will be to receive the appraised value of your Accufacts shares in cash
under the laws of Delaware.
9
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
THE SPECIAL MEETING
This proxy statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the board of directors of
Accufacts Pre-Employment Screening, Inc. for use at the special meeting of
stockholders of Accufacts to be held at the offices of the Company located at
2180 State Road 434, Longwood, Florida, on May 31, 2006, at 11:00 a.m., Eastern
Daylight Time, and any adjournment or adjournments thereof, for the purposes set
forth in the accompanying notice of special meeting of stockholders. All
stockholders are encouraged to attend the special meeting. Your proxy is
requested, whether or not you attend in order to assure maximum participation
and to expedite the proceedings.
At the special meeting, stockholders will be requested to act upon the
matters set forth in this proxy statement. If you are not present at the
meeting, your shares can be voted only when represented by proxy. The shares
represented by your proxy will be voted in accordance with your instructions if
the proxy is properly signed and returned to Accufacts before the special
meeting. If you are the record holder of your shares, you may revoke your proxy
at any time prior to its being voted at the special meeting by delivering a new
duly executed proxy with a later date or by delivering written notice of
revocation to the Secretary of Accufacts prior to the day of the special
meeting, or by appearing and voting in person at the special meeting. If you
hold your shares through a broker or nominee, you must contact that broker or
nominee to change your vote. It is anticipated that this proxy statement and
accompanying proxy will first be mailed to Accufacts' stockholders on or about
April 26, 2006. The expenses incidental to this special meeting and the
preparation and mailing of this proxy material are being paid by Accufacts.
Accufacts at its sole expense may elect to retain a proxy solicitation service
as prescribed rates. Additionally, some of our officers, directors and regular
employees, without additional compensation may solicit proxies personally or by
telephone, if necessary or desirable.
Abstentions and broker non-votes will be counted toward determining
whether a quorum is present.
The principal executive offices of the Company are located at 2180 State
Road 434, West, Suite 4150, Longwood, Florida 32779. The telephone number is
(407)682-5031.
OUTSTANDING SHARES AND VOTING RIGHTS
Votes Required; Quorum
The only security entitled to vote at the special meeting is Accufacts'
common stock. The board of directors, pursuant to the bylaws of Accufacts, has
fixed the close of business April 21, 2006 as the record date for determining
stockholders entitled to notice of and to vote at the special meeting or any
adjournment or adjournments thereof. At April 21, 2006, there were 6,721,913
shares of common stock outstanding and entitled to be voted at the special
meeting. Each share of common stock is entitled to one vote at the special
meeting. A majority of the shares of common stock outstanding and entitled to
vote which are represented at the special meeting, in person or by proxy, will
constitute a quorum. Mr. Philip Luizzo, our majority shareholder, has indicted
that he intends to attend the meeting so that a quorum is assured. In accordance
with the bylaws of Accufacts, provided a quorum (majority) of issued and
outstanding shares entitled to vote are present in person or by proxy, a
majority vote of all shares issued and outstanding must be voted in favor of
adoption of the merger agreement and approval of the merger and the other
transactions contemplated by the merger agreement.
All shares of Accufacts common stock which are entitled to vote and are
represented at the Accufacts special meeting by properly executed proxies
received prior to or at such meeting, and not revoked, will be voted at such
meeting in accordance with the instructions indicated on such proxies. If no
such instruction is indicated (other than broker non-votes), such proxies will
be voted FOR adoption of the merger agreement and approval of the merger and the
other transactions contemplated by the merger agreement.
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The Accufacts board of directors does not know of any matters other than
those described in the notice of the Accufacts special meeting that are to come
before such meeting. If any other matters are properly presented at the
Accufacts special meeting for consideration, including, among other things,
consideration of a motion to adjourn or postpone such meeting to another time
and/or place (including, without limitation, for the purposes of soliciting
additional proxies or allowing additional time for the satisfaction of
conditions to the merger), the persons named in the enclosed proxy card and
acting thereunder generally will have discretion to vote on such matters in
accordance with their best judgment.
Revocability of Proxies
Any proxy given pursuant to the solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Accufacts, at or before the taking of a vote at the
Accufacts special meeting, a written notice of revocation bearing a later date
than the proxy, (ii) duly executing a later dated proxy relating to the same
shares and delivering it to the Secretary of Accufacts before the taking of the
vote at the Accufacts special meeting, or (iii) attending the Accufacts special
meeting and voting in person (although attendance at the Accufacts special
meeting will not in and of itself constitute a revocation of a proxy). Any
written notice of revocation or subsequent proxy should be sent to Accufacts
Pre-Employment Screening, Inc., 2180 State Road 434, West, Suite 4150, Longwood,
Florida 32779, Attn: Secretary, or hand-delivered to the Secretary of Accufacts
at or before the taking of the vote at the Accufacts special meeting.
Stockholders that have instructed a broker to vote their shares must follow
directions received from such broker in order to change their vote or to vote at
the Accufacts special meeting.
Expenses of Solicitation
All expenses of Accufacts' solicitation of proxies for the Accufacts
special meeting will be borne by Accufacts. In addition to solicitation by use
of the mails, proxies may be solicited from Accufacts stockholders by directors,
officers and employees of Accufacts in person or by telephone, facsimile or
other means of communication. Such directors, officers and employees will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation.
THE MERGER
Background of the Merger
On June 30, 2005, John Long, John Lawson and Ezra Schneier of First Advantage
spoke with Philip Luizzo, President of Accufacts, to introduce themselves and
the First Advantage organization and to discuss consolidation within the
industry. After some discussion, Mr. Luizzo and Mr. Schneier found a mutual
interest in continuing these discussions and exploring a possible strategic
acquisition by First Advantage. Mr. Luizzo felt that First Advantage would be an
appropriate candidate to consider for such an arrangement.
On July 5, 2005, First Advantage and Accufacts entered into a mutual
nondisclosure agreement to openly discuss the respective businesses of each
company. First Advantage's strategic development team examined preliminary due
diligence materials.
On July 7, 2005, First Advantage provided Accufacts a non-binding letter setting
forth proposed economic terms of an agreement and plan of merger which was
subject to satisfactory due diligence and the negotiation and execution of a
definitive agreement.
During July and August 2005, Mr. Schneier and Mr. Long of First Advantage and
Mr. Luizzo of Accufacts held various discussions, by telephone and in person,
considering a possible acquisition of Accufacts by First Advantage. These
conversations focused on the likely benefits to the companies.
On August 3, 2005 a special committee consisting of an independent director and
a financial consultant was formed by the Accufacts board of directors to
evaluate the terms of the proposed transactions and to make a recommendation to
the full board and stockholders.
On August 10, 2005, the Accufacts special committee engaged PCE Valuations, LLC
for purposes of reviewing the current financial situation of Accufacts and to
prepare itself to evaluate economic terms of a proposed transaction with First
Advantage and to ultimately provide a fairness opinion to the board of
directors.
On August 19, 2005, Mr. Luizzo received a comprehensive due diligence request
list from Tom Edwards of First Advantage.
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On October 17, 2005, Mr. Luizzo and Mr. Schneier spoke by phone, and First
Advantage presented Accufacts with a first draft of a proposed Agreement and
Plan of Merger. From October 31, 2005 to February 14, 2006, Mr. Luizzo and First
Advantage's strategic development team and their respective legal counsel
negotiated and exchanged drafts of the merger agreement and related transaction
agreements.
On November 28, 2005, the First Advantage strategic development team met with
Mr. Luizzo and certain senior employees at Accufacts' office. This meeting
focused on the review of the due diligence materials that had been prepared and
specifically on the financial status of the Company and its customer base. The
material obtained was further reviewed over the following 5 weeks.
Between January 31 to February 14, 2006, First Advantage's strategic development
team and Mr. Luizzo and their respective legal counsels finalized the terms of
the merger and related transaction agreements.
On February 15, 2006 after the close of trading on the Nasdaq National Market
and the Over the Counter Bulletin Board, the special committee held a meeting
and unanimously determined that the merger was fair to and in the best interest
of the stockholders and unanimously adopted the merger agreement and approved
the merger and other transactions contemplated by the merger agreement. The
special committee then recommended that the full board recommend the merger to
the stockholders and that the stockholders vote in favor of adoption of the
merger agreement and approval of the merger. Immediately thereafter the full
board met at which time the Company's legal counsel reviewed the resolution of
the open negotiation points and issues. The special committee then presented
PCE's financial analysis relating to the proposed transaction and its written
opinion to the board of directors that the merger consideration in the proposed
transaction was fair to stockholders of Accufacts from a financial point of
view. Following this discussion, Accufacts' full board of directors (other than
Mr. Philip Luizzo, who abstained) approved the merger agreement, related
agreements and the transactions contemplated by those agreements, including the
merger.
On February 16, 2006, after the Accufacts board meeting, both First Advantage
and Accufacts entered into the merger agreement and other related agreements. At
4:02 pm EST on February 16, 2006 following the close of trading on the Nasdaq
National Market and Over the Counter Bulletin Board, the parties issued a joint
press release announcing the transaction.
Accufacts' Reasons for Engaging in the Merger
Accufacts' board of directors has appointed a special committee comprised
of a member of the board and an outside financial consultant to assess variables
of the proposed merger and benefits to be derived by stockholders. The terms of
the merger agreement and contemplated transactions were approved unanimously by
the special committee, and the special committee recommended that the full board
adopt the merger agreement and approve the merger.
In delivering its report to the board of directors, the special committee
looked at such factors including:
1. Accufacts' current business operations;
2. Accufacts' short and long term prospects in the marketplace. The
special committee reviewed the possibility of continuing to operate
Accufacts as a publicly-owned entity and concluded this was a less
desirable alternative in view of the prospects for Accufacts'
operating performance and its financing capacity;
3. the financial condition of Accufacts and its ability to implement
new plans and/or expand operations;
4. that the cash merger consideration of $0.75 per share represented a
53% premium over the average closing price of Accufacts common stock
over the six (6) month period immediately prior to the day the
merger agreement was signed;
5. its familiarity with First Advantage's business, financial
condition, results of operations, prospects and the nature of the
industries in which First Advantage operates;
6. the fact that the merger agreement and the transactions contemplated
by the merger agreement were the product of arm's-length
negotiations between First Advantage Corporation and Accufacts. None
of the members of the special committee was assured any position
with First Advantage Corporation following the transaction;
7. the written opinion of PCE Valuations, LLC, delivered February 14,
2006, to the effect, that, as of that date and based upon and
subject to the matters described in the written opinion, the cash
merger consideration to be received by the holders of the common
stock of Accufacts was fair, from a financial point of view, to
those holders. The full text of the PCE Valuations opinion, which
states the procedures followed, assumptions made, matters considered
and limitations on the review undertaken by PCE Valuations, is
attached as Appendix B to this proxy statement and is incorporated
in this section by reference. You are urged to, and should, read the
opinion of PCE Valuations carefully in its entirety. See "Fairness
of the Transaction";
12
8. the financial consideration to be received by certain affiliated
stockholders. The special committee considered the possible
conflicts of interest arising from the interests of certain
executive officers, directors and stockholders of Accufacts in the
merger. Through its deliberations the special committee concluded
that these potential conflicts did not affect its conclusions and
recommendations to the board of directors. For more information
regarding these conflicts of interest, see "Other
Information-Interests of Certain Persons; Conflicts of Interest";
9. the provisions in the merger agreement allowing Accufacts to
participate in unsolicited discussions with third parties that
indicate a willingness to make a superior acquisition proposal and
enabling the board of directors, in the exercise of its fiduciary
duties, to terminate the merger agreement subject to its terms in
order to permit Accufacts to accept a superior proposal;
10. that appraisal rights under Delaware law would be available to
Accufacts stockholders; and
11. that the merger agreement contemplates the payment of a termination
fee and expenses of up to $1 million in the aggregate, by Accufacts
to First Advantage and Accufacts Acquisition LLC if the merger is
not completed under certain circumstances. In analyzing the
termination fee provision, the special committee considered that its
effect could be to increase the costs to a third party, other than
First Advantage, of acquiring Accufacts.
Although the special committee did not find it practicable to quantify or
otherwise attach relative weight to the above factors, they considered it
important to their analysis the fact that on February 14, 2006, PCE Valuations,
LLC delivered to the board of directors its opinion that, as of that date and
based on and subject to the matters described in the written opinion, the cash
merger consideration to be received in the merger by holders of Accufacts common
stock, was fair from a financial point of view to those holders. They also
considered that the cash merger consideration of $0.75 per share represented a
premium over the closing price per share of Accufacts common stock on February
15, 2006, the last trading day prior to the day the merger agreement was signed.
The Accufacts special committee and the board of directors also considered the
recent and historical prices of Accufacts common stock.
After receiving the special committee's report and recommendation, the full
board (other than Mr. Philip Luizzo who abstained) unanimously determined that
the merger is fair and is the best interests of the stockholders and unanimously
adopted the merger agreement and approved the merger.
First Advantage's Reasons for Engaging in the Merger
The board of directors of First Advantage believes that the merger with
Accufacts will allow First Advantage to achieve greater growth in its background
screening business than First Advantage would have been able to achieve without
acquiring Accufacts' business and customers. The First Advantage board of
directors identified a number of potential benefits to the merger, including the
following:
o Grow revenues in First Advantage's employee and vendor background
investigation business through the acquisition of Accufacts'
customer base;
o Reduce First Advantage Corporation's unit cost of purchasing
information due to greater volumes of customer orders in certain
markets;
o Grow First Advantage's overall revenue through cross-selling other
First Advantage services into the Accufacts client base;
o Strengthen First Advantage's business development team by adding
proven talent in key smaller markets;
o Diversify First Advantage's customer base across a wider base of
industries after adding the Accufacts customer base; and
o Increase shareholder value by adding accretive earnings at a
reasonable price.
13
Except as outlined above, First Advantage's board of directors did not find it
practicable to quantify, analyze or assign relative weights to each individual
factor to reach its determination. Individual members of First Advantage's board
of directors may have assigned different relative weights or conclusions to each
factor affecting the board's determination.
Recommendation of the Special Committee and Board of Directors of Accufacts
The special committee unanimously determined that the merger is fair to
and in the best interests of the stockholder. In addition, the special committee
unanimously adopted the merger agreement and approved the merger and other
transactions contemplated by the merger agreement. The special committee then
recommended that the full board adopt the merger agreement and approve the
merger. The special committee recommends that you vote FOR the proposal. The
full Accufacts' board of directors (other than Mr. Philip Luizzo who abstained),
has adopted the merger agreement and approved the merger and the transactions
contemplated by the merger agreement. The full Accufacts board of directors
(other than Mr. Philip Luizzo who abstained) and the special committee believe
that the merger and the related transactions are fair to and in the best
interests of Accufacts and its stockholders, and recommend that Accufacts'
stockholders vote "FOR" adoption of the merger agreement and approval of the
merger and the transactions contemplated by the merger agreement.
Fairness of the Transaction - Opinion and Evaluation of Financial Advisor
In addition to the business considerations outlined above (Reasons for
Engaging in the Transaction), the special committee and the board of directors
has obtained at Accufacts' cost an independent valuation of the merger from PCE
Valuations, LLC, an affiliate of PCE Holdings, Inc. and PCE Investment Bankers,
Inc. a member NASD and SIPC. PCE Valuations provides valuation opinions and
consulting services for both closely-held and public companies. PCE Valuations
issues opinions in connection with merger, acquisitions and other forms of
corporate reorganization, business planning, accounting compliance and
litigation support among other areas. Accufacts retained PCE Valuations based on
its qualifications, expertise and reputation in providing advice to companies
regarding transactions similar to the merger.
As part of PCE Valuations engagement as financial advisor, the special
committee and the board of directors of Accufacts requested that it evaluate the
fairness, from a financial point of view, to the holders of the common stock of
Accufacts of the cash merger consideration to be received by those holders in
the merger. On February 14, 2006, PCE Valuations delivered a written opinion
that, as of that date and based on and subject to the matters described in the
written opinion, the cash merger consideration to be received in the merger by
the holders of the common stock of Accufacts, was fair, from a financial point
of view, to those holders.
The full text of PCE Valuations' opinion, which states the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken, is attached as Appendix B in this proxy statement and is
incorporated by reference into this proxy statement. The summary of the opinion
below is qualified by reference to its text. Accufacts stockholders are urged to
read the opinion carefully in its entirety. The opinion was directed to the
board of directors of Accufacts for their information regarding their
consideration of the merger and relates only to the fairness, from a financial
point of view, of the cash merger consideration to be received by the holders of
the common stock of Accufacts, does not address any other aspect of the merger
or any related transaction other than the change of control payment to be
received by Mr. Philip Luizzo (see Other Information - Interest of Certain
Persons, Conflicts of Interest), does not address Accufacts' underlying business
decision to effect the merger, does not constitute a recommendation to the
special committee or the board of directors of Accufacts, and does not
constitute a recommendation to any stockholder as to any matter relating to the
merger.
Although PCE Valuations evaluated the fairness, from a financial point of
view, of the cash merger consideration to be received by the holders of the
common stock of Accufacts, the cash merger consideration itself was determined
by Accufacts and First Advantage through arm's-length negotiations. Accufacts
did not provide specific instructions to, or place any limitations on, PCE
Valuations regarding the procedures to be followed or factors to be considered
by PCE Valuations in performing its analyses or rendering its opinion.
In arriving at its opinion, PCE Valuations, among other things:
o reviewed a final draft of the merger agreement;
o reviewed publicly available business and financial information
relating to Accufacts, including Accufacts' Annual Report on Form
10-KSB for the fiscal year ended December 31, 2004 and Accufacts'
Quarterly Reports on Form 10-QSB for the quarters ended March 31,
June 30, and September 30, 2005;
o reviewed operating and financial information, including estimates,
provided to or discussed with PCE Valuations by the management of
Accufacts relating to Accufacts' business and prospects;
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o met with some members of Accufacts' management to discuss Accufacts'
business, operations, historical and projected financial results and
future prospects;
o reviewed the historical stock prices, valuation parameters and
trading volume of Accufacts common stock;
o reviewed the terms of recent selected merger and acquisition
transactions which PCE Valuations deemed generally relevant in
evaluating the merger; and
o considered other information and conducted other studies, analyses,
inquiries and investigations as PCE Valuations deemed appropriate.
In the course of its review, PCE Valuations relied on and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including, without limitation, the estimates provided to or
discussed with PCE Valuations by Accufacts. Regarding Accufacts' estimated
financial results, PCE Valuations was advised that they were reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
management of Accufacts as to the expected future performance of Accufacts. PCE
Valuations did not assume any responsibility for the independent verification of
any of the information or of the estimates provided to or discussed with it, and
PCE Valuations relied on the assurances of management of Accufacts that they
were unaware of any facts that would make the information or estimates provided
to or discussed with PCE Valuations incomplete or misleading. PCE Valuations,
with Accufacts' consent, relied on the fact that, in all respects material to
PCE Valuations analysis, the representations and warranties contained in the
merger agreement are true and correct, the conditions to the merger will be met
and the merger will be consummated on the terms and conditions contemplated in
the merger agreement.
In preparing its opinion to the board of directors of Accufacts, PCE
Valuations performed a variety of financial and comparative analyses. The
preparation of an opinion is a complex process involving various judgments and
determinations as to the most appropriate and relevant assumptions and financial
analyses and the application of those methods to the particular circumstances
and, therefore, PCE Valuations' opinion is not necessarily susceptible to
partial analysis or summary description. In arriving at its opinion, PCE
Valuations made qualitative judgments as to the significance and relevance of
each analysis and factor considered by it and did not attribute particular
weight to any one analysis or factor. Accordingly, PCE Valuations believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and factors or of the summary described below or focusing on
information presented, without considering all analyses and factors or the
narrative description of the analyses, could create a misleading or incomplete
view of the processes underlying its analyses and opinion.
The following is a summary of the material analyses underlying PCE
Valuations' opinion delivered to the board of directors of Accufacts in
connection with the merger. The opinion took into account:
In evaluating the fairness, from a financial point of view, to the holders
of the common stock of Accufacts of the cash merger consideration to be
received, PCE Valuations considered what it deemed to be all relevant data
concerning the value of Accufacts in relation to the planned merger. Those
considerations include, but are not limited to, Accufacts' operations, including
its management, customer base, competition, the business operations and
prospects of Accufacts, and Accufacts' products and services mix. PCE Valuations
also considered the current economic climate, Accufacts' position within its
industry and its markets, and the risks associated with Accufacts' continuing
operations. In addition, PCE Valuations analyzed Accufacts' financial
characteristics, including book value, historical and projected earnings, and
other operating data and business and audited financial information contained in
Accufacts' periodic reports filed with the Securities and Exchange Commission.
PCE Valuations also analyzed, to the extent publicly available, the financial
characteristics of specific merger transactions involving other reasonably
comparable companies operating within the same industry, as well as the
operational and financial characteristics, to the extent publicly available, of
other reasonably comparable publicly traded companies operating within the same
industry. PCE Valuations analyzed the cash consideration to be received by all
stockholders for their shares of common stock ($0.75 per share), and the
financial terms of the merger in the context of the analyses described above and
in relation to the current and historical market prices and trading volumes of
Accufacts' common stock.
In its final analysis, PCE considered the fairness, from a financial point
of view, to the holders of the common stock of Accufacts of the cash merger
consideration to be received, based upon its overall analysis of the value of
Accufacts common stock, considering analyses applying market, income, and assets
approaches to valuation, as well as analyses of the trading history of the
shares of Accufacts.
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Based upon the foregoing financial factors examined by PCE Valuations and
business considerations outlined elsewhere in this proxy, the board of directors
has determined that the merger and the terms of the merger agreement are in the
best interest of all stockholders (affiliated and unaffiliated) of Accufacts.
Important Federal Income Tax Consequences
This section discusses the material United States federal income tax
consequences of the merger to Accufacts stockholders whose shares of Accufacts
common stock are surrendered in the merger in exchange for the right to receive
cash consideration of $0.75 per share. The discussion below applies only to
Accufacts stockholders that hold Accufacts common stock as capital assets at the
time of the merger, and the discussion may not apply to stockholders that are
subject to special tax rules, such as financial institutions, insurance
companies, dealers in securities, persons that mark-to-market their securities,
persons that hold common stock as part of a "straddle," "hedge" or "synthetic
security transaction" (including a "conversion" transaction), persons with a
"functional currency" other than the U.S. dollar, retirement plans and
tax-exempt organizations, stockholders who acquired Accufacts common stock
pursuant to the exercise of stock options, pursuant to participation in an
employee stock purchase plan or otherwise as compensation, or stockholders that
are nonresident alien individuals, foreign corporations, foreign partnerships,
foreign trusts or foreign estates. The discussion below is based upon federal
income tax laws as now in effect and interpreted and does not take into account
possible changes in these tax laws or interpretations, any of which may be
applied retroactively. The discussion does not include any description of the
tax laws of any state, local or foreign government that may apply to Accufacts
stockholders.
THIS SECTION DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT
MAY BE RELEVANT TO A PARTICULAR ACCUFACTS STOCKHOLDER IN LIGHT OF THE
STOCKHOLDER'S PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH
STOCKHOLDER SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND CHANGES TO THOSE LAWS.
For federal income tax purposes, an Accufacts stockholder generally will
recognize capital gain or capital loss equal to the difference between the cash
received by the stockholder pursuant to the merger and the stockholder's
adjusted tax basis in the shares of Accufacts common stock surrendered pursuant
to the merger. If at the time of the merger, a non-corporate stockholder has
held his or her shares of Accufacts common stock for more than one year, any
gain recognized generally will be subject to federal income tax at a maximum
rate of 15%. If a stockholder has held shares of common stock for one year or
less at the time of the merger, any gain will be subject to federal income tax
at the same rate as ordinary income, unless offset by other losses. Any capital
loss generally will be applied to offset the stockholder's capital gains, if
any, from other transactions. For non-corporate stockholders, any amount of
capital loss in excess of capital gain in any year generally is deductible
against ordinary income only to the extent of $3,000, but any net capital loss
in excess of $3,000 may be carried forward to subsequent taxable years.
For corporations, capital gain is taxed at the same rate as ordinary
income, and capital loss in excess of capital gain is not deductible.
Corporations, however, generally may carry back capital losses up to three
taxable years and carry forward capital losses up to five taxable years.
Cash consideration received by Accufacts stockholders in the merger may be
subject to backup withholding. Backup withholding generally will apply only if
the stockholder fails to furnish a correct social security number or other
taxpayer identification number, or otherwise fails to comply with applicable
backup withholding rules and certification requirements. Corporations generally
are exempt from backup withholding. Any amounts withheld under the backup
withholding rules will be allowed as a credit against the stockholder's federal
income tax liability and may entitle the stockholder to a refund, provided the
stockholder furnishes specified required information to the Internal Revenue
Service.
Interest of Certain Persons in the Merger
In considering the recommendations of the special committee and board of
directors to adopt the merger agreement and to approve the merger and the
transactions contemplated by the merger agreement, you should be aware that
certain executive officers and directors of Accufacts have interests in the
merger that are different from your interests as stockholders generally. Those
interests may present them with actual or potential conflicts of interest in
connection with the merger. The Accufacts special committee and board of
directors were aware of these interests and considered them along with the other
matters summarized above. These interests include:
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o Philip Luizzo, Chairman of the Board, Chief Executive Officer and
President of Accufacts, currently has an employment agreement with
Accufacts under which he is entitled to receive a payment equal to
his current base salary for the remainder of his agreement or one
year's salary, whichever is the greater of the two in the event
there is a change of control of Accufacts in which a person or
entity becomes the beneficial owner of more than fifty percent (50%)
of the voting stock of Accufacts, other through the sale of shares
held by Mr. Luizzo. In connection with the merger, First Advantage
has agreed to cause Accufacts to pay to Mr. Luizzo upon the
effective date of the merger, a change of control payment. Following
the contemplated merger, Mr. Luizzo would be entitled to a payment
of $1.3 million for a change of control under the terms of his
current agreement, however Mr. Luizzo has agreed to reduced change
of control payment of $1.1 million. Mr. Luizzo fully disclosed the
terms of his employment agreement and his proposed agreement with
First Advantage to the board of directors of Accufacts prior to the
Accufacts board's consideration of the merger. Due to the existence
of these agreements and the fact that Mr. Luizzo holds approximately
56% of the issued and outstanding stock, Mr. Luizzo abstained from
votes taken by Accufacts' board to approve the merger. The
disinterested members of Accufacts' board, which constitute a
majority of its members, acting upon a unanimous recommendation of
its special committee, unanimously approved the merger.
Deregistration of Accufacts Common Stock after the Merger
When the merger is completed such that all holders of Accufacts shares
(other than those who have exercised dissenters' rights) have exchanged their
Accufacts shares for cash, the shares of Accufacts common stock will be delisted
from the OTC Bulletin Board, and it is anticipated that there will cease to be a
trading market for the common stock of Accufacts following the merger
transaction. In addition, immediately following the effective time of the
merger, Accufacts will file a certification under section 12(g)(4) of the
Securities and Exchange Act of 1934, as amended, with the Securities and
Exchange Commission seeking to discontinue its periodic reporting requirements
under the Exchange Act.
THE AGREEMENT AND PLAN OF MERGER
The following is a summary of the material terms of the merger and the
merger agreement. Because this description of the merger agreement is a summary,
it may not contain all the information that may be important to you. You should
read carefully the entire copy of the merger agreement, which, with the
exception of schedules and exhibits, is attached as Appendix A to this proxy
statement, before you decide how to vote.
The merger agreement has been included to provide you with information
regarding its terms. It is not intended to provide any other factual information
about Accufacts. The merger agreement contains representations and warranties
the parties thereto made to and solely for the benefit of each other. The
assertions embodied in those representations and warranties are qualified by
information in confidential disclosure schedules that the parties have exchanged
in connection with signing the merger agreement. Accordingly, investors and
security holders should not rely on the representations and warranties as
characterizations of the actual state of facts, since they were only made as of
the date of the merger agreement and are modified in important part by the
underlying disclosure schedules. Moreover, information concerning the subject
matter of the representations and warranties may change after the date of the
merger agreement, which subsequent information may or may not be fully reflected
in Accufact's public disclosures. This information may be found elsewhere in
this proxy statement and in the other public filings that Accufacts makes with
the SEC.
Effective Time of the Merger
The merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware or a later date as
is specified in the certificate of merger. The filing of the certificate of
merger will occur as soon as practicable after the closing of the merger.
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Effect of the Merger
At the time of the merger, a wholly-owned subsidiary of First Advantage
Corporation, named "Accufacts Acquisition, LLC," will be merged into Accufacts.
The surviving entity will be Accufacts which will become a wholly-owned
subsidiary of First Advantage Corporation. Concurrent with the merger, the
current executive officers and directors of Accufacts will resign, and the
officers and directors of Accufacts Acquisition, LLC, as in effect immediately
prior to the effective time of the merger, will become, from and after the
effective time of the merger, the officers and directors of the surviving
entity. Immediately following the effective time of the merger, Accufacts will
file a certification under section 12(g)(4) of the Securities and Exchange Act
of 1934, as amended, with the Securities and Exchange Commission seeking to
discontinue its periodic reporting obligations under the Exchange Act. It is
also anticipated that there will cease to be a trading market for the common
stock of Accufacts following the merger transaction.
Consideration Offered to Securityholders
Immediately prior to the effective time of the merger, all issued and
outstanding shares of Accufacts common stock will be converted into the right to
receive an amount in cash equal to $0.75 per share payable to the holder without
interest upon surrender of the certificates formerly representing the shares of
Accufacts common stock. Upon consummation of the merger contemplated by the
merger agreement, all holders of issued and outstanding shares of common stock
of Accufacts who have not exercised their dissenters' rights will be entitled to
receive an amount in cash equal to $0.75 per share.
Representations and Warranties
The merger agreement contains customary representations and warranties of
Accufacts and its subsidiary regarding the following matters:
1. their organization, standing and similar corporate matters;
2. their authorization to execute, deliver and perform the merger
agreement, the enforceability of the merger agreement against them,
and the absence of conflicts, violations and defaults in connection
with their performance of the merger agreement;
3. their capitalization;
4. their financial statements;
5. the absence of any undisclosed liabilities;
6. the filing of their tax returns and the payment of taxes by them;
7. their accounts receivable and accounts payable;
8. the absence of any changes in either of their businesses since
September 30, 2005;
9. the accuracy of their minute books and records;
10. their real property;
11. condition and sufficiency of their assets; 12. their employee
benefit plans;
13. their compliance with laws and governmental authorizations;
14. the absence of any pending or threatened legal proceedings against
them;
15. the absence of certain changes and events on the part of either
Accufacts or its subsidiary;
16. their material agreements and their compliance with those material
agreements;
17. their insurance policies;
18. environmental matters pertaining to them;
19. their employees;
20. their labor relations;
21. intellectual property matters pertaining to them;
22. the absence of certain payments by them;
23. their relationships with related persons;
24. brokers' fees and expenses incurred by them in connection with the
merger agreement;
25. their deposit accounts;
26. the conduct of their business and the use of their name;
27. the absence of restrictions on their business activities;
28. their outstanding indebtedness;
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29. their material clients and contractors;
30. the receipt of a fairness opinion from Accufacts' financial advisor;
31. the required vote of its stockholders to approve and adopt the
merger and the merger agreement; and
32. the accuracy of information provided to First Advantage Corporation
and Accufacts Acquisition, LLC
The merger agreement also contains customary representations and
warranties of First Advantage Corporation and Accufacts Acquisition, LLC
regarding the following matters:
1. organization, standing and similar corporate matters;
2. authorization to execute, deliver and perform the merger agreement
and the enforceability of the merger agreement against them;
3. the absence of any pending or threatened legal proceedings against
them;
4. brokers' fees and expenses incurred by them in connection with the
merger agreement;
5. the continuing effectiveness of the confidentiality and
non-disclosure agreement;
6. the absence of dealings in the stock of Accufacts; and
7. the accuracy of information provided by First Advantage and
Accufacts Acquisition, LLC.
All representations and warranties are subject to various qualifications
and limitations, and all such representations and warranties expire upon
completion of the merger.
The representations and warranties contained in the merger agreement are
complicated and not easily summarized. You are urged to read carefully Article
III of the merger agreement entitled "Representations and Warranties of the
Company" and Article IV of the merger agreement entitled "Representations and
Warranties of Parent and Merger Sub."
Vote Required for Approval of the Transaction
The required vote necessary for the approval of the proposed transaction,
assuming a quorum of all issued and outstanding shares (50%) of the Company is
present in person or represented by proxy at the special meeting, will be the
affirmative vote of the holders of a majority of Accufacts' voting stock as of
the record date. The vote of stockholders required is a majority of all
stockholders, including affiliates, not merely a majority of unaffiliated
Accufacts' stockholders.
Closing of the Merger
Unless the parties agree otherwise, the closing of the merger will take place as
soon as practicable after the date on which all closing conditions have been
satisfied or waived. We expect that the closing of the merger will take place
shortly after the approval of Accufacts' stockholders at the special meeting.
Certain Covenants of Accufacts
Accufacts has agreed that, from the date of the merger agreement through the
date of closing of the contemplated transaction, it and its subsidiaries will:
1. maintain its corporate existence in good standing;
2. maintain the general character of its business;
3. use all reasonable best efforts to maintain in effect all of its
existing insurance coverage, preserve its business organization
substantially intact, keep the services of its principal employees
and preserve its business relationships with its material suppliers
and clients;
4. permit First Advantage and its representatives full access to its
management, books and records contracts, properties and operations;
and
5. in all respects conduct its business in the usual and ordinary
course consistent with past practices and perform in all material
respects, all contracts with banks, clients, suppliers, employees
and others.
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Accufacts has agreed that, prior to the closing of the merger, subject to
certain exceptions, including provisions which permit Accufacts or its
subsidiaries to conduct its respective businesses in accordance with prior
practices, neither it nor its subsidiaries will, without the prior written
consent of First Advantage:
1. amend or otherwise modify its certificate of incorporation or
bylaws;
2. issue or sell any shares of capital stock, options or other
convertible securities, alter any term of its outstanding securities
or make any change in its capitalization;
3. mortgage, pledge or grant a security interest in any of its assets;
4. declare or pay any dividend or other distribution with respect to
its capital stock;
5. redeem purchase or acquire directly or indirectly any capital stock;
6. increase the compensation of any of its directors, consultants or
other employees who hold management positions;
7. adopt or amend any employee benefit plan or severance plan or enter
into any collective bargaining agreement;
8. terminate or modify any contract;
9. incur or assume indebtedness for borrowed money or guarantee any
obligation or the net worth of any person in an aggregate amount in
excess of $25,000;
10. discharge or satisfy any encumbrance;
11. pay any material obligation or liability, whether due or to become
due except for previously disclosed current liabilities;
12. sell, transfer, lease or dispose of any of its properties or assets
having a fair market value in the aggregate in excess of $25,000;
13. cancel, compromise or waive any material debt or claim;
14. make any loan or advance to any person;
15. acquire any capital stock or other securities of another corporation
or ownership interest in any other business enterprise;
16. make any non-budgeted capital expenditure or capital addition or
betterment exceeding $50,000 in the aggregate;
17. change its method of accounting, accounting principles or practices;
18. settle any litigation or any action or proceeding before any
governmental authority relating to it or its property;
19. commit to provide services for an indefinite period of time or for a
period of more than 12 months;
20. make any tax election inconsistent with past practice or settle or
compromise any material tax liability;
21. enter into any arrangement with any affiliate other than a
subsidiary;
22. fail to maintain adequate insurance coverage;
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23. waive, write off or compromise any account receivable in excess of
$25,000, or $50,000 in the aggregate; or
24. take any action or omit to take any action that would result in a
breach of Accufacts' covenants or would cause any of its
representations or warranties to be inaccurate.
Accufacts has agreed to use its reasonable best efforts to satisfy the closing
conditions to the merger that are within its control.
Accufacts has also agreed to cooperate with First Advantage Corporation with
respect to filings with regulatory authorities required to be made to carry out
the contemplated transaction as well as to use its best efforts to obtain as
promptly as practicable all consents, authorizations, approvals and waivers
required to consummate the transaction.
Certain Covenants of First Advantage Corporation and Accufacts Acquisition, LLC.
First Advantage Corporation and Accufacts Acquisition, LLC have agreed to use
their reasonable best efforts to satisfy the closing conditions to the merger
that are within their control.
First Advantage Corporation and Accufacts Acquisition, LLC have agreed to
cooperate with Accufacts with respect to filings made with regulatory
authorities required to be made to carry out the contemplated transactions.
No Solicitation by Accufacts
The merger agreement provides that Accufacts and its affiliates must promptly
discontinue any negotiations with any parties other than First Advantage
Corporation concerning any acquisition offers. An acquisition offer includes any
inquiries or proposals for a merger, consolidation, sale of substantial assets,
sale of shares of capital stock or other securities (including by way of a
tender offer) or similar transaction. Until the merger is completed or the
merger agreement is terminated, neither Accufacts nor any of its subsidiaries or
affiliates may:
1. solicit, initiate, encourage or take any actions to facilitate any
acquisition offers;
2. engage in discussions or negotiations or provide any non-public
information to any person relating to any possible acquisition
offer; or
3. agree to enter into a letter of intent or similar document or
recommended acquisition offer.
The merger agreement does not prevent Accufacts or its board of directors, to
the extent its board determines in good faith and on a reasonable basis by a
majority vote, that such board of directors' fiduciary duties under applicable
law require it to do so, from:
1. furnishing non-public information to or entering into discussions or
negotiations with any person in connection with an unsolicited bona
fide written acquisition offer or recommending an unsolicited bona
fide written acquisition offer to the stockholders of Accufacts; if:
a. the board of directors determines in good faith that the
acquisition offer is reasonably capable of being completed on
the terms proposed and would result in a transaction more
favorable to Accufacts' stockholders from a financial point of
view than the merger with First Advantage Corporation and the
board of directors in good faith determines that the action is
necessary to comply with its fiduciary duties to stockholders;
and
b. prior to furnishing such non-public information or entering
into a discussion or negotiations, the board receives an
executed confidentiality agreement, any non-public information
provided under the confidentiality agreement to the third
party must have also been previously delivered to First
Advantage Corporation, and Accufacts advises First Advantage
Corporation in writing of these disclosures, discussions or
negotiations.
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2. complying with Rules 14d-9 and 14e-2 under the Securities and
Exchange Act of 1934 with regard to an acquisition offer.
In addition, Accufacts has agreed that if its board of directors receives an
acquisition offer, then Accufacts will promptly inform First Advantage
Corporation of the terms and conditions of the proposal and the identity of the
person making it. Accufacts has agreed not to accept or enter into any
agreement, letter of intent or similar document concerning any acquisition offer
for a period of at least 24 hours after First Advantage Corporation's receipt of
the notice. During this 24-hour period, Accufacts has agreed to negotiate with
First Advantage Corporation in good faith any proposal submitted to Accufacts by
First Advantage Corporation which address the third-party acquisition offer.
Conditions to Completion of the Merger
The obligations of First Advantage Corporation and Accufacts Acquisition, LLC to
effect the merger are subject to the satisfaction or waiver of each of the
following conditions:
1. each of Accufacts' and Accufacts' subsidiaries' representations and
warranties which are not qualified as to materiality will be
complete and correct as of the date of the merger agreement and will
be complete and correct in all material respects as of the closing
date of the merger, and each of Accufacts' and Accufacts'
subsidiaries' representations and warranties which are qualified as
to materiality will be complete and correct as of the date of the
merger agreement and will be complete and correct in all respects as
of the closing date of the merger;
2. Accufacts will have complied in all material respects with each
covenant, agreement and condition required by the merger agreement
to be performed or complied with prior to or on the closing date of
the merger;
3. there will have occurred no material adverse change which,
individually or in the aggregate, may result in a material adverse
effect with respect to Accufacts or its subsidiaries;
4. First Advantage Corporation and Accufacts Acquisition, LLC will have
received a certificate executed on behalf of Accufacts confirming
satisfaction of these above-listed conditions;
5. no order of any governmental authority shall be in effect that
restrains or prohibits the transaction contemplated by the merger
agreement or affect First Advantage Corporation's ownership or
operation of Accufacts' business;
6. all material consents, waivers and approvals required to be obtained
and/or made by Accufacts will have been made or obtained except
where the failure to receive such consents, waivers or approvals
authorizations or orders would not reasonably be expected to have a
material adverse effect;
7. Accufacts' stockholders will have adopted the merger agreement and
approved the merger and transactions contemplated by the merger
agreement;
8. holders of not more than 10% of the issued and outstanding common
stock of Accufacts will have exercised appraisal rights with respect
to the merger;
9. First Advantage Corporation and Accufacts Acquisition, LLC will have
received the resignations of all officers and directors of Accufacts
and its subsidiaries;
10. the non-compete agreement entered into between Philip Luizzo and
First Advantage Corporation will be in full force and effect;
11. the employment agreement entered into between Philip Luizzo and
First Advantage Corporation will be in full force and effect;
12. First Advantage Corporation will have received from Accufacts an
executed certification and notice meeting the requirements of
Section 897 and 1145 of the Internal Revenue Code of 1986, as
amended;
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13. Accufacts will have terminated all shareholder rights and
registration rights agreements and all employment agreements; and
14. Accufacts will have discharged all indebtedness.
The obligation of Accufacts to effect the merger are subject to the satisfaction
or waiver of each of the following conditions:
1. each of First Advantage Corporation's and Accufacts Acquisition,
LLC's representations and warranties which are not qualified as to
materiality will be complete and correct as of the date of the
merger agreement and will be complete and correct in all material
respects as of the closing date of the merger, and each of First
Advantage Corporation's and Accufacts Acquisition LLC's
representations and warranties which are qualified as to materiality
will be complete and correct as of the date of the merger agreement
and will be complete and correct in all respects as of the closing
date of the merger;
2. First Advantage Corporation and Accufacts Acquisition, LLC, shall
have performed and complied in all material respects with each
covenant, agreement and condition required to be performed or
complied by them prior to the closing date of the merger;
3. Accufacts will have received certificates executed on behalf of
First Advantage Corporation and Accufacts Acquisition, LLC
confirming satisfaction of these above-listed conditions;
4. no order of any governmental authority prohibiting the merger will
be in effect or written advice received by any party seeking to
invalidate or restrain the merger.
Termination
The merger agreement provides that at any time prior to the effective time of
the merger, the merger agreement may be terminated in any of the following ways:
1. by mutual consent of First Advantage Corporation and Accufacts;
2. by First Advantage Corporation, Accufacts Acquisition, LLC or
Accufacts if the effective time of the merger 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
non-fulfillment in an material respect, and failure to cure such
non-fulfillment within ten (10) business days following receipt by
such party of notice of such breach or nonfulfillment, of any
covenant or agreement contained in the merger agreement on the part
of the party or parties seeking to terminate the merger agreement;
3. by First Advantage Corporation alone if there has been a material
misrepresentation by Accufacts or a material breach on the part of
Accufacts of any of its warranties, covenants or agreement set forth
in the merger agreement or if there is a material failure on the
part of Accufacts to comply with any of its obligations under the
merger agreement;
4. by Accufacts alone if there has been a material misrepresentation by
First Advantage Corporation or Accufacts Acquisition, LLC or
material breach on the part of First Advantage Corporation or
Accufacts Acquisition, LLC of any of their warranties, covenants or
agreements set forth in the merger agreement, or if there is a
material failure on the part of First Advantage Corporation or
Accufacts Acquisition, LLC to comply with any of their obligations
under the merger agreement;
5. by either First Advantage Corporation or Accufacts if a governmental
authority shall have issued a non-appealable final order, decree or
ruling or taken any other non-appealable final action permanently
restraining, enjoining or otherwise prohibiting the merger;
6. by either First Advantage Corporation or Accufacts if the requisite
vote of stockholders of Accufacts approving the merger shall have
not been obtained, however, the right to terminate the merger
agreement by Accufacts under these circumstances shall not be
available to Accufacts when the failure to obtain stockholder
approval shall have been caused by the action or failure to act by
Accufacts and such action or failure to act constitutes a material
breach by Accufacts of the merger agreement;
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7. by Accufacts if it proposes to accept an acquisition offer from a
third party in accordance with the terms of the merger agreement;
8. by First Advantage Corporation if the board of Accufacts or special
committee of Accufacts shall have withdrawn or modified its approval
or recommendation of the merger or the adoption of the merger
agreement; or
9. by First Advantage, should in its sole discretion elect to terminate
in accordance with the terms of the merger agreement.
If the merger agreement is terminated, the merger will be abandoned and all
obligations of all parties under the merger agreement will terminate and there
will be no liability, except for the payment of a termination fee and
termination expenses, any liability of a party for breaches of representations,
warranties, covenants or agreements under the merger agreement, and except as
otherwise provided in the merger agreement.
Termination Fees and Expenses
The merger agreement provides that Accufacts shall pay First Advantage
Corporation a termination fee of $900,000 in the event the merger agreement is
terminated by Accufacts if it proposes to accept an acquisition offer from a
third party in accordance with the terms of the merger agreement.
In addition, Accufacts shall pay up to $100,000 of First Advantage Corporation's
and Accufacts Acquisition LLC's out-of-pocket expenses incurred in connection
with the merger agreement, within five business days following the termination
of the merger agreement by First Advantage Corporation for any of the following
reasons:
1. if Accufacts accepts an acquisition offer from a third party in
accordance with the terms of the merger agreement; or
2. if the board of directors or the special committee of Accufacts
withdraws or modifies its approval or recommendation of the merger
or the adoption of the merger agreement.
First Advantage Corporation shall pay up to $100,000 of Accufacts' out-of-pocket
expenses incurred in connection with the merger agreement within five business
days following its unilateral election to terminate the merger agreement.
Indemnification
The merger agreement provides that the present and former directors, officers
and employees of Accufacts will be entitled, for a period of three years
following the effective time of the merger, to the same provisions with respect
to indemnification in the certificate of incorporation and by-laws of the
surviving corporation as those set forth in the certificate of incorporation and
by-laws of Accufacts in effect on the effective date of the merger agreement.
The merger agreement also provides that, for a period of three years after the
effective time of the merger agreement, First Advantage Corporation and
Accufacts will maintain directors and officers liability insurance covering
those persons who on the effective date of the merger agreement are covered by
directors and officers liability insurance policies maintained by Accufacts on
terms substantially similar to those terms under the current policies. The
amounts to be expended by First Advantage Corporation or Accufacts for the
directors and officers liability insurance shall not exceed 100% of the annual
premiums currently paid by the Company and its subsidiaries for such insurance.
Amendment and Modification
Generally, the merger agreement may be amended, and any provision or default
under the merger agreement, may be waived at any time by a written agreement
executed by the party to be charged with the amendment or the waiver. After the
merger agreement has been approved by the stockholders of Accufacts, however, it
may be amended only as permitted by Delaware law.
24
DESCRIPTION OF FIRST ADVANTAGE CORPORATION
First Advantage Corporation, a Delaware corporation (NASDAQ: FADV), is a
global risk mitigation and business solutions provider. First Advantage's
operations are divided into six business segments:
o LENDER SERVICES -- First Advantage's Lender Services segment
provides specialized credit reports for mortgage lenders throughout
the United States. First Advantage believes that it is the largest
provider of credit reports to the United States mortgage lending
industry, based on the number of credit reports issued. In preparing
its merged credit reports for mortgage lenders, First Advantage
obtains credit reports from at least two of the three United States
primary credit bureaus, merges and summarizes the credit reports and
delivers its report in a standard format acceptable to mortgage loan
originators and secondary mortgage purchasers.
o DATA SERVICES -- First Advantage's Data Services segment offers
motor vehicle records, transportation industry credit reporting,
fleet management, supply chain theft and damage mitigation
consulting, consumer location, criminal records reselling, subprime
credit reporting, consumer credit reporting services and lead
generation.
o DEALER SERVICES -- The Dealer Services segment provides specialized
credit reports, credit automation software, and lead generation
services to auto dealers and lenders. These reports may be derived
from credit reports obtained from one or more of the three United
States credit bureaus and may be specially formatted for ease of use
by the creditor or to facilitate interpretation by a consumer. The
segment provides comprehensive solutions that help organizations
meet their lending, leasing and other consumer credit automation
needs. By delivering innovative systems, services and data
solutions, First Advantage helps companies reduce risk, decrease
costs and improve service.
o EMPLOYER SERVICES -- First Advantage's Employer Services segment
helps thousands of companies in the United States and abroad manage
risk with our employment screening, occupational health, tax
incentive and services hiring solutions.
o MULTIFAMILY SERVICES -- First Advantage's Multifamily Services
segment helps thousands of companies in the United States manage
risk with resident screening services.
o INVESTIGATIVE AND LITIGATION SUPPORT SERVICES -- The Investigative
and Litigation Support Services segment provides corporate
litigation and investigative services. Products and services
provided by the segment include: surveillance services, field
interviews, computer forensics, electronic discovery, due diligence
reports and other high level investigations.
First Advantage's principal executive office is located at One Progress Plaza,
Suite 2400, St. Petersburg, Florida 33701. Its telephone number is (727)
214-3411. You may obtain additional information about First Advantage on its
website at www.fadv.com or in its various filings with the Securities and
Exchange Commission.
DESCRIPTION OF ACCUFACTS
Accufacts is primarily engaged in researching and providing decision support
information to our clients, generally Human Resources (HR) departments of
corporations. These services typically include pre-employment background checks
and screenings of new hire candidates and/or employees. The background
information products and services currently provided by Accufacts include:
o Criminal history checks
o Credit reports
o Social Security number verifications
25
o Driving record histories
o Previous employer verifications
o Education verifications
o Professional reference verifications
o Professional license verifications
o Federal criminal/civil searches
o Drug Testing
o Exit Interviews
Accufacts believes that employers increasingly are realizing the benefits of
conducting thorough background checks of candidate employees not only because of
the desire to help assure a better quality employee, but also to mitigate the
risks of potential negligent hiring lawsuits. Additionally, many companies and
organizations are discovering that their increasing security concerns may be
addressed by conducting background checks and screenings.
Accufacts has approximately 850 clients located throughout the United States.
During each of the last two fiscal years, sales of the Company's products and
services were made in all 50 states.
Markets
Accufacts markets its pre-employment/decision support products and services to
corporations and organizations throughout the United States. Many small firms
are first-time users of these services. However, most mid-size and especially
larger companies have a history of contracting for Accufacts' products and
services.
In general, certain types of business and industry sectors lend themselves
strongly to utilizing pre-employment screenings and other related services.
Overall, these sectors may include:
o High technology
o Health care
o Retail
o Manufacturing
o Services
o Information technology
o Food/hospitality
o Government, both federal and state organizations.
Products and Services
Accufacts' products and services are designed to verify job applicant background
information and provide research results to facilitate the HR decision
processes. The Company sees itself as a partner with the client in optimizing
decisions. Our clients may request and receive records by telephone, mail, and
facsimile or through our Web site. Clients may also receive results via our
proprietary decision support software or a modem-equipped personal
computer/terminal to access our on-line order-placing network. This network is
available 24 hours a day, seven days a week. We license our software to our
clients free of charge.
The prices charged to customers for reports prepared by Accufacts vary in price
from a few dollars to over $75.00 depending upon the type(s) and location(s) of
the research requested by the client. The resulting reports may be viewed
on-line or printed. The reports also remain in our host computer system for two
years and are available to the client at no additional cost during that period.
Our in-house computer host system consists of automated, networked PCs running
Window NT, using SQL data bases which automatically read orders out to our
agents and/or to third party databases for automatic processing. In addition,
Accufacts operates its Internet-based consumer order entry system with the same
automatic computer system, thereby reducing turnaround time and operating costs.
Accufacts' network agent system currently consists of individuals and small
companies located throughout the United States. The agents are engaged as
independent contractors, who are paid a fee on a per document, per day, or
monthly basis. The number of agents in each state or locality depends on the
size, population density, number of counties, and the respective
organization/structure of the court files and documentation systems.
26
Accufacts currently offers an extensive range of products and services. Among
those most commonly requested by clients are:
o Criminal History Checks - Searches in selected geographical areas
for the presence of a criminal record. This background information
is available statewide from 32 states or from all 3,300 counties in
the United States on a county-by-county basis. The remaining 18
states do not have an accessible statewide depository for this type
of information. This information is retrieved through our network
agent system, computer access directly into the states and certain
counties or, in some instances, by facsimile, mail and telephone.
o Motor Vehicle Reports - Confirms driving records. This background
information is retrieved by Accufacts through a non-affiliated third
party and is available from all 50 states, the District of Columbia,
and Puerto Rico. The same information can be obtained directly by
Accufacts from the source or from other non-affiliated third
parties. These reports and the credit reports discussed below are
the only two products for which we serve as a broker.
o Credit Information - This background information is a special form
of a common "credit report" designed for employment purposes only.
We serve as a broker for this information for all three of the major
credit bureaus (Equifax, TRW and TransUnion) and retrieve the
information from these credit bureaus through proprietary software
that we developed and own. Our clients may order reports from any
combination of the three credit bureaus.
o Social Security Number Verifications - This report will verify the
issue date and name associated with the reported number. It will
also indicate if the number has been reported deceased or not issued
as of a certain date. The report may also reveal other names,
including, "also-known-as" or maiden names, and/or addresses
previously or currently used by the applicant.
o Employment Verifications - Pursuant to the client's requirements,
this report can include a complete verification of all previous
employers, or a review of the most recent two or three positions
held.
o Education Verifications - This report contains the applicant's
academic history including: name of institution, dates of
attendance, major course of study and the type of degree(s) received
by the individual.
o Professional License Verifications - Professional licenses in most
states may be verified to include physicians, registered nurses,
dentists, chiropractors, physical therapists, attorneys, certified
public accountants, et al.
o Professional/Personal Reference Verifications - This report is based
on an interview of a co-worker or personal reference as provided by
the applicant. The co-worker or personal reference is questioned as
to the length and nature of their relationship with the applicant
and the applicant's skills and work ethic.
o Federal Searches - This search consists of a check for criminal and
civil filings in a federal district identified by the client, or the
district of residence as identified by us. This search will reveal
criminal and civil information that has not been purged, sealed or
expunged by the court and generally involves a two to four-year time
frame from the date of the offense.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the best knowledge of Accufacts, as of
March 31, 2006, certain information regarding the beneficial ownership of
Accufacts with respect to (1) each beneficial owner of more than five percent
(5%) of the outstanding common stock of Accufacts, (2) each director and named
executive of Accufacts; and (3) all of the directors and officers of Accufacts
as a group.
Unless otherwise noted, all shares are beneficially owned and the sole
voting and investment power is held by the persons/entities indicated.
27
% OF
SHARES OF TOTAL COMMON
COMMON BENEFICIAL(1)(2) STOCK
NAME OF BENEFICIAL OWNER STOCK OWNERSHIP OUTSTANDING
Philip Luizzo 3,770,000 3,770,000 56.09%
2180 West State Road
Suite 4150 Longwood FL 32779
Anthony Luizzo 10,754 -- Less than 1%
2180 West State Road
Suite 4150 Longwood FL 32779
John Svedese 10,754 -- Less than 1%
2180 West State Road
Suite 4150 Longwood FL 34779
All current directors and
executive officers
as a group (3) 3,791,508 3,791,508 56.41%
(1) Based in part upon ownership/beneficial ownership reports as filed with
the Securities and Exchange Commission and provided to Accufacts.
(2) Computed on the basis of 6,721,913 shares of common stock outstanding.
DISSENTING STOCKHOLDERS RIGHTS OF APPRAISAL
Delaware law provides that you will be entitled to appraisal rights as a
result of the merger. Holders who wish to seek appraisal rights must follow
required procedures, including filing notices with Accufacts and either
abstaining from or voting against adoption of the merger agreement and approval
of the merger and the transactions contemplated by the merger agreement. If you
dissent from the merger or seek appraisal rights and follow the required
procedures, you will not receive the $0.75 per share cash price. Instead your
only right will be to receive the appraised value of your shares of Accufacts
common stock in cash.
The following are summaries of the principal steps a stockholder must take
to perfect appraisal rights under Delaware law. We have attached the applicable
provisions of Delaware law related to appraisal rights to this proxy statement
as Appendix C.
Any holder of shares of Accufacts common stock contemplating exercising
appraisal rights under Delaware law should consult with his or her own legal
counsel to determine the procedure for exercising those rights.
Appraisal Rights under Delaware Law
The following is a summary of the principal steps an Accufacts stockholder
must take to perfect appraisal rights under Section 262 of the Delaware General
Corporation Law (which may be referred to in this proxy statement as the
"DGCL"). Because the description of appraisal rights in this proxy statement is
a summary, it does not contain all the information that may be important to you.
A copy of Section 262 of the DGCL is attached to this proxy statement as
Appendix D. We note that any Accufacts stockholder contemplating the exercise of
appraisal rights is urged to review carefully these provisions and to consult an
attorney, because appraisal rights will be lost if the procedural requirements
under Section 262 of the DGCL are not fully and precisely satisfied. If
appraisal rights are determined to be available for the merger, these rights
will entitle the holder to require Accufacts Acquisition Corp. to purchase the
holder's shares for cash at their fair market value.
1. No Vote in Favor of the Merger. A vote in favor of the reorganization
merger will constitute a waiver of appraisal rights. If an Accufacts
stockholder delivers a blank proxy, Accufacts will vote the proxy in favor
of the adoption of the merger agreement and approval of the merger and the
transactions contemplated by the merger agreement, unless the proxy is
revoked before the special meeting. Therefore, any Accufacts stockholder
that intends to exercise appraisal rights under the DGCL and to vote by
proxy should not leave the proxy blank. The stockholder should either vote
against the adoption of the merger agreement and approval of the merger
and the transactions contemplated by the merger agreement or abstain from
voting on the adoption of the merger agreement and approval of the merger
and the transactions contemplated by the merger agreement.
28
2. Notification of Adoption of Merger Agreement and Approval of the Merger
and the Transactions Contemplated by the Merger Agreement. Within 10 days
after adoption of the merger agreement and approval of the merger and the
transactions contemplated by the merger agreement by the Accufacts
stockholders, Accufacts Acquisition must mail a notice of the adoption and
approval to holders of shares of Accufacts common stock which were not
voted in favor of the merger agreement, and who, prior to the special
meeting, notified Accufacts that they intended to dissent as described in
paragraph 1 above, together with notice of the effective date of the
merger, a brief description of the procedures to be followed in order for
the holder to pursue appraisal rights appears below, and a copy of Section
262 of the DGCL. Only a holder of record of shares of Accufacts common
stock on the record date (or the holder's duly appointed representative)
is entitled to exercise appraisal rights.
3. Exercising Appraisal Rights. To exercise appraisal rights, the record
holder of Accufacts common stock must not vote to adopt the merger
agreement and approve the merger and the transactions contemplated by the
merger agreement, and within 20 days after the date the approval notice is
mailed to the holder, must deliver a written demand for purchase demanding
that Accufacts Acquisition purchase the holder's shares of common stock.
The written demand for purchase must be delivered to Accufacts
Pre-Employment Screening, Inc. 2180 State Road 434, Suite 4150 Longwood,
FL 32779.
4. Appraisal Proceeding By Delaware Court.
a. Filing of Petition
Within 120 days after the effective date of the merger, Accufacts
stockholders who wish to exercise appraisal rights and who have
followed the procedures stated above may file a petition in the
Court of Chancery in Delaware to demand a determination of the fair
market value of their stock. Accordingly, it is the obligation of
the Accufacts stockholders to initiate all necessary action to
perfect their appraisal rights within the time period provided in
Section 262 of the DGCL.
b. Request for Statement Regarding Stockholders who seek Appraisal
Rights
Within 120 days after the effective date, any record holder of
shares of Accufacts common stock who has complied with the
requirements for exercise of appraisal rights will be entitled, upon
written request, to receive from Accufacts a statement listing the
total number of shares of common stock for which demands for
appraisal have been received and the aggregate number of those
shares. Accufacts Acquisition must mail these statements within 10
days after receiving the written request.
c. Determination of "Fair Value"
After determining the former holders of Accufacts common stock
entitled to appraisal, the Delaware Court of Chancery will appraise
the "fair value" of the shares of common stock. The fair value will
exclude any element of value which is derived from the completion or
the expectation of the merger, together with any fair rate of
interest to be paid on the amount determined to be the fair value.
Holders considering seeking appraisal should be aware that the fair
value of their shares of common stock as determined under Section
262 of the DGCL could be more than, the same as or less than the
value of the consideration that they would otherwise receive in the
merger if they did not seek appraisal of their shares of Accufacts
common stock, which they would receive in the merger. The court will
also determine the amount of interest, if any, to be paid on the
amounts to be received by persons whose shares of Accufacts common
stock have been appraised.
29
d. Costs and Expenses Regarding the Appraisal
The costs of the action may be determined by the court and taxed on
the parties as the court considers equitable. The court may also
order that all or a portion of the expenses incurred by any holder
of common stock in connection with an appraisal, including
reasonable attorneys' fees and the fees and expenses of experts
hired in connection with the appraisal proceeding, to be charged
proportionately against the value of all of the shares of common
stock entitled to appraisal.
5. Effect of Exercise of Appraisal Rights on Voting and Right to
Dividends. Any stockholder who has duly exercised appraisal rights in
compliance with Section 262 of the DGCL will not, after the effective time
of the merger, be entitled to vote his or her shares for any purpose.
These shares will not be entitled to the payment of dividends or other
distributions, other than those payable or deemed payable to stockholders
of record as of the date prior to the effective time of the merger.
6. Loss, Waiver or Withdrawal of Appraisal Rights. If a holder of shares
of Accufacts common stock who demands the purchase of shares under Section
262 of the DGCL fails to perfect, or effectively withdraws or loses the
right to that purchase, that holder will be entitled to receive the
consideration otherwise payable in the merger.
Shares for which appraisal rights have been asserted lose their status if:
a. the merger is abandoned;
b. the shares are transferred prior to their submission for the
required endorsement;
c. the stockholder fails to make a timely written demand for
purchase, along with a statement of fair market value;
d. the shares are voted in favor of the adoption of the merger
agreement and approval of the merger and the transactions
contemplated by the merger agreement;
e. the stockholder and Accufacts Acquisition do not agree upon the
status of the shares as shares for which appraisal rights are sought
or do not agree on the purchase price, but neither Accufacts
Acquisition nor the stockholder files a complaint or intervene in a
pending action within six months after mailing of the approval
notice; or
f. with Accufacts Acquisition consent, the stockholder delivers to
Accufacts Acquisition a written withdrawal of the stockholder's
written demand for purchase.
For purposes of Section 262 of the DGCL, the fair market value of the
Accufacts common stock will be determined as of the day before the first
announcement of the terms of the merger, excluding any element of value arising
from the accomplishment or expectation of the merger.
Any holder of shares of Accufacts common stock contemplating exercising
appraisal rights under Delaware law should consult with his or her own legal
counsel to determine the procedure for exercising these rights.
APPROVAL REQUIRED
Approval of this Proposal requires the affirmative vote of a majority of the
outstanding shares of Common Stock of the Company.
THE BOARD RECOMMENDS A VOTE FOR THE AGREEMENT AND PLAN OF MERGER. PROXIES
SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A DIFFERENT
CHOICE IN THEIR PROXIES.
GOVERNMENTAL AND REGULATORY APPROVALS
Other than compliance with the Delaware General Corporation Law, Accufacts
does not believe that any material federal or state governmental approvals or
actions will be required for completion of the merger.
30
Although no antitrust approvals are required to consummate the merger, at
any time before the effective time of the merger, the Antitrust Division of the
Department of Justice, the Federal Trade Commission or a private person or
entity could seek under antitrust laws, among other things, to enjoin the merger
and any time after the effective time of the merger, to cause First Advantage
Corporation to divest itself, in whole or in part, of the surviving corporation
of the merger. There can be no assurance that a challenge to the merger will not
be made or that, if such challenge is made, First Advantage Corporation will
prevail.
STOCKHOLDER PROPOSALS
Accufacts will hold its 2006 annual meeting of stockholders only if the
merger is not consummated. In the event that this meeting is held, any proposals
of Accufacts stockholders intended to be presented at the 2006 annual meeting of
Accufacts stockholders must be received by the Secretary of Accufacts no later
than May 1, 2006 in order to be considered for inclusion in the Accufacts annual
meeting information statement/proxy materials.
OTHER MATTERS
As of the date of this proxy statement, the Accufacts board of directors
knows of no matters that will be presented for consideration at the special
meeting other than as described in this proxy statement. If any other matters
shall properly come before either the special meeting or any adjournment or
postponement of the special meeting to be voted upon, the enclosed proxies will
be deemed to confer discretionary authority on the individuals named as proxies
to vote the shares represented by those proxies as to any of these matters. The
persons named as proxies intend to vote or not to vote in accordance with the
recommendation of the Accufacts board of directors.
Accufacts incorporates by reference all items and matters contained in its
Form 10-KSB for the Fiscal Year ended December 31, 2005 as filed with the
Securities and Exchange Commission in addition to Form 10-QSB and Form 8-K
Reports as filed with the Commission.
Dated April 24, 2006 BY ORDER OF THE BOARD OF DIRECTORS
Longwood, Florida
/s/ Philip Luizzo
-----------------
Philip Luizzo
Chairman of the Board
31
APPENDIX A
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
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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.
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"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.
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"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.
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"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.
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"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.
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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.
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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.
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(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
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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.
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(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.
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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.
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(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,
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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.
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(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:
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(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.
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(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.
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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.
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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:
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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.
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(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.
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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,
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(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
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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,
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(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
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(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.
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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.
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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.
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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.
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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.
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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.
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(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.
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(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.
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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):
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(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.
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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-
APPENDIX B
[LETTERHEAD, PCE VALUATIONS, LLC]
February 14, 2006
Mr. John Svedese
The Board of Directors
Accufacts Pre-Employment Screening, Inc.
2180 SR 434 West, Suite 4150
Longwood, FL 32779
Dear Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view, to the holders of the common stock, par value $0.01 per share (the
"Accufacts Common Stock"), of Accufacts Pre-Employment Screening, Inc.
("Accufacts") of the consideration to be received by such holders pursuant to
the terms and subject to the conditions set forth in the Agreement and Plan of
Merger, dated as of February 13, 2006 (the "Merger Agreement"), by and among
Accufacts, First Advantage Corporation ("FADV") and Accufacts Acquisition Corp.
(the "Merger Sub"). As more fully described in the Merger Agreement (i) Merger
Sub will merge with and into Accufacts, and Accufacts will become a wholly-owned
subsidiary of FADV (the "Merger"), and (ii) each holder of the outstanding
shares of Accufacts Common Stock will receive an amount in cash equal to $0.75
per share (the "Purchase Price"). No shareholder will receive any consideration
for shares of Accufacts Common Stock other than the cash payment described in
the Merger Agreement. In addition to the foregoing, Mr. Philip Luizzo a
shareholder in Accufacts and the Chairman, Chief Executive Officer and President
of Accufacts will receive a change of control payment of $1,100,000 pursuant to
the terms of his employment agreement with Accufacts.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers and directors of Accufacts, concerning
the business, operations, and prospects of Accufacts. We examined certain
publicly available business and financial information including but not limited
to all periodic reports filed with the Securities and Exchange Commission
related to Accufacts as well as certain financial forecasts and other
information and data which were provided to or otherwise discussed with us by
the management of Accufacts. We reviewed the financial terms of the Merger as
set forth in the Merger Agreement in relation to, among other things: current
and historical market prices and trading volumes of Accufacts Common Stock (the
contemplated price represents a premium of 53% over the average per share
trading price for shares of Accufacts Common Stock between August 2005 and
February 2006, and a premium of 74.42% over the closing price of $0.43 per
The Board of Directors Page 2
Accufacts Pre-Employment Screening, Inc.
February 14, 2006
share, as of February 13, 2006); the historical and projected earnings and other
operating data of Accufacts; and the capitalization and financial condition of
Accufacts. We considered, to the extent publicly available, the financial terms
of certain other similar transactions recently effected that we considered
relevant in evaluating the proposed Merger, and analyzed certain financial,
stock market, and other publicly available information relating to the
businesses of other companies whose operations we considered relevant in
evaluating those of Accufacts. In addition to the foregoing, we conducted such
other analyses and examinations and considered such other financial, economic,
and market criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by management of Accufacts that such forecasts and other information and
data were reasonable as to the future financial performance of Accufacts.
We have reviewed the Merger Agreement, with your consent, and are expressing
only our opinion of the fairness from a financial point of view to the holders
of the Accufacts Common Stock of the price to be paid in the Merger for such
shares. In evaluating the assets of Accufacts we have not made any physical
inspection of the property or assets of Accufacts nor been provided with an
independent evaluation of those assets.
The opinion expressed herein is provided for the information of the Board of
Directors of Accufacts in its evaluation of the proposed Merger, and our opinion
is not intended to be and does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the proposed Merger. This
opinion may be included in its entirety in any proxy statement to be distributed
to the holders of Accufacts Common Stock in connection with the Merger.
Based upon and subject to the foregoing, our experience as business appraisers,
our work as described above, and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Purchase Price is fair, from a
financial point of view, to the holders of Accufacts Common Stock.
Very truly yours,
/s/ Robert H. Buchanan
PCE Valuations, LLC
APPENDIX C
APPRAISAL RIGHTS PROVISIONS
UNDER THE DELAWARE GENERAL CORPORATION LAW
DELAWARE GENERAL CORPORATION LAW
SECTION 262
SECTION 262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of
this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to (S) 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S) 251 (other than a merger effected pursuant to (S)251(g)
of this title), (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or (S) 264 of this
title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)(S) 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
D-1
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under (S) 253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder each constituent corporation who has complied with this subsection
and has not voted in favor of or consented to the merger or consolidation of the
date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228
or (S) 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitle to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identify of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
D-2
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so,
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
D-3
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
D-4
Accufacts Pre-Employment Screening, Inc.
April 24, 2006
Dear Stockholder,
You are cordially invited to attend the Accufacts Pre-Employment
Screening Special Meeting of Stockholders on Wednesday, May 31, 2006. The
meeting will begin promptly at 11:00a.m. local time at the offices of the
Company located at 2180 State Road 434, Longwood, Florida.
The official Notice of Special Meeting of Stockholders and Proxy
Statement, form of proxy are included with this letter. The matter listed in the
Notice of Special Meeting of Stockholders is described in detail in the Proxy
Statement.
Your vote is important. Whether or not you plan to attend the special
meeting, I urge you to complete, sign and date the enclosed proxy card and
return it in the accompanying envelope as soon as possible so that your stock
may be represented at the meeting.
Sincerely,
/s/ PHILIP LUIZZO
-----------------
Philip Luizzo
CHAIRMAN OF THE BOARD
Accufacts Pre-Employment Screening, Inc.| 2180 State Road 434,
West- Suite 4150 | Longwood, FL 32779 | 407-682-5051
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- --------------------------------------------------------------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Accufacts Pre-Employment Screening, Inc.
The undersigned appoints John Svedese and Anthony Luizzo each of them, as
proxies, each with the power to appoint his substitute, and authorizes each of
them to represent and to vote, as designated on the reverse hereof, all of the
shares of common stock of Accufacts Pre-Employment Screening, Inc. held of
record by the undersigned at the close of business on April 21, 2006 at the
Special Meeting of Shareholders of Accufacts Pre-Employment Screening, Inc. to
be held on May 31, 2006 or at any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
LEFT BLANK INTENTIONALLY
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
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PROXY
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS Please mark
INDICATED, WILL BE VOTED "FOR" THE PROPOSAL. THIS PROXY IS your votes
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. like this:
|X|
FOR AGAINST ABSTAIN
1. To adopt the Agreement and |_| |_| |_|
Plan of Merger dated
February 16, 2006 and all
transactions contemplated
by the Agreement and Plan
of Merger among Accufacts
Pre-Employment Screening
Inc., First Advantage
Corporation and Accufacts
Acquisition, LLC, whereby
Accufacts Pre-Employment
Screening will become a
wholly owned subsidiary
of First Advantage and
each share of Accufacts
Pre-Employment Screening
common stock will be
cancelled and each holder
of the outstanding shares
of Accufacts
Pre-Employment Screening
common stock will
receive, in cash, $0.75
per share.
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COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER:
SIGNATURE_______________________ SIGNATURE_______________________ DATE__________
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation, please sign in
full corporate name by President or other authorized officer, If a partnership,
please sign in partnership name by authorized person.