EXHIBIT B
Merger Agreement
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INTERNATIONAL NURSING SERVICES, INC. AND
INS ACQUISITION SUB, INC.
AND
ELEVENTH HOUR, INC. AND
AMERICAN CONSOLIDATED GROWTH CORPORATION
December 20, 1996
TABLE OF CONTENTS
Page
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1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Basic Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
(a) Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . .6
(b) Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .6
(c) Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
(d) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
(e) Deliveries and other Actions at the Closing . . . . . . . . . . . . . . . . .7
(f) Allocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3. Representations and Warranties of the Target and the Seller. . . . . . . . . . .7
(a) Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
(b) Authorization of Transaction. . . . . . . . . . . . . . . . . . . . . . . . .7
(c) Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(e) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(f) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(g) Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(h) Events Subsequent to Most Recent Fiscal Year End. . . . . . . . . . . . . . .9
(i) Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 10
(j) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(l) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(m) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(n) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(o) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(p) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(q) Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . 13
(r) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(s) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(t) Product or Service Liability. . . . . . . . . . . . . . . . . . . . . . . . 14
(u) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(v) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(w) Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(x) Environment, Health, and Safety . . . . . . . . . . . . . . . . . . . . . . 15
(y) Certain Business Relationships With The Target . . . . . . . . . . . . . . 16
(z) Filings with the SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(aa) SEC Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(ab) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(ac) Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. Representations and Warranties of the Buyer and Buyer Sub. . . . . . . . . . 17
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(a) Organization of the Buyer and Buyer Sub . . . . . . . . . . . . . . . . . . 17
(b) Authorization of Transaction. . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5. Pre-Closing Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Notices and Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(c) Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) Preservation of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(f) Notice of Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Regulatory Matters and Approvals. . . . . . . . . . . . . . . . . . . . . . 19
6. Conditions to Obligations to Close.. . . . . . . . . . . . . . . . . . . . . . 20
(a) Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . 20
(b) Conditions to Obligation of the Target and the Seller . . . . . . . . . . . 21
7. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Termination of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Survival of Representations and Warranties . . . . . . . . . . . . . . . . 23
(b) Press Releases and Public Announcements . . . . . . . . . . . . . . . . . . 23
(c) No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(e) Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(g) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(h) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(j) Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(k) Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(l) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(m) Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(n) Incorporation of Exhibits and Schedules . . . . . . . . . . . . . . . . . . 25
(o) Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(p) Submission to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . 26
(q) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(r) Employee Benefits Matters . . . . . . . . . . . . . . . . . . . . . . . . . 26
(s) Bulk Transfer Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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EXHIBIT A Form of Articles of Merger
EXHIBIT B Registration Rights Agreement
EXHIBIT C Form of Warrant
DISCLOSURE SCHEDULE
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Agreement") entered into as of
December 20, 1996, by and among International Nursing Services, Inc., a
Colorado corporation (the "Buyer"), INS Acquisition Sub, Inc., a Colorado
corporation (the "Buyer Sub"), and Eleventh Hour, Inc., a Colorado
corporation (the "Target"), American Consolidated Growth Corporation, a
Delaware corporation and the Target's sole stockholder, (the "Seller"). The
Buyer, the Buyer Sub, the Target and the Seller are referred to collectively
herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer will acquire
the Target pursuant to a reverse triangular merger in which the Buyer Sub
will merge with and into the Target with the Target being the Surviving
Corporation.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts
paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses,
and fees, including court costs and reasonable attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Sec. 1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"BUYER" has the meaning set forth in the preface above.
"BUYER SUB" has the meaning set forth in the preface above. References
in this Agreement to the Buyer Sub with respect to events, actions, or
respective rights or obligations of the Parties after the Effective Time
shall be deemed to be references to the Surviving Corporation.
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"CASH" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in Section 2(b) below.
"CLOSING DATE" has the meaning set forth in Section 2(b) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the business
and affairs of the Target that is not already generally available to the
public.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code Sec.
1563.
"DELAWARE GENERAL CORPORATION LAW" means the General Corporation Law of
the State of Delaware, as amended.
"DISCLOSURE DOCUMENT" means the disclosure document containing the
Definitive Seller Proxy Materials.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"EFFECTIVE TIME" has the meaning set forth in Section 2(d)(i) below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments
(and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating
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to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCESS LOSS ACCOUNT" has the meaning set forth in Treas. Reg. Section
1.1502-19.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FINANCIAL STATEMENT" has the meaning set forth in Section 3(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"HOLDBACK SHARES" has the meaning set forth in Section 2(d)(v) below.
"INDEMNIFIED PARTY" has the meaning set for in Section 8(d) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d) below.
"INITIAL PURCHASE PRICE" has the meaning set forth in Section 2(e) below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all transactions, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, technical data, designs, specifications,
customer, employee and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (e) all computer software
(including data and related documentation), (f) all other proprietary rights,
and (g) all copies and tangible embodiments thereof (in whatever form or
medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LIABILITY" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"MERGER CONSIDERATION has the meaning set forth in Section 2(d)(v) below.
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"MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
3(g) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section 3(g)
below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 3(g)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"PUBLIC REPORT" has the meaning set forth in Section 3(aa) below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
"REQUISITE SELLER STOCKHOLDER APPROVAL" means the affirmative vote of the
holders of a majority of the Seller's common stock in favor of this Agreement
and the Merger.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate proceeding,
(c) purchase money liens and liens securing rental payments under capital
lease arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"SELLER" means American Consolidated Growth Corporation, a Delaware
corporation.
"SPECIAL SELLER MEETING" has the meaning set forth in Section 5(j)(ii)
below.
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"SUBSIDIARY" means any corporation, limited partnership, limited
liability company or other entity with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or other equity
interest or has the power to vote or direct the voting of sufficient
securities or other interests to elect a majority of the directors, the
general partners, the managers or other governing bodies.
"SURVIVING CORPORATION" has the meaning set forth in Section 2(a).
"TARGET" has the meaning set forth in the preface above.
"TARGET SHARE" means any share of the Common Stock, par value $.10 per
share, of the Target.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), custom
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 4(d) below.
"VOTING STOCKHOLDER" means any Person who or which holds any capital
stock of the Seller entitled to vote on approval of the Merger.
2. BASIC TRANSACTION.
(a) THE MERGER. On and subject to the terms and conditions of this
Agreement, the Buyer Sub will merge with and into the Target (the "Merger")
at the Effective Time. The Target shall be the corporation surviving the
Merger (the "Surviving Corporation").
(b) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, L.L.P. in Denver, Colorado, commencing at 10:00 a.m. local
time on the business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or on such other date or
at such other time or place as the Parties may mutually determine (the
"Closing Date").
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(c) ACTIONS AT THE CLOSING. At the Closing, (i) the Target and the
Seller will deliver to the Buyer and the Buyer Sub the various certificates,
instruments, and documents referred to in Section 6(a) below; (ii) the Buyer
and the Buyer Sub will deliver to the Target and the Seller the various
certificates, instruments, and documents referred to in Section 6(b) below;
(iii) prior to the Effective Time, the Buyer shall loan to the Target
$150,000, on terms and conditions satisfactory to the Buyer; (iv) the Target
and the Buyer Sub will file with the Secretary of State of the State of
Colorado Articles of Merger in the form attached hereto as Exhibit A (the
"Articles of Merger"), (v) the Buyer will deliver to the Seller the Merger
Consideration; (vi) the Buyer and the Seller will enter into the Registration
Rights Agreement substantially in the form attached hereto as Exhibit B;
(vii) the Buyer will execute a guarantee substantially to the effect of
Section 7(h); and (viii) the Surviving Corporation shall enter into an
employment agreement with each of Norman Fisher and Valerie Fisher, in form
and substance satisfactory to the Buyer and the Buyer Sub. In addition,
concurrently with the Closing, Norman L. Fisher shall be elected or appointed
to the Buyer's Board of Directors and the Surviving Corporation's Board of
Directors.
(d) EFFECT OF THE MERGER.
(i) GENERAL. The Merger shall become effective at the time (the
"Effective Time") the Target and the Buyer Sub file the Certificate of Merger
with the Secretary of State of the State of Colorado. The Merger shall have
the effect set forth in the Colorado Business Corporation Act. The Surviving
Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf
of either the Target or the Buyer Sub in order to carry out and effectuate
the transactions contemplated by this Agreement. Immediately following the
Effective Time, the Buyer shall own the entire outstanding equity of the
Surviving Corporation.
(ii) ARTICLES OF INCORPORATION. The Articles of Incorporation
of the Surviving Corporation shall be amended and restated at and as of the
Effective Time to read as did the Articles of Incorporation of the Buyer Sub
immediately prior to the Effective Time, except that the name of the
Surviving Corporation will remain unchanged.
(iii) BYLAWS. The Bylaws of the Surviving Corporation shall be
amended and restated of and as of the Effective Time to read as did the
Bylaws of the Buyer Sub immediately prior to the Effective Time (except that
the name of the Surviving Corporation will remain unchanged).
(iv) DIRECTORS AND OFFICERS. The directors and officers of the
Buyer Sub shall become the director and officers of the Surviving Corporation
at and as of the Effective Time (retaining their respective positions and
terms of office), and, in addition, Norman Fisher shall become an officer of
the Surviving Corporation and be elected or appointed to each of the Buyer's
and the Surviving Corporation's Board of Directors and Valerie Fisher shall
become an officer of the Surviving Corporation, pursuant to employment
agreements entered into at the Closing.
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(v) CONVERSION OF TARGET SHARES. At and as of the Effective Time,
each outstanding Target Share shall be converted into the right to receive a
pro rata portion of each of the following (the "Merger Consideration") based
on the number of Target Shares outstanding at the Effective Time: (A) a
number of shares of the Buyer's common stock, $.001 par value per share
("Buyer Common Stock"), having a value of $900,000 (subject to adjustment
pursuant to Section 3(j)) based on the average closing (last sale) price for
the Buyer Common Stock on the Nasdaq Small Cap Market for the ten trading
days ending two business days prior to the Closing Date by delivery of duly
and validly issued stock certificates of the Buyer and (B) Warrants to
purchase 250,000 shares of Buyer common stock at an exercise price of $4.00
per share (which such Warrants shall be substantially in the form set forth
as Exhibit C); PROVIDED, HOWEVER, that a number shares of Buyer Common Stock
in amount determined pursuant to Section 5(i) shall be held and retained by
the Buyer until June 30, 1998 pursuant to Section 8(f) (the "Holdback
Shares") and any Holdback Shares remaining on such date shall be delivered to
the Seller on such date. At, as of, and after the Effective Time each
outstanding Target Share shall cease to represent any interest in the Target
or the Surviving Corporation and shall not be deemed to be outstanding or to
have any rights other than those set forth above in this Section 2(d)(v).
(vi) CONVERSION OF CAPITAL STOCK OF THE BUYER SUB. At and as of the
Effective Time, each share of common stock, $.001 par value per share, of the
Buyer Sub shall be converted into one share of common stock, $.001 par value
per share, of the Surviving Corporation.
3. REPRESENTATIONS AND WARRANTIES REGARDING THE TARGET AND THE SELLER.
The Seller represents and warrants to the Buyer and the Buyer Sub that the
statements contained in this Section 3 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Section 3), except as set forth
in the disclosure schedule accompanying this Agreement and initialed by the
Parties (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) ORGANIZATION. Each of the Target and the Seller is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Target is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction in which
the nature of its businesses or the ownership or leasing of its properties
requires such qualification, except in those jurisdictions in which the
failure to be so qualified would not materially adversely affect the
operations of the Target. The Target has full corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. Section 3(a) of the Disclosure Schedule
lists the directors and officers of the Target. The Seller has delivered to
the Buyer and the Buyer Sub correct and complete copies of the charter and
bylaws of the Target (as amended to date). The minute books containing the
records of meetings and/or resolutions of the stockholders, the board of
directors, and any committees of the board of directors, the stock
certificate books, and the stock record books of the Target are correct and
complete. The Target is not in default under or in violation of any
provision of its charter or bylaws.
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(b) CAPITALIZATION. The entire authorized capital stock of the Target
consists of 40,000 Target Shares, of which 11,000 Target Shares are issued
and outstanding and no Target Shares are held in treasury. All of the issued
and outstanding Target Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the Seller. There
are no outstanding or authorized options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights, or other agreements or
commitments to which the Target is a party or which are binding upon the
Target providing for the issuance, disposition, or acquisition of any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, or similar rights with respect to the Target. There are no
voting trusts, proxies, or any other agreements or understandings with
respect to the voting of the capital stock of the Target.
(c) AUTHORIZATION OF TRANSACTION. Each of the Target and the Seller has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder;
PROVIDED, HOWEVER, that the Target and the Seller cannot consummate the
transactions contemplated hereby unless and until the Seller receives the
Requisite Seller Stockholder Approval. Without limiting the generality of
the foregoing, the board of directors of the Target, the Seller, and the
board of directors of the Seller have duly authorized the execution,
delivery, and performance of this Agreement by the Target and the Seller.
This Agreement constitutes the valid and legally binding obligation of the
Target and the Seller, enforceable in accordance with its terms and
conditions.
(d) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any of the Target and the
Seller is subject or any provision of the charter or bylaws of either of the
Target or the Seller or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, sublease, license, sublicense, instrument, or
other arrangement to which either of the Target or the Seller is a party or
by which it is bound or to which any of its assets is subject (or result in
the imposition of any Security Interest upon any of its assets). Neither of
the Target nor the Seller need to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of, any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement other than in connection with the provisions
of the Delaware General Corporation Law, the Colorado Business Corporation
Act, the Securities Exchange Act, the Securities Act, and state securities
laws.
(e) BROKERS' FEES. Neither the Target nor the Seller has any Liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which the
Buyer or Buyer Sub could become liable or obligated.
(f) TITLE TO ASSETS. The Target has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown in the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests,
8
except for properties and assets disposed of in the Ordinary Course of
Business since the date of the Most Recent Balance Sheet. Section 3(f) of
the Disclosure Schedule lists all of such assets.
(g) SUBSIDIARIES. The Target has no Subsidiaries nor does it otherwise
own, or have any commitment or other obligation to own or acquire, an equity
or joint venture interest in any other entity.
(h) FINANCIAL STATEMENTS.
(i) The Target has previously delivered to the Buyer the following
financial statements (collectively the "Financial Statements"): (i)
audited consolidated and unaudited consolidating balance sheets and
statements of income, change in stockholders' equity, and cash flow as of
and for the fiscal years ended December 31, 1992, December 31, 1993,
December 31, 1994, June 30, 1995 and June 30, 1996 (the "Most Recent Fiscal
Year End") for the Target; and (ii) unaudited consolidated and
consolidating balance sheets and statements of income, changes in
stockholders equity, and cash flow (the "Most Recent Financial
Statements") as of and for the four months ended November 30, 1996 (the
"Most Recent Fiscal Month End") for the Target. The Financial Statements
(including the Notes thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby,
present fairly the financial condition of the Target as of such dates and
the results of operations of the Target for such periods, are correct and
complete, and are consistent with the books and records of the Target
(which books and records are correct and complete); PROVIDED, HOWEVER, that
the Most Recent Financial Statements are subject to normal year-end
adjustments (which will not be material individually or in the aggregate)
and lack footnotes and other presentation items.
(ii) The Seller has filed a Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 (the "Most Recent Fiscal Quarter
End") and an Annual Report on Form 10-KSB/A for the fiscal year ended June
30, 1996. The financial statements included in or incorporated by
reference into these Public Reports (including the related notes and
schedules) have been prepared in accordance with GAAP applied on a
consistent basis throughout the period covered thereby present fairly the
financial condition of the Seller and its Subsidiaries as of the indicated
dates and the results of operations of the Seller and its Subsidiaries for
the indicated period are correct and complete in all respects, and are
consistent with the books and records of the Seller and its Subsidiaries;
PROVIDED, HOWEVER, that the interim statements are subject to normal
year-end adjustments.
(i) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of either of the Target or the Seller nor has the Target or the Seller
incurred any Liabilities other than those incurred in the Ordinary Course of
Business and which, in the aggregate, do not exceed $25,000. Without limiting
the generality of the foregoing, since that date:
9
(i) no party (including either of the Target or the Seller) has
accelerated, terminated, modified, or cancelled any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) involving more than $10,000 to which either of the Target or the
Seller is a party or by which either of them is bound;
(ii) neither of the Target nor the Seller has delayed or postponed
the payment of accounts payable or other Liabilities outside the Ordinary
Course of Business;
(iii) neither of the Target nor the Seller has cancelled,
compromised, waived, or released any right or claim (or series of related
rights and claims) either involving more than $10,000 or outside the
Ordinary Course of Business;
(iv) neither of the Target nor the Seller has issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its or another Person's capital stock;
(v) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving either of the Target or the Seller; and
(vi) neither of the Target nor the Seller has committed to any of the
foregoing.
(j) UNDISCLOSED LIABILITIES. Neither of the Target nor the Seller has
any Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet and (ii) Liabilities
which have arisen after the Most Recent Fiscal Month End in the Ordinary
Course of Business (none of which results from, arises out of, relates to, is
in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law). Section 3(j) of the
Disclosure Schedule describes the amount and nature of all of the Target's
Liabilities on the date hereof and will so describe all of the Target's
Liabilities as they exist on the Closing Date. Such Liabilities, net of the
book value of the Target's assets as determined in accordance with GAAP on
each of such dates, do not, and will not, respectively, exceed an aggregate
of $1,900,000 unless there is a commensurate decrease in the value of the
Buyer Common Stock constituting part of the Merger Consideration as set forth
in Section 2(d)(v)(A); PROVIDED, HOWEVER, that in no event shall such
Liabilities be more than $2,800,000.
(k) LEGAL COMPLIANCE. Each of the Target, the Seller, and their
respective predecessors and Affiliates has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local and
foreign governments (and all agencies thereof), including, without
limitation, applicable federal and state securities laws, rules and
regulations and applicable Taxes, except where the failure to so comply would
not have an adverse economic effect on the Target or its business, and
10
no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of them
alleging any failure to so comply.
(l) TAX MATTERS.
(i) Each of the Target and the Seller has filed all Tax Returns that
it was required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by the Target and the Seller (whether or not
shown on any Tax Return) have been paid. Neither of the Target nor the
Seller currently is the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where either of the Target or the Seller does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of either of the
Target or the Seller that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) Each of the Target and the Seller has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or
other third party.
(iii) Neither the Target, the Seller nor any director or officer
(or employee responsible for Tax matters) of either of the Target or the
Seller expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim
concerning any Tax Liability of either of the Target and the Seller either
(A) claimed or raised by any authority in writing or (B) as to which any of
the Seller and the directors and officers (and employees responsible for
Tax matters) of the Target or the Seller has Knowledge based upon personal
contact with any agent of such authority. Section 3(l) of the Disclosure
Schedule lists all federal, state, local and foreign income Tax Returns
filed with respect to the Target and the Seller for taxable periods ended
on or after December 31, 1991, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. The Target has delivered to the Buyer correct and complete copies of
all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Target and its
Subsidiaries since December 31, 1991.
(iv) Neither of the Target nor the Seller has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(v) Neither of the Target nor the Seller has been a United States
real property holding corporation within the meaning of Code Sec. 897(c)(2)
during the applicable period specified in Code Sec. 897(c)(1)(A)(ii).
Neither of the Target nor the Seller is a party to any Tax allocation or
sharing agreement. Neither of the Target nor the Seller (A) has been a
member of an Affiliated Group filing a consolidated federal income Tax
Return (other than, with respect to the Target, a group the common parent
of which was the Target) or (B) has any Liability for the Taxes of any
Person (other than any of the Target
11
and the Seller) under Treas. Reg. Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract,
or otherwise.
(vi) The unpaid Taxes of the Target do not exceed the reserve for
Tax Liability set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
the Target in filing its Tax Returns.
(m) REAL PROPERTY.
(i) Neither the Target nor the Seller owns any real property, nor
does it have any interest in, or any rights to acquire any interest in, any
real property or improvements thereon (other than the leases disclosed in
Section 3(m) of the Disclosure Schedule, and the related leasehold
improvements).
(ii) Section 3(m)(ii) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to the Target. The Target has
delivered to the Buyer correct and complete copies of the leases and
subleases listed in Section 3(m)(ii) of the Disclosure Schedule (as amended
to date). With respect to each lease and sublease listed in Section
3(m)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(B) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
and
(C) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder.
(n) INTELLECTUAL PROPERTY.
(i) The Intellectual Property owned by the Target is listed on
Section 3(n)(i) of the Disclosure Schedule and constitutes all Intellectual
Property necessary or desirable for the operation of the business of the
Target as presently conducted and as presently proposed to be conducted, no
third party has any rights therein or thereto, and such Intellectual
Property will be owned by the Buyer Sub on identical terms immediately
subsequent to the Closing hereunder. The Target or the Seller has taken
all necessary and desirable action to maintain and protect each item of
Intellectual Property that the Target owns.
(ii) To the Knowledge of any of the Target, the Seller and the
directors and officers (and employees with responsibility for Intellectual
Property matters) with respect to the two years prior to the date of this
Agreement and to the best knowledge of any such
12
Person prior to such time, neither the Target nor the Seller has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties in any material respect,
and none of the Seller and the directors and officers of the Target and the
Seller has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or
violation. To the Knowledge of any of the Seller and the directors and
officers of the Target and the Seller no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Target.
(iii) To the Knowledge of the Target and any of the Seller and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of the Target and the Seller, neither of the Target nor
the Seller will interfere with, infringe upon, misappropriate, or otherwise
come into conflict with, any Intellectual Property rights of third parties
as a result of the continued operation of its businesses as presently
conducted and as presently to be conducted.
(o) TANGIBLE ASSETS. The Target owns or leases all real property,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted and as presently proposed to be conducted. Each such
tangible asset is free from defects (patent and latent), has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used, and presently is proposed to be used.
(p) INVENTORY. The Target does not maintain any inventory for sale in the
operation of its business as presently conducted and as proposed to be
conducted.
(q) CONTRACTS. Section 3(q) of the Disclosure Schedule lists the
following contracts and other agreements to which either of the Target or the
Seller is a party:
(i) any agreement with a customer involving consideration of $10,000
or more;
(ii) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(iii) any agreement concerning confidentiality or noncompetition;
(iv) any agreement (A) between the Target and the Seller, (B)
involving any officer or director of the Target or the Seller, or (C)
involving any of the Voting Stockholders, or their respective Affiliates
(other than the Target);
(v) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
13
(vi) any collective bargaining agreement;
(vii) any agreement for the employment of any individual on a
full-time, part-time, temporary, or consulting basis not terminable by
the Target or the Seller without penalty on 30 days' or less notice or
providing severance benefits; or
(viii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000 and is not
terminable by the Target or the Seller without penalty on 30 days' or less
notice.
The Target has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3(q) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 3(q) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the Closing Date; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
(r) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of
the Target are reflected properly on its books and records, are valid
receivables subject to no set offs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Target.
(s) INSURANCE. Section 3(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which either of the Target or the Seller has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past five years;
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
14
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each insurance policy: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect; (B) the policy will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby;
(C) neither of the Target or the Seller nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach of default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. Each of the Target and the Seller has
been covered during the past five years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. Section 3(s) of the Disclosure Schedule describes any
self-insurance arrangements affecting either of the Target and the Seller.
(t) LITIGATION. Section 3(t) of the Disclosure Schedule sets forth each
instance in which either of the Target and the Seller (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or to the Knowledge of any of the Target or the Seller and the respective
directors and officers (and employees with responsibility for litigation
matters) of the Target and the Seller is threatened to be made a party to any
action, suit, proceeding, hearing or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of these actions, suits,
proceedings, hearings, and investigations set forth in Section 3(t) of the
Disclosure Schedule could result in any material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
the Target. None of the Target, the Seller and the respective directors and
officers (and employees with responsibility for litigation matters) of the
Target and the Seller has any reason to believe that any such action, suit,
proceeding, hearing or investigation may be brought or threatened against either
of the Target or the Seller.
(u) PRODUCT OR SERVICE LIABILITY. Neither of the Target nor the Seller
has any Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the provision of any service sold,
leased, or delivered by the Target or the Seller. Neither the Target nor the
Seller has ever manufactured, serviced, sold, leased or delivered any product
that could give risk to any Liability arising out of any injury to individuals
or property as a result of the ownership, possession or use thereof.
(v) EMPLOYEES. Section 3(v) of the Disclosure Schedule list all of the
Target's employees, consultants and agents, whether full-time, part-time,
temporary, or otherwise. Neither of the Target nor the Seller has experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. Neither the Target nor the Seller has committed any unfair
labor practice. Neither of the Target, the Seller nor the respective directors
and officers (and employees with responsibility for employment matters) of the
Target and the Seller has any
15
Knowledge of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of the Target.
(w) EMPLOYEE BENEFITS. Section 3(w) of the Disclosure Schedule briefly
describes every plan or arrangement providing benefits to current or former
employees, including any bonus plan, plan for deferred compensation, accrued but
unpaid salary, bonus or vacation time, employee health, medical, life insurance
or other welfare benefit plan or other arrangement, whether or not terminated,
maintained by the Target or the Seller or under which the Target or the Seller
may have any liability or other obligation, and lists the respective amounts
thereof, and indicates those that are subject to ERISA. The Target and the
Seller are in full compliance with the applicable provisions of ERISA and the
Code with respect to all such plans.
(x) GUARANTIES. Neither of the Target nor the Seller is a guarantor or
otherwise is liable for any Liability or obligation (including indebtedness) of
any other Person.
(y) ENVIRONMENT, HEALTH, AND SAFETY.
(i) Each of the Target, the Seller and their respective predecessors
and Affiliates has complied with all Environmental Health, and Safety Laws,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of them
alleging any failure so to comply. Without limiting the generality of the
preceding sentence, each of the Target, the Seller, and their respective
predecessors and Affiliates has obtained and been in compliance with all of
the terms and conditions of all permits, licenses, and other authorizations
which are required under and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health, and Safety Laws.
(ii) Neither of the Target nor the Seller has any Liability (and none
of the Target, the Seller and their respective predecessors and Affiliates
has handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against either
of the Target and the Seller giving rise to any Liability) for damage to
any site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual, or for
any reason under any Environmental, Health, and Safety Law.
(z) CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGET. None of the Seller
and its Affiliates (other than the Target) has been involved in any business
arrangement or relationship with the Target within the past 12 months, and none
of the Seller and its Affiliates owns any asset, tangible or intangible, which
is used in the business of the Target.
16
(aa) FILINGS WITH THE SEC. The Seller has made all filings with the SEC
that it has been required to make within the past five years under the
Securities Act and the Securities Exchange Act (collectively the "Public
Reports"). Each of the Public Reports was timely filed and has complied with
the Securities Act and the Securities Exchange Act in all material respects.
None of the Public Reports, as of their respective dates, contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Target has
delivered to the Buyer a correct and complete copy of each Public Report
(together with all exhibits and schedules thereto and as amended to date).
(ab) SEC DISCLOSURE. The Definitive Seller Proxy Materials will comply
with the Securities Exchange Act in all material respects. The Definitive
Seller Proxy Materials will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
will be made, not misleading; PROVIDED, HOWEVER, that neither the Target nor
the Seller makes any representation or warranty with respect to any
information that the Buyer will supply specifically for use in the Definitive
Seller Proxy Materials.
(ac) DISCLOSURE. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
(ad) INVESTMENT. The Seller (i) understands that the Buyer Common Stock
and Warrants issued pursuant to this Agreement have not been, and will not
be, registered under the Securities Act, or under any state securities laws,
and are being offered and sold in reliance upon federal and state exemptions
for transactions not involving any public offering, (ii) is acquiring such
Buyer Common Stock and Warrants solely for its own account for investment
purposes, and not with a view to the distribution thereof, (iii) is a
sophisticated investor with knowledge and experience in business and
financial matters, (iv) has received certain information concerning the Buyer
and has had the opportunity to obtain additional information as desired in
order to evaluate the merits and the risk inherent in holding Buyer Common
Stock and the Warrants, and (v) is able to bear the economic risk and lack of
liquidity inherent in holding such Buyer Common Stock.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE BUYER SUB. The
Buyer and the Buyer Sub each severally represents and warrants to the Target
and to the Seller that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the Disclosure Schedule. The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.
(a) ORGANIZATION OF THE BUYER AND THE BUYER SUB. Each of the Buyer and
the Buyer Sub is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
17
(b) AUTHORIZATION OF TRANSACTION. Each of the Buyer and the Buyer Sub
has full power and authority (including full corporate power and authority)
to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of each of the Buyer and the Buyer Sub, enforceable in accordance
with its terms and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, government agency, or court to which either the Buyer or the
Buyer Sub is subject or any provision of the charter or bylaws of the Buyer
or the Buyer Sub or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which either the Buyer or the Buyer Sub is a party or by which it is bound or
to which any of its assets is subject. Neither the Buyer nor the Buyer Sub
needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement, except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, or failure to give
notice would not have a material adverse effect on the ability of the Parties
to consummate the transactions contemplated by this Agreement. To the
Knowledge of any director or officer of the Buyer or the Buyer Sub, and other
than in connection with the provisions of the state securities laws, neither
the Buyer nor the Buyer Sub needs to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not have a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(d) BROKERS' FEES. Neither the Buyer nor the Buyer Sub has any
Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement for
which the Target or the Seller could become liable or obligated.
5. PRE-CLOSING COVENANTS. The parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable, in
order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Section 7 below).
(b) NOTICES AND CONSENTS. The Target and the Seller will give any
notices to third parties, and the Target and the Seller will use their best
efforts to obtain any third party consents that the Buyer or the Buyer's Sub
reasonably may request in connection with the matters referred
18
to in Section 3(c) above. Each of the Parties will give any notices to, make
any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3(c) and
Section 4(c) above.
(c) OPERATION OF BUSINESS. The Target and the Seller will not engage in
any practice, take any action, or enter into any transaction outside the
Ordinary Course of Business. Without limiting the generality of the
foregoing, the Target will not (i) declare, set aside, or pay any dividend or
make any distribution with respect to its capital stock or redeem, purchase
or otherwise acquire any of its capital stock, (ii) pay any amount to any
third party with respect to any Liability or obligation (including any costs
and expenses the Target has incurred or may incur in connection with this
Agreement and the transactions contemplated hereby) which would not
constitute a Liability disclosed on Section 3(j) of the Disclosure Schedule
if in existence as of the Closing, or (iii) otherwise engage in any practice,
take any action, or enter into any transaction of the sort described in
Section 3(h) above.
(d) PRESERVATION OF BUSINESS. The Target and the Seller will keep each
of its respective business and properties substantially intact, including its
present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
(e) FULL ACCESS. The Target and the Seller will permit representatives
of the Buyer and the Buyer Sub to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Target and the Seller to all premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
each of the Target and the Seller.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice
to the other Party of any material adverse development causing a breach of
any of its own representations and warranties in Section 3 and Section 4
above. No disclosure by any party pursuant to this Section 5(f), however,
shall be deemed to amend or supplement the Disclosure Schedule or to prevent
or cure any misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. Neither the Target nor the Seller will (i) solicit,
initiate, or encourage the submission of any proposal or offer from any
Person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets, of the Target
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or
seek any of the foregoing. The Seller will notify the Buyer and the Buyer
Sub immediately if any Person makes any proposal offer, inquiry, or contact
with respect to any of the foregoing.
(h) REGULATORY MATTERS AND APPROVALS. Each of the Parties will give any
notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Section
3(d) and Section 4(d) above. Without limiting the generality of the
forgoing:
19
(i) SECURITIES ACT, SECURITIES EXCHANGE ACT, AND STATE SECURITIES
LAWS. The Seller will prepare and file with the SEC preliminary proxy
materials under the Securities Exchange Act relating to the Special Seller
Meeting. The Seller will use its reasonable best efforts to respond to the
comments of the SEC thereon and will make any further filings (including
amendments and supplements) in connection therewith that may be necessary,
proper, or advisable. The Buyer and the Buyer Sub will provide the Target
and the Seller, and the Target and the Seller will provide the Buyer and
the Buyer Sub, with whatever information and assistance in connection with
the foregoing or any other filings that the filing Party reasonably may
request. The Buyer will take all actions that may be necessary, proper, or
advisable under state securities laws in connection with the offering and
issuance of the Buyer Common Stock pursuant to this Agreement.
(ii) DELAWARE GENERAL CORPORATION LAW. The Seller will call a special
meeting of its stockholders or, in lieu thereof, seek the written consent
of the Voting Stockholders holding a majority of the Seller's capital
stock entitled to vote thereon (the "Special Seller Meeting") as soon as
practicable in order that the Voting Stockholders may consider and vote
upon the adoption of this Agreement and the transactions contemplated
hereby in accordance with the Delaware General Corporation Law. The Seller
will mail the Disclosure Document to the Voting Stockholders as soon as
practicable. The Disclosure Document will contain the affirmative
recommendations of the respective boards of directors of the Target and the
Seller in favor of the adoption of this Agreement and the transactions
contemplated hereby; PROVIDED, HOWEVER, that no director or officer of
either such Party shall be required to violate any fiduciary duty or other
requirement imposed by law in connection therewith.
(i) TAX LIABILITY AND HOLDBACK SHARES. The Parties shall in good faith
negotiate to determine the maximum amount of any Tax Liability for which the
Target or, following the Effective Time, the Surviving Corporation, could be
liable pursuant to Internal Revenue Service audits currently being conducted
with respect to the Target and/or the Seller, Tax Returns of the Target or the
Seller (whether or not filed prior to the Effective Time) or otherwise. The
number of Holdback Shares shall be equal to the sum of $75,000 plus the maximum
amount of such Tax Liability as so determined, divided by the value of the Buyer
Common Stock determined pursuant to Section 2(d)(v)(A) (rounded to the nearest
whole share).
6. CONDITIONS TO OBLIGATIONS TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of each of the
Buyer and the Buyer Sub to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions.
(i) this Agreement shall have received the Requisite Seller
Stockholder Approval;
(ii) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the Closing
Date (provided that the last two sentences of Section 3(j) shall be true in
all respects without regard to materiality);
20
(iii) each of the Target and the Seller shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing;
(iv) each of the Target and the Seller shall have procured all of the
third party consents specified in Section 5(b) above;
(v) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, or (C) affect adversely the right
of the Surviving Corporation to own the former assets and to operate the
former businesses of the Target (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect);
(vi) the Target shall have delivered to the Buyer and the Buyer Sub a
certificate to the effect that each of the conditions specified above in
Section 6(a)(i)-(vi) is satisfied in all respects;
(vii) the Parties shall have received all authorizations, consents,
and approvals of governments and governmental agencies referred to in
Section 3(d) and Section 4(c) above;
(viii) the Buyer and the Buyer Sub shall have received from counsel
to the Target an opinion in form and substance reasonably satisfactory to
the Buyer, the Buyer Sub, and their counsel, addressed to the Buyer and the
Buyer Sub, and dated as of the Closing Date;
(ix) the Buyer and the Buyer Sub shall have received the
resignations, effective as of the Closing, of each director and officer of
the Target other than those whom the Buyer shall have specified in writing
at least five business days prior to the Closing and shall have received
employment agreements in form and substance satisfactory to it executed by
each of Norman Fisher and Valerie Fisher;
(x) the Parties shall have agreed in writing on the maximum amount of
the Tax Liability referred to in Section 5(i);
(xi) the Buyer shall have obtained from or through Strategica Group
(as previously disclosed to the Seller and the Target) or otherwise on
terms reasonably satisfactory to the Buyer all of the financing it needs in
order to consummate the Merger; and
(xii) all actions to be taken by the Target and the Seller in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to the Buyer and the Buyer Sub.
21
The Buyer and the Buyer Sub may waive any condition specified in this
Section 6(a) if they execute a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE TARGET AND THE SELLER. The obligation
of the Target and the Seller to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in Section 4 above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) each of the Buyer and the Buyer Sub shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing;
(iii) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of the Merger or any of the other transactions
contemplated by this Agreement or (B) cause the Merger or any of the other
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(v) the Buyer and the Buyer Sub shall have delivered to the Target
and the Seller a certificate to the effect that each of the conditions
specified above in Section 6(b)(i)-(iv) is satisfied in all respects;
(vi) the Parties shall have received all authorizations, consents,
and approvals of governments and governmental agencies referred to in
Section 3(d) and Section 4(c) above;
(vii) this Agreement and the transactions contemplated hereby shall
have received the Requisite Seller Stockholder Approval;
(viii) the Target and the Seller shall have received from counsel to
the Buyer and the Buyer Sub an opinion in form and substance reasonably
satisfactory to the Seller, the Target and their counsel, addressed to the
Target and the Seller, and dated as of the Closing Date;
(ix) the Parties shall have agreed in writing on the maximum amount
of the Tax Liability referred to in Section 5(i); and
(x) all actions to be taken by the Buyer and the Buyer Sub in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to the Target and the Seller.
22
The Target and the Seller may waive any condition specified in this Section 6(b)
if it executes a writing so stating at or prior to the Closing.
7. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party may request, all the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 8 below). The Target
acknowledges and agrees that from and after the Closing the Buyer and the Buyer
Sub will be entitled to possession of all documents, books, records including
Tax records), agreements, and financial data of any sort relating to the Target.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving either of the Target or the Seller, each of the
other Parties will cooperate with the contesting or defending Party and its
counsel in the contest or defense, make available its personnel, and provide
such testimony and access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below).
(c) TRANSITION. The Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, employee, or other business associate of the Target from maintaining
the same business relationships with the Buyer and the Buyer Sub after the
Closing as it maintained with the Target prior to Closing. The Seller will
refer all customer inquiries relating to the business of the Target to the Buyer
Sub from and after the Closing.
(d) CONFIDENTIALITY. The Seller's Stockholder will treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer and the Buyer Sub or destroy, at the request and option of
the Buyer and the Buyer Sub, all tangible embodiments (and all copies) of the
Confidential Information which are in its possession. In the event that the
Seller is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, the Seller
will notify the Buyer and the Buyer Sub promptly of the request or requirement
so that the Buyer and the Buyer Sub may seek an appropriate protective order or
waive compliance with the provisions of this Section 7(d). If, in the absence
of a protective order or the receipt of a waiver hereunder, the Seller is, on
the advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller
23
may disclose the Confidential Information to the tribunal; PROVIDED, HOWEVER,
that the Seller shall use its best efforts to obtain, at the reasonable
request of the Buyer or the Buyer Sub, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer or the Buyer Sub shall
designate.
(e) COVENANT NOT TO COMPETE. For a period of two years from and after
the Closing Date, the Seller will not engage directly or indirectly in any
business that the Target or Buyer conducts (or the Target plans or proposes
to conduct) in any jurisdiction in which the Buyer or the Target conduct or
plan or propose to conduct business as of the Closing Date; PROVIDED,
HOWEVER, that no owner of less than 1% of the outstanding stock of any
publicly traded corporation shall be deemed to engage solely by reason
thereof in any of its businesses. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section
7(e) is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be appealed.
(f) BUYER COMMON STOCK. Each certificate representing Buyer Common
Stock will be imprinted with a legend substantially in the following form:
The securities represented by this Certificate were originally
issued on ______________, and have not been registered under the
Securities Act of 1933, as amended. The transfer of the
securities represented by this certificate is subject to the
limitations and conditions specified in the Merger Agreement,
dated as of _______________ and as amended and modified from time
to time, among International Nursing Services, Inc. (the
"Company"), and the certain other parties thereto, and the
Company reserves the right to refuse the transfer of such
securities until such conditions have been fulfilled with respect
to such transfer. A copy of all such conditions shall be
furnished by the Company to the holder hereof upon written
request and without charge.
Any holder desiring to transfer Buyer Common Stock first must furnish the Buyer
with (i) a written opinion reasonably satisfactory to the Buyer in form and
substance from counsel reasonably satisfactory to the Buyer by reason of
experience to the effect that the holder may transfer the Buyer Common Stock as
desired without registration under the Securities Act and (ii) a written
undertaking executed by the desired transferee reasonably satisfactory to the
Buyer in form and substance agreeing to be bound by the restrictions on transfer
and other applicable provisions contained herein.
(g) LIMITATION ON RESALES. Notwithstanding anything in this Agreement to
the contrary, through and until June 30, 1997, the Seller may not sell or
otherwise transfer any Buyer Shares,
24
thereafter and through and until June 30, 1998, the Seller shall not sell or
otherwise transfer more than 50,000 Buyer Shares during any thirty-day period.
(h) If the Buyer Sub fails to satisfy in full the Liabilities as set forth
on Section 3(j) of the Disclosure Schedule when due, the Buyer shall cause such
Liabilities to be satisfied in full.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Buyer, the Buyer Sub, the Target, and the
Seller contained in this Agreement shall survive the Closing (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect until
March 31, 1999 (subject to any applicable statutes of limitations); PROVIDED,
HOWEVER, the representations and warranties of the Target and the Seller
contained in Section (3)(l) hereof and the covenant of the Buyer set forth in
Section 7(h) hereof shall survive the Closing and continue in full force and
effect forever thereafter (subject to any applicable statutes of limitations).
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER AND THE BUYER SUB.
(i) In the event the Seller breaches (or in the event any third party
alleges facts that, if true, would mean the Seller has breached) any of its
representations, warranties, and covenants contained in this Agreement,
and, if there is an applicable survival period pursuant to Section 8(a)
above, provided that the Buyer or the Buyer Sub makes a written claim for
indemnification against the Seller pursuant to Section 10(h) below within
such survival period, the Seller agrees to indemnify the Buyer and the
Buyer Sub from and against the entirety of any Adverse Consequences the
Buyer and the Buyer Sub may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences the Buyer or the
Buyer Sub may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by
the breach (or the alleged breach). resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach).
(ii) The Seller agrees to indemnify the Buyer and the Buyer Sub from
and against the entirety of any Adverse Consequences the Buyer and the
Buyer Sub may suffer resulting from, arising out of, relating to, in the
nature of, or caused by:
(A) any Liability of the Target or the Seller which is not set
forth in Section 3(j) of the Disclosure Schedule (including any
Liability of the Target or the Seller that becomes a Liability of the
Buyer or the Buyer Sub under any bulk transfer law of any
jurisdiction, under any common law doctrine of de facto merger or
successor liability, or otherwise by operation of law) up to an
aggregate maximum of $75,000; PROVIDED, HOWEVER, that such $75,000
limitation shall not apply with respect to any such Liability as to
which the Seller had Knowledge or should have had Knowledge on the
Closing Date or any Tax Liability referred to in Section 8(b)(ii)(B);
and
25
(B) any Liability of the Target or the Seller for the unpaid
Taxes of any Person (other than of the Target) incurred after the
Effective Time under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise, or any other Liability of the
Target or the Seller for Taxes other than Taxes of the Target relating
to its operations after the Effective Time.
(iii) The Seller agrees to indemnify the Buyer and the Buyer Sub
from and against the entirety of any Adverse Consequences the Buyer and the
Buyer Sub may suffer resulting from, arising out of, relating to, in the
nature of, or caused by any of the matters referenced in Section 3(t) of
the Disclosure Schedule.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.
(i) In the event the Buyer or the Buyer Sub breaches (or in the event
any third party alleges facts that, if true, would mean the Buyer or the
Buyer Sub has breached) any of its representations, warranties, and
covenants contained in this Agreement, and, if there is an applicable
survival period pursuant to Section 8(a) above, provided that the Seller
makes a written claim for indemnification against the Buyer or the Buyer
Sub pursuant to Section 10(h) below within such survival period, then each
of the Buyer and the Buyer Sub severally agree to indemnify the Seller from
and against the entirety of any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Seller may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach).
(ii) Each of the Buyer and the Buyer Sub severally agree to
indemnify the Seller from and against the entirety of any Adverse
Consequences the Seller may suffer resulting from, arising out of, relating
to, in the nature of, or caused by any Liability as set forth in Section
3(j) of the Disclosure Schedule (except to the extent such Adverse
Consequence results from any action or inaction by the Target or the Seller
prior to the Effective Time or by the Seller after the Effective Time).
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8(d), then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing; PROVIDED,
HOWEVER, that no delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the
26
Indemnified Party so long as (A) the Indemnifying Party notifies the
Indemnified Party in writing within 15 days after the Indemnified Party
has given notice of the Third Party Claim that the Indemnifying Party
will indemnify the Indemnified Party from and against the entirety of
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder, (C) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief, (D) settlement
or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
(iv) In the event any of the conditions in Section 8(d)(ii) above is
or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in connection
therewith), (B) the Indemnifying Parties will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the
Third Party Claim (including reasonable attorneys' fees and expenses), and
(C) the Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third Party Claim to
the fullest extent provided in this Section 8.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall take into
account the time cost of money (using the prime rate as set forth from time to
time in the WALL STREET JOURNAL as the discount rate) in determining Adverse
Consequences for purposes of this Section 8. All indemnification payments
under this Section 8 shall be deemed adjustments to the Purchase Price.
(f) RECOUPMENT. Until June 30, 1998, the Seller shall have the option of
indemnifying all or any part of the amount of any Adverse Consequences it is
obligated to pay to the Buyer or the Buyer Sub pursuant to Section 8(b)(ii) in
cash or by requesting in writing that, in lieu thereof, the
27
Buyer cancel the number of Holdback Shares having a value equal to the amount
of such Adverse Consequences. If the Seller has not paid in cash such amount
within ten days after receipt of the Buyer and/or the Buyer Sub's notice, the
Seller shall be deemed to have elected to indemnify the Buyer and the Buyer
Sub for such Adverse Consequences with Holdback Shares and the Buyer may
cancel (and, in the case of the Buyer Sub, request that the Buyer cancel) the
number of Holdback Shares having a value equal to the amount of such Adverse
Consequences, and the Seller shall, in any event, promptly pay in cash the
amount of such Adverse Consequences that exceed the value of any
then-remaining Holdback Shares. For purposes of this Section 8(f), any such
Holdback Shares shall be valued as set forth in Section 2(d)(v)(A), without
regard to the market value of the Buyer Common Stock at the time of such
recoupment.
(g) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant. The Seller hereby agrees that it will not make any claim
for indemnification against any of the Buyer and its Subsidiaries by reason of
the fact that it was an agent of the Target or was serving at the request of the
Target as a partner, trustee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim or demand brought by the Buyer
against Seller (whether such action, suit, proceeding, complaint, claim, or
demand is pursuant to this Agreement, applicable by law, or otherwise).
8A. CERTAIN TAX MATTERS.
(a) RETURNS FOR PERIODS THROUGH THE CLOSING DATE. The Seller will allow
the Buyer an opportunity to review and comment upon any Tax Returns it
files (including any amended returns) to the extent that they relate to the
Target. The Seller will take no position on such returns that relate to
the Target that would adversely affect the Surviving Corporation after the
Effective Time. The income of the Target will be apportioned to the period
up to and including the Effective Time and the period after the Effective
Time by closing the Books of the Target as of the end of the Closing Date.
(b) AUDITS. The Seller will allow the Surviving Corporation and its
counsel to participate in any audits of the Seller's federal income Tax
Returns to the extent that such returns relate to the Target. The Seller
will not settle any such audit in a manner which would adversely affect the
Surviving Corporation without prior written consent of the Buyer, which
consent shall not be unreasonably withheld.
(c) CARRYBACKS. The Seller will immediately pay to the Buyer any Tax
refund (or reduction in Tax liability) resulting from a carryback of a
post-acquisition Tax attribute of the Target into the consolidated Tax
Return, when such refund or reduction is realized by the Seller. The
Seller will cooperate with the Surviving Corporation in obtaining such
refunds (or reduction in Tax liability), including through the filing of
amended tax returns
28
or refund claims. The Buyer agrees to indemnify the Seller for any
Taxes resulting from the disallowance of such post-acquisition Tax
attribute on audit or otherwise.
(d) ADDITIONAL TAX MATTERS.
(i) the Seller shall use its best efforts to cause the Target to file
with the appropriate governmental authorities all Tax Returns required to
be filed by it for any taxable period ending on or prior to the Closing
Date and shall remit any Taxes due in respect of such Tax Returns. The
Buyer shall cause the Surviving Corporation to file with the appropriate
governmental authorities all Tax Returns required to be filed by it for any
taxable period beginning before and ending after the Closing Date and shall
remit any Taxes due in respect of such Tax Returns and the Seller shall
deliver to Buyer the amount of any Tax due in respect of such Tax Returns
incurred prior to such time pursuant to Section 8A(d)(iv).
(ii) The Parties hereto shall provide such necessary information as
any other Party hereto may reasonably request in connection with the
preparation of such Party's Tax Returns, or to reasonably respond to any
audit, claim for refund or credit or otherwise satisfy any obligation or
requirement relating to Taxes of the Target.
(iii) The Buyer and the Seller recognize that each of them will need
access, from time to time, after the Closing Date, to certain accounting
and tax records and information held by the Surviving Corporation and/or
the Seller to the extent such records and information pertain to events
occurring on or prior to the Closing Date; therefore, each Party agrees to
(A) use its best commercially reasonable efforts to properly retain and
maintain such records for a period of six (6) years after the Closing, and
(B) allow the other Party and its agents and representatives at times and
dates mutually acceptable to the Parties, to inspect, review and make
copies of such records as such other Party may deem necessary or
appropriate from time to time, such activities to be conducted during
normal business hours at the other Party's expense.
(iv) The Seller shall pay to the Buyer the amount of Taxes for which
the Seller is liable pursuant to Section 8(b)(ii)(B) hereof, but which are
payable in respect of Tax Returns to be filed by the Buyer or the Surviving
Corporation pursuant to Section 8A(d)(i) hereof or otherwise within five
(5) business days after receipt of written demand by the Buyer, however,
only to the extent such Taxes are in excess of the reserve for such Tax
Liability as set forth in Section 3(j) of the Disclosure Schedule.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer, the Buyer Sub, the Target and the Seller may terminate
this Agreement by mutual written consent at any time prior to the Closing;
29
(ii) the Buyer and the Buyer Sub may terminate this Agreement by
giving written notice to the Target and the Seller on or before the 30th
day following the date of this Agreement if the Buyer and the Buyer Sub are
not reasonably satisfied with the results of their continuing business,
legal, Tax, and accounting due diligence regarding the Target and the
Seller;
(iii) the Buyer and the Buyer Sub may terminate this Agreement by
giving written notice to the Target at any time prior to the Closing (A) in
the event the Target or the Seller has breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, the Buyer and the Buyer Sub have notified the Target and
the Seller of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if the Closing shall
not have occurred on or before February 15, 1997 by reason of the failure
of any condition precedent under Section 6(a) hereof (unless the failure
results primarily from the Buyer or the Buyer Sub breaching any
representation, warranty, or covenant contained in this Agreement);
(iv) the Target and the Seller may terminate this Agreement by giving
written notice to the Buyer and the Buyer Sub at any time prior to the
Closing (A) in the event the Buyer or the Buyer Sub has breached any
material representation, warranty, or covenant contained in this Agreement
in any material respect, the Target or the Seller has notified the Buyer
and the Buyer Sub of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach or (B) if the Closing
shall not have occurred on or before February 15, 1997 by reason of the
failure of any condition precedent under Section 6(b) hereof (unless the
failure results primarily from the Target or the Seller breaching any
representation, warranty, or covenant contained in this Agreement); and
(v) either the Buyer and the Buyer Sub, on the one hand, or the
Target or the Seller, on the other hand, may terminate this Agreement by
giving written notice to the other Parties at any time after the Special
Seller Meeting in the event this Agreement and the transactions
contemplated hereby fail to receive the Requisite Seller Stockholder
Approval.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach).
10. MISCELLANEOUS.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder as provided in Section 8 hereof.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; PROVIDED,
HOWEVER, that any party may make any public
30
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its best efforts to advise the other
Party prior to making the disclosure).
(c) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way
to the subject matter hereof.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the other Party; PROVIDED, HOWEVER, that the Buyer may
(i) assign any or all of its rights and interests hereunder to the Buyer Sub
and (ii) designate the Buyer Sub to perform its obligations hereunder (in any
or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given at the
time of the first attempted delivery if it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below.
If to the Target or the Seller: Copy to:
American Consolidated Growth Hall & Evans
Corporation 1200 17th Street, Suite 1700
8100 East Arapahoe Road, #311 Denver, CO 80202
Englewood, CO 80112 Attn: Samuel David Cheris
Attn: Norman Fisher Telephone: (303) 628-3331
Lou Coppage Facsimile: (303) 628-3431
Telephone: (303) 220-5300
Facsimile: (303) 220-5961
If to the Buyer or the Buyer Sub: Copy to:
31
International Nursing LeBoeuf, Lamb, Greene
Services, Inc. & MacRae
Suite 400 633 17th Street
360 South Garfield Street Suite 2800
Denver, CO 80209 Denver, CO 80202
Attn: John P. Yeros Attn: Thomas J. Moore
Telephone: (303) 393-1515 Steven E. Segal
Facsimile: (303) 394-3653 Telephone: (303) 291-2600
Facsimile: (303) 297-0422
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), and any such
notice, request, demand, claim, or other communication shall be deemed to
have been duly given at the time it actually is received by the intended
recipient Party during such Party's normal business hours. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice
in the manner herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the
State of Colorado or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Colorado.
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Buyer, the Buyer Sub, the Target and the Seller. The Target and the
Seller may consent to any such amendment at any time prior to the Closing
with the prior authorization of its board of directors; PROVIDED, HOWEVER,
that any amendment effected after the Voting Stockholders have approved this
Agreement will be subject to the restrictions contained in the Delaware
General Corporation Law. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(l) EXPENSES. Except as set forth in Section 3(j) of the Disclosure
Schedule, each of the Buyer, the Buyer Sub, and the Seller will bear its own
(and the Seller will bear the Target's) costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby). The Seller agrees that the Target has not
borne and, except as set forth in Section 3(j) of the Disclosure Schedule,
will not bear, any of the costs and expenses of
32
the Target and the Seller (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated
hereby. The Seller also agrees that it has not paid any amount to any third
party, and will not pay any amount to any third party until after the
Closing, with respect to any of the costs and expenses of the Target and the
Seller (including any of their legal fees and expenses) in connection with
his Agreement or any of the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity
and describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception
to a representation or warranty made herein (unless the representation or
warranty has to do with the existence of the document or other items itself).
The Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
parties and the matter (subject to the provisions set forth in Section 8(p)
below), in addition to any other remedy to which it may be entitled, at law or
in equity.
(p) SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Denver, Colorado, in any
action or proceeding arising out of or relating to this Agreement and agree that
all claims in respect of the action or proceeding may be heard and determined in
any such court. Each party also agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so
33
brought and waives any bond, surety, or other security that might be required
of any other Party with respect thereto. Any Party may make service on the
other Party by sending or delivering a copy of the process to the Party to be
served at the address and in the manner provided for the giving of notices in
Section 10(h) above. Nothing in this Section 10(p), however, shall affect
the right of any Party to serve legal process in any other manner permitted
by law or in equity. Each party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on
the judgment or in any other manner provided by law or in equity.
(q) EMPLOYEE BENEFITS MATTERS. The Buyer will not adopt or assume any of
the Employee Benefit Plans that the Target maintains or any trust, insurance
contract, annuity contract, or other funding arrangement that the Target has
established with respect thereto and the Seller will remain liable for any
obligations thereunder.
* * * * *
34
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
BUYER INTERNATIONAL NURSING SERVICES, INC.
By:
--------------------------------
Name:
Title:
-------------------------------
BUYER SUB INS ACQUISITION SUB, INC.
By:
---------------------------------
Name:
Title:
------------------------------
TARGET ELEVENTH HOUR, INC.
By:
---------------------------------
Name:
Title:
------------------------------
SELLER AMERICAN CONSOLIDATED
GROWTH CORPORATION
By:
---------------------------------
Name:
Title:
------------------------------
35
EXHIBIT A
FORM OF ARTICLES OF MERGER
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT C
FORM OF WARRANT
DISCLOSURE SCHEDULE