CONFIDENTIAL TREATMENT REQUESTED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DAOU SYSTEMS, INC.,
DAOU-RHI, INC.,
RESOURCES IN HEALTHCARE INNOVATIONS, INC.,
HEALTHCARE TRANSITION RESOURCES, INC.,
ULTITECH RESOURCES GROUP, INC.,
INNOVATIVE SYSTEMS SOLUTIONS, INC.,
GRAND ISLE CONSULTING, INC.
AND
THE RESPECTIVE SHAREHOLDERS
OF
RESOURCES IN HEALTHCARE INNOVATIONS, INC.,
HEALTHCARE TRANSITION RESOURCES, INC.,
ULTITECH RESOURCES GROUP, INC.,
INNOVATIVE SYSTEMS SOLUTIONS, INC.
AND
GRAND ISLE CONSULTING, INC.
LISTED ON THE SIGNATURE PAGE HERETO
Dated as of June 26, 1998
CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.01 THE MERGER . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02 EFFECTIVE TIME . . . . . . . . . . . . . . . . . 2
SECTION 1.03 EFFECT OF THE MERGER . . . . . . . . . . . . . . 2
SECTION 1.04 CERTIFICATE OF INCORPORATION; BY-LAWS. . . . . . 2
SECTION 1.05 DIRECTORS AND OFFICERS . . . . . . . . . . . . . 3
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES. . . . . . . 3
SECTION 2.01 CONVERSION OF SECURITIES . . . . . . . . . . . . 3
SECTION 2.02 EXCHANGE OF CERTIFICATES . . . . . . . . . . . . 4
SECTION 2.03 STOCK TRANSFER BOOKS . . . . . . . . . . . . . . 6
SECTION 2.04 DISSENTING SHARES. . . . . . . . . . . . . . . . 6
ARTICLE IIA VOTING RIGHTS AND PROXY . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.01A. CONSENT AND VOTING AGREEMENT . . . . . . . . . . 7
SECTION 2.02A. GRANT OF PROXY . . . . . . . . . . . . . . . . . 7
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING . . . . . . . . . . . 8
SECTION 3.01 ORGANIZATION AND QUALIFICATION . . . . . . . . . 8
SECTION 3.02 CERTIFICATE OF INCORPORATION AND BY-LAWS . . . . 8
SECTION 3.03 CAPITALIZATION . . . . . . . . . . . . . . . . . 9
SECTION 3.04 AUTHORITY. . . . . . . . . . . . . . . . . . . . 9
SECTION 3.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . .10
SECTION 3.06 PERMITS; COMPLIANCE. . . . . . . . . . . . . . .10
SECTION 3.07 FINANCIAL STATEMENTS . . . . . . . . . . . . . .11
SECTION 3.08 NO UNDISCLOSED LIABILITIES . . . . . . . . . . .11
SECTION 3.09 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . .11
SECTION 3.10 ABSENCE OF LITIGATION. . . . . . . . . . . . . .14
SECTION 3.11 VOTE REQUIRED. . . . . . . . . . . . . . . . . .14
SECTION 3.12 BROKERS. . . . . . . . . . . . . . . . . . . . .14
SECTION 3.13 COMPANY ACTION . . . . . . . . . . . . . . . . .14
SECTION 3.14 TAX MATTERS; "POOLING OF INTERESTS". . . . . . .14
SECTION 3.15 REAL PROPERTY. . . . . . . . . . . . . . . . . .16
SECTION 3.16 INTELLECTUAL PROPERTY. . . . . . . . . . . . . .16
SECTION 3.17 TANGIBLE ASSETS. . . . . . . . . . . . . . . . .18
SECTION 3.18 CUSTOMERS. . . . . . . . . . . . . . . . . . . .18
SECTION 3.19 CONTRACTS. . . . . . . . . . . . . . . . . . . .18
SECTION 3.20 NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . .19
SECTION 3.21 POWERS OF ATTORNEY . . . . . . . . . . . . . . .19
SECTION 3.22 INSURANCE. . . . . . . . . . . . . . . . . . . .19
SECTION 3.23 EMPLOYEES. . . . . . . . . . . . . . . . . . . .20
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CONFIDENTIAL TREATMENT REQUESTED
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SECTION 3.24 EMPLOYEE BENEFITS. . . . . . . . . . . . . . . .20
SECTION 3.25 GUARANTIES . . . . . . . . . . . . . . . . . . .22
SECTION 3.26 ENVIRONMENT, HEALTH AND SAFETY . . . . . . . . .22
SECTION 3.27 CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGET
COMPANIES. . . . . . . . . . . . . . . . . . . .23
SECTION 3.28 [RESERVED] . . . . . . . . . . . . . . . . . . .23
SECTION 3.29 PRODUCT AND SERVICE WARRANTIES . . . . . . . . .23
SECTION 3.30 PRODUCT AND SERVICE LIABILITY. . . . . . . . . .23
SECTION 3.31 CUSTOMER/SUPPLIER RELATIONSHIPS. . . . . . . . .23
SECTION 3.32 CERTAIN BUSINESS PRACTICES . . . . . . . . . . .23
SECTION 3.33 DISCLOSURE . . . . . . . . . . . . . . . . . . .24
SECTION 3.34 LIMITATION ON REPRESENTATIONS AND WARRANTIES . .24
ARTICLE IIIA REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER. . . . . . .24
SECTION 3.01A. AUTHORIZATION OF TRANSACTION . . . . . . . . . .24
SECTION 3.02A. NONCONTRAVENTION . . . . . . . . . . . . . . . .24
SECTION 3.03A. BROKERS. . . . . . . . . . . . . . . . . . . . .25
SECTION 3.04A. COMPANY SHARES . . . . . . . . . . . . . . . . .25
SECTION 3.05A. ACCREDITED INVESTOR. . . . . . . . . . . . . . .25
SECTION 3.06A. INVESTMENT INTENTION . . . . . . . . . . . . . .25
SECTION 3.07A. EMPLOYMENT . . . . . . . . . . . . . . . . . . .25
SECTION 3.08A. LIMITATION ON REPRESENTATIONS AND WARRANTIES . .26
SECTION 3.09A. DELIVERY OF INFORMATION. . . . . . . . . . . . .26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB . . . .26
SECTION 4.01 ORGANIZATION AND QUALIFICATION . . . . . . . . .26
SECTION 4.02 CERTIFICATES OF INCORPORATION AND BY-LAWS. . . .26
SECTION 4.03 PARENT COMMON STOCK; CAPITALIZATION. . . . . . .26
SECTION 4.04 AUTHORITY. . . . . . . . . . . . . . . . . . . .27
SECTION 4.05 REQUIRED FILINGS AND CONSENTS. . . . . . . . . .27
SECTION 4.06 REPORTS; FINANCIAL STATEMENTS. . . . . . . . . .28
SECTION 4.07 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . .28
SECTION 4.08 OWNERSHIP OF PARENT SUB; NO PRIOR ACTIVITIES . .29
SECTION 4.09 BROKERS. . . . . . . . . . . . . . . . . . . . .29
SECTION 4.10 [RESERVED. . . . . . . . . . . . . . . . . . . .29
SECTION 4.11 LIMITATION ON REPRESENTATIONS AND WARRANTIES . .29
ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.01 AFFIRMATIVE COVENANTS OF TARGET COMPANIES. . . .30
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CONFIDENTIAL TREATMENT REQUESTED
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SECTION 5.02 NEGATIVE COVENANTS OF THE TARGET COMPANIES . . .30
SECTION 5.03 NEGATIVE COVENANTS OF PARENT . . . . . . . . . .32
SECTION 5.04 ACCESS AND INFORMATION . . . . . . . . . . . . .33
SECTION 5.05 ESCROW AGREEMENT . . . . . . . . . . . . . . . .33
SECTION 5.06 * * *. . . . . . . . . . . . . . . . . . . . . .33
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . .33
SECTION 6.01 APPROPRIATE ACTION; CONSENTS; FILINGS. . . . . .33
SECTION 6.02 TAX TREATMENT; POOLING OF INTERESTS; AFFILIATES.34
SECTION 6.03 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . .35
SECTION 6.04 OBLIGATIONS OF PARENT SUB. . . . . . . . . . . .35
SECTION 6.05 RESTRICTIVE LEGEND . . . . . . . . . . . . . . .36
SECTION 6.06 * * *. . . . . . . . . . . . . . . . . . . . . .36
SECTION 6.07 DELIVERY OF SEC FILINGS. . . . . . . . . . . . .36
SECTION 6.08 TERMINATION OF SHAREHOLDERS' AGREEMENT . . . . .36
SECTION 6.09 BEST EFFORTS.. . . . . . . . . . . . . . . . . .37
ARTICLE VII CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .37
SECTION 7.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER
THIS AGREEMENT . . . . . . . . . . . . . . . . .37
SECTION 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS
OF PARENT. . . . . . . . . . . . . . . . . . . .37
SECTION 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE
COMPANY. . . . . . . . . . . . . . . . . . . . .39
ARTICLE VIII TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION. . . . . . .40
SECTION 8.01 TERMINATION. . . . . . . . . . . . . . . . . . .40
SECTION 8.02 INVESTIGATION. . . . . . . . . . . . . . . . . .41
SECTION 8.03 AMENDMENT. . . . . . . . . . . . . . . . . . . .41
SECTION 8.04 WAIVER; REMEDIES CUMULATIVE. . . . . . . . . . .41
SECTION 8.05 * * *. . . . . . . . . . . . . . . . . . . . . .42
SECTION 8.06 SHAREHOLDER INDEMNIFICATION, HOLD BACK
AND ESCROW . . . . . . . . . . . . . . . . . . .42
ARTICLE IX GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . .46
SECTION 9.01 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS . . . . . . . . . . . . . . . . .46
SECTION 9.02 NOTICES. . . . . . . . . . . . . . . . . . . . .46
SECTION 9.03 CERTAIN DEFINITIONS. . . . . . . . . . . . . . .47
SECTION 9.04 HEADINGS; CONSTRUCTION . . . . . . . . . . . . .55
SECTION 9.05 SEVERABILITY . . . . . . . . . . . . . . . . . .55
SECTION 9.06 ENTIRE AGREEMENT; AMENDMENT. . . . . . . . . . .55
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CONFIDENTIAL TREATMENT REQUESTED
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SECTION 9.07 ASSIGNMENT . . . . . . . . . . . . . . . . . . .55
SECTION 9.08 PARTIES IN INTEREST. . . . . . . . . . . . . . .55
SECTION 9.09 FURTHER ASSURANCES . . . . . . . . . . . . . . .55
SECTION 9.10 GOVERNING LAW. . . . . . . . . . . . . . . . . .55
SECTION 9.11 BINDING ARBITRATION. . . . . . . . . . . . . . .56
SECTION 9.12 WAIVER; REMEDIES CUMULATIVE. . . . . . . . . . .56
SECTION 9.13 COUNTERPARTS . . . . . . . . . . . . . . . . . .57
SECTION 9.14 REPRESENTATION BY COUNSEL. . . . . . . . . . . .57
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CONFIDENTIAL TREATMENT REQUESTED
INDEX TO EXHIBITS
Exhibit 2.01A Written Consent of the Shareholders of the Target
Companies
Exhibit III Schedule of Exceptions
Exhibit 5.05 Form of Escrow Agreement
Exhibit 7.02(a)(i) Form of Certificate of President of the Target
Companies
Exhibit 7.02(f) Legal Opinion of Counsel to the Target Companies
Exhibit 7.02(g) Form of Affiliate Agreement (Target Company)
Exhibit 7.02(h)(i) Form of Employment Agreement for D. Parker Hinshaw
Exhibit 7.02(h)(ii) Form of Employment Agreement for each of Darryl
Bollinger, Carol R. Selvey, Daniel W. Murry and Charles
G. Shelley, Jr.
Exhibit 7.02(h)(iii) Form of Consulting Agreement for each of Larry Collins
and Eileen M. Weldon
Exhibit 7.02(i)(i) Form of Noncompetition Agreement for each of D. Parker
Hinshaw, Darryl Bollinger, Carol R. Selvey, Daniel W.
Murry, Jennifer Arthur and Charles G. Shelley, Jr.
Exhibit 7.02(i)(ii) Form of Noncompetition Agreement for each of Larry
Collins and Eileen M. Weldon
Exhibit 7.02(j) Form of Spousal Consent
Exhibit 7.03(a) Form of Certificate of President of Parent
Exhibit 7.03(d) Legal Opinion of Counsel to Parent
Exhibit 7.03(e) Form of Affiliate Agreement (Parent)
Exhibit 7.03(h) * * *
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CONFIDENTIAL TREATMENT REQUESTED
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 26, 1998 (this
"AGREEMENT"), by and among DAOU Systems, Inc., a Delaware corporation
("PARENT"), DAOU-RHI, a Delaware corporation and a wholly-owned subsidiary of
Parent ("PARENT SUB"), Resources in Healthcare Innovations, Inc., an Indiana
corporation ("RHI"), Healthcare Transition Resources, Inc., an Indiana
corporation ("HTR"), Ultitech Resources Group, Inc., an Indiana corporation
("URG"), Innovative Systems Solutions, Inc., an Indiana corporation ("ISS"),
Grand Isle Consulting, Inc., an Indiana corporation ("GIC"), and the respective
shareholders of RHI, HTR, URG, ISS and GIC (each a "Target Company" and
collectively, the "TARGET COMPANIES"), listed on the signature page hereto (each
a "SHAREHOLDER" and collectively, among all of the Target Companies, the
"SHAREHOLDERS").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
("DELAWARE LAW") and the Business Corporation Law of the State of Indiana
("INDIANA LAW"), the Target Companies will merge with and into Parent Sub (the
"MERGER");
WHEREAS, the Board of Directors of each of the Target Companies has
determined that the Merger is in the best interests of such Target Company and
its Shareholders, has approved and adopted this Agreement and the transactions
contemplated hereby, and has recommended that its Shareholders approve and adopt
this Agreement and the transactions contemplated hereby;
WHEREAS, the Shareholders collectively hold one hundred percent (100%) of
the outstanding voting power of the Target Companies, have irrevocably consented
to the execution and delivery of this Agreement and the consummation of the
Merger and have irrevocably agreed to vote in favor of the Merger at a meeting
of Shareholders or by a written consent executed by each Shareholder, and such
consent and agreement is an essential condition and inducement to Parent and
Parent Sub to enter into this Agreement;
WHEREAS, the Boards of Directors of Parent and Parent Sub have determined
that the Merger is in the best interests of Parent and Parent Sub and their
respective stockholders, and have approved and adopted this Agreement and the
transactions contemplated hereby;
WHEREAS, the Target Companies, Parent and Parent Sub intend that the Merger
shall constitute a "reorganization" under Section 368(a)(1)(A) of the Code, by
application of Section 368(a)(2)(D) of the Code, and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code;
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests"; and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
WHEREAS, certain capitalized terms used in this Agreement are defined in
Section 9.03;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with Delaware Law and
Indiana Law, at the Effective Time (as defined in Section 1.02), each of the
Target Companies shall be merged with and into Parent Sub. As a result of the
Merger, the separate corporate existence of the Target Companies shall cease and
Parent Sub shall continue as the surviving corporation in the Merger (the
"SURVIVING CORPORATION"). The name of the Surviving Corporation shall be
DAOU-RHI, Inc.
SECTION 1.02 EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the closing conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing with respect to each of the Target Companies: (i) a certificate of merger
(the "CERTIFICATE OF MERGER") with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, Delaware Law; and (ii) articles of merger (the "ARTICLES
OF MERGER") with the Secretary of State of the State of Indiana, in such form as
required by, and executed in accordance with the relevant provisions of, Indiana
Law (the date and time of the last of such filings, or such later time as may be
agreed to in writing by Parent, Parent Sub and the Target Companies and
specified in the Certificate of Merger, being the "EFFECTIVE TIME").
SECTION 1.03 EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law and Indiana Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, except as otherwise provided herein,
all of the property, rights, privileges, powers and franchises of Parent Sub and
the Target Companies shall vest in the Surviving Corporation, and all debts,
Liabilities and duties of Parent Sub and the Target Companies shall become the
debts, Liabilities and duties of the Surviving Corporation.
SECTION 1.04 CERTIFICATE OF INCORPORATION; BY-LAWS. Certificate of
Incorporation; By-Laws. At the Effective Time, the Certificate of Incorporation
of Parent Sub as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, and the By-Laws of
Parent Sub shall be the By-Laws of the Surviving Corporation.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 1.05 DIRECTORS AND OFFICERS. The directors of Parent Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Parent Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 CONVERSION OF SECURITIES.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Parent Sub, the Target Companies or the holders of any of
the following securities, each share of each of the Target Companies' common
stock, no par value per share ("COMMON STOCK"), issued and outstanding
immediately prior to the Effective Time, excluding any treasury shares held by
such Target Company, shares held by Parent or any direct or indirect
wholly-owned Subsidiary of Parent or of such Target Company and the Dissenting
Shares, if any, shall be converted into the right to receive that number of
fully paid, nonassessable shares of Parent's common stock, par value $.001 per
share ("PARENT COMMON STOCK"), equal to the Exchange Ratio, subject to
adjustment as set forth in Section 2.01(b) and subject to pro rata withholding
of shares to be held in escrow pursuant to Section 5.05.
(b) If between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock or any Target Company's Common Stock
shall have been changed into a different number of shares of a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Exchange Ratio
shall be correspondingly adjusted as necessary to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
(c) At the Effective Time, all of the shares of the Target Companies'
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each Certificate previously evidencing
any such shares shall thereafter represent only the right to receive the Merger
Consideration (as defined in Section 2.02(b)). The holders of such Certificates
previously evidencing such shares of the Target Companies' Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of the Target Companies' Common Stock, except
as otherwise provided herein or by Law. Such Certificates previously evidencing
shares of the Target Companies' Common Stock shall be exchanged for certificates
evidencing whole shares of Parent Common Stock issued in consideration therefor
in accordance with the allocation procedures of this Section 2.01 and upon the
surrender of such Certificates in accordance with the provisions of Section
2.02. No fractional shares of
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
Parent Common Stock shall be issued, and, in lieu thereof, a cash payment shall
be made pursuant to Section 2.02(e).
(d) Each share of each of the Target Companies' Common Stock held in
the treasury of such Target Company and each share of such Target Company's
Common Stock owned by Parent or any direct or indirect wholly-owned Subsidiary
of Parent or of any of the Target Companies, if any, immediately prior to the
Effective Time shall be canceled and extinguished without any conversion thereof
and no payment shall be made with respect thereto.
SECTION 2.02 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit,
or shall cause to be deposited, with Baker & McKenzie or such other Person
designated by Parent and reasonably satisfactory to the Target Companies (the
"EXCHANGE AGENT"), for the benefit of the Shareholders and for exchange in
accordance with this Article II through the Exchange Agent (i) certificates
evidencing such number of whole shares of Parent Common Stock equal to the sum
of the product of (x) the Exchange Ratio for each Target Company multiplied by
(y) the number of shares of such Target Company's Common Stock then outstanding
and (ii) cash in consideration of fractional shares as provided in Section
2.02(e) (such Parent Common Stock and cash being hereinafter referred to as the
"EXCHANGE FUND"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver to the Shareholders the shares of Parent Common Stock
(except that * * * of such shares of Parent Common Stock shall be delivered to
an escrow agent pursuant to Sections 5.05 and 8.06) and cash out of the Exchange
Fund in accordance with Section 2.02(b) below. Except as contemplated by
Section 2.02(f), the Exchange Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of a Target Company's Common Stock
(other than Dissenting Shares, if applicable) (collectively, the
"CERTIFICATES"), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates evidencing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, and such other customary documents as
may * * * be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) certificates
evidencing that number of whole shares of Parent Common Stock which such holder
has the right to receive in respect of the shares of such Target Company's
Common Stock formerly evidenced by such Certificate in accordance with Section
2.01, less the pro rata portion of the shares attributable to such Certificate
(rounded to the nearest whole share) to be held in escrow pursuant to Sections
5.05 and 8.06 and (B) cash in lieu of fractional shares of Parent Common Stock
to which such holder is
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
entitled pursuant to Section 2.02(e) (such shares of Parent Common Stock and
cash, if any, being collectively, the "MERGER CONSIDERATION"), and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of any shares of a Target Company's Common Stock which is
not registered in the transfer records of such Target Company, a certificate
evidencing the proper number of shares of Parent Common Stock may be issued in
accordance with this Article II to a transferee if the Certificate evidencing
such shares of such Target Company's Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02, each of the
Certificates shall be deemed at any time after the Effective Time to evidence
only the right to receive, upon such surrender, the Merger Consideration.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT
COMMON STOCK. No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock evidenced
thereby, and no other part of the Merger Consideration shall be paid to any
such holder, until the holder of such Certificate shall surrender such
Certificate, at which time, subject to the effect of applicable Laws, there
shall be issued to the holder (i) the Merger Consideration payable with
respect to such Certificate, (ii) the amount of dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to the shares of Parent Common Stock issued as part of the
Merger Consideration, and (iii) at the appropriate payment date, the amount
of dividends or other distributions (without interest thereon), with a record
date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of
Parent Common Stock. No interest shall be paid on the Merger Consideration.
(d) NO FURTHER RIGHTS IN THE TARGET COMPANIES' COMMON STOCK. All
shares of Parent Common Stock issued and cash paid upon exchange of the
shares of each of the Target Companies' Common Stock in accordance with the
terms hereof shall be deemed to have been issued or paid in full satisfaction
of all rights pertaining to such shares of such Target Company's Common Stock.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip evidencing fractional shares
of Parent Common Stock shall be issued upon the surrender for exchange of the
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent.
(ii) Each holder of a Certificate having a fractional
interest arising upon the conversion of such Certificate shall, at the time
of surrender of such Certificate, be paid by the Exchange Agent an amount in
cash equal to the value of such fractional interest based on a price per
share equal to the Market Price.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
5
CONFIDENTIAL TREATMENT REQUESTED
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of the Target Companies'
Common Stock for two (2) years after the Effective Time shall be delivered to
Parent, upon demand, and any holders of the Target Companies' Common Stock
who have not theretofore complied with this Article II shall thereafter look
only to Parent for the Merger Consideration to which they are entitled.
(g) NO LIABILITY. Neither Parent nor the Surviving Corporation
shall be liable to any holder of shares of the Target Companies' Common Stock
for any shares of Parent Common Stock, cash or dividends or distributions
with respect thereto delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
SECTION 2.03 STOCK TRANSFER BOOKS. On the date hereof, the stock
transfer books of each of the Target Companies shall be closed and there shall
be no further registration of transfers of shares of such Target Company's
Common Stock thereafter on the records of such Target Company. On or after the
Effective Time, any Certificates presented to the Exchange Agent for any reason
shall be converted into the Merger Consideration.
SECTION 2.04 DISSENTING SHARES. If required under Delaware Law or
Indiana Law, notwithstanding any other provisions of this Agreement to the
contrary, shares of any Target Company's Common Stock that are outstanding
immediately prior to the Effective Time and which are held by shareholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly, in writing, appraisal for such shares in
accordance with Section 262 of Delaware Law or demand for payment in accordance
with Chapter 44 of Indiana Law (IC 23-1-44) (collectively, the "DISSENTING
SHARES") shall not be converted into or represent the right to receive the
Merger Consideration. Such shareholders shall be entitled to receive payment of
the appraised value of such shares of such Target Company's Common Stock held by
them in accordance with the provisions of Section 262 of Delaware Law and
Chapter 44 of Indiana Law, except that all Dissenting Shares held by
shareholders who have failed to perfect or who effectively have withdrawn or
lost their rights to appraisal of such shares of such Target Company's Common
Stock under Section 262 of Delaware Law and Chapter 44 of Indiana Law shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration, upon surrender, in the manner provided in
Section 2.02, of the Certificate or Certificates that formerly evidenced such
shares of such Target Company's Common Stock. Any payments required to be made
to the holders of any Dissenting Shares shall be funded by Parent or the
Surviving Corporation.
ARTICLE IIA
VOTING RIGHTS AND PROXY
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
6
CONFIDENTIAL TREATMENT REQUESTED
SECTION 2.01A. CONSENT AND VOTING AGREEMENT. Each Shareholder hereby
(a) irrevocably consents to the execution and delivery of this Agreement and to
the consummation of the Merger and shall contemporaneously herewith execute the
written consent attached hereto as EXHIBIT 2.01A (the "CONSENT"), and (b) as
long as this Agreement has not been terminated prior to the date specified in
Section 8.01(f), further irrevocably agrees to vote all shares of the Target
Companies' Common Stock as to which such Shareholder is entitled to vote at a
meeting of the shareholders of such Target Companies if any meeting is so held,
or by written consent without a meeting as follows: (i) in favor of approval and
adoption of this Agreement and the transactions contemplated hereby; (ii)
against any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of such Target
Companies or such Shareholder under this Agreement; (iii) against any action or
agreement (other than this Agreement or the transactions contemplated by this
Agreement or the termination of this Agreement in accordance with its terms),
that would, directly or indirectly, impede, interfere with, delay, postpone or
attempt to discourage the Merger, including, without limitation: (A) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving such Target Companies; (B) a sale or transfer of
a material amount of Assets of such Target Companies, or a reorganization,
recapitalization or liquidation of such Target Companies; (C) any change in the
management or board of directors of such Target Companies or any Competing
Transaction, except as otherwise agreed to in writing by Parent; (D) any
material change in the present capitalization or dividend policy of such Target
Companies; or (E) any other material change in such Target Companies' corporate
structure or business.
SECTION 2.02A. GRANT OF PROXY. Each Shareholder hereby irrevocably
appoints each of the Chief Executive Officer, President and Chief Financial
Officer of Parent, each with full power of substitution (each such individual0
and his substitutes being referred to herein as the "PROXY"), as attorneys and
proxies to vote all shares of each of the Target Companies' Common Stock on all
matters referred to in Section 2.01A as to which such Shareholder is entitled to
vote at a meeting of the shareholders of such Target Company or to which he is
entitled to express consent or dissent to corporate action in writing without a
meeting, in the Proxy's absolute, sole and binding discretion. Each Shareholder
agrees to refrain from taking any action contrary to or in any manner
inconsistent with the terms of this Article IIA. Each Shareholder agrees that
this grant of proxy is irrevocable and coupled with an interest and agrees that
a person designated as Proxy pursuant hereto may, at any time, name any other
person as his substituted Proxy to act pursuant hereto, either as to a specific
matter or as to all matters. Each Shareholder hereby revokes any proxy
previously granted by him or her with respect to voting his or her shares of the
Target Companies' Common Stock. In discharging its powers under this Agreement,
the Proxy may rely upon advice of counsel to Parent, and any vote made or action
taken by the Proxy in reliance upon such advice of counsel shall be deemed to
have been made in good faith by the Proxy. This grant of proxy shall terminate
upon the termination of this Agreement pursuant to Article VIII hereof.
ARTICLE III
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
7
CONFIDENTIAL TREATMENT REQUESTED
REPRESENTATIONS AND WARRANTIES CONCERNING
THE TARGET COMPANIES
Except as set forth in the Schedule of Exceptions attached hereto as
EXHIBIT III, each of the Target Companies and the Shareholders hereby represents
and warrants, jointly and severally, to Parent and Parent Sub as follows ***:
SECTION 3.01 ORGANIZATION AND QUALIFICATION. Each Target Company is
a corporation duly organized, validly existing and in good standing under the
Laws of Indiana, has all requisite corporate or other power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary * * *.
No Target Company directly or indirectly, owns or has an economic interest in
any Subsidiary or other Person.
SECTION 3.02 CERTIFICATE OF INCORPORATION AND BY-LAWS. SCHEDULE
3.02 contains (i) a list of the officers and directors of each Target Company
and (ii) complete and correct copies of the Certificate of Incorporation and
By-Laws or equivalent organizational documents, in each case as amended or
restated, of such Target Company. No Target Company is in violation of any of
the provisions of its Certificate of Incorporation or By-Laws or equivalent
organizational documents, in each case as amended or restated.
SECTION 3.03 CAPITALIZATION.
(a) The authorized capital stock of each of RHI, HTR, URG, ISS and
GIC consists of One Million (1,000,000), One Thousand (1,000), One Thousand
(1,000), One Thousand (1,000) and One Thousand (1,000) shares of Common Stock,
respectively. As of the date of this Agreement, (i) Two Hundred Two Thousand
Seven Hundred Eighty (202,780), One Hundred (100), One Hundred (100), One
Hundred (100) and One Hundred (100) shares of common stock of RHI, HTR, URG, ISS
and GIC, respectively, were issued and outstanding, in each case all of which
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights created by statute, such Target Company's
Certificate of Incorporation or By-Laws or any agreement to which such Target
Company is a party or bound, (ii) no shares of the Target Companies' Common
Stock were held in treasury of any Target Company, except as set forth on
Schedule 3.03, and (iii) SCHEDULE 3.03(a) sets forth the name and address of
each holder of the Target Companies' Common Stock and the number of shares of
Common Stock held by such holder. There are no bonds, debentures, notes or
other indebtedness, issued or outstanding, having the right to vote on any
matters on which the Shareholders may vote. There are no options, warrants,
calls or other rights (including registration rights), agreements, arrangements
or commitments of any character, presently outstanding, which (x) obligate any
Target Company to issue, deliver or sell shares of its capital stock or debt
securities, (y) obligate any Target Company to grant, extend or enter into any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
8
CONFIDENTIAL TREATMENT REQUESTED
such option, warrant, call or other such right, agreement, arrangement or
commitment, or (z) obligate any Target Company to repurchase, redeem or
otherwise acquire any shares of such Target Company's Common Stock.
(b) [Reserved]
SECTION 3.04 AUTHORITY. Each Target Company has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action (including, with respect to the Merger, the approval and
adoption of this Agreement by the Shareholders who collectively hold one hundred
percent (100%) of the outstanding shares of each Target Company's Common Stock)
and no other corporate proceeding on the part of any Target Company is necessary
to authorize the execution, delivery and performance of this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by each Target Company and, assuming the due
authorization, execution and delivery thereof by the Shareholders, Parent and
Parent Sub, constitutes a legal, valid and binding obligation of such Target
Company enforceable in accordance with its terms * * *.
SECTION 3.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in SCHEDULE 3.05, the execution and delivery
of this Agreement by each Target Company does not, and the performance of this
Agreement by such Target Company will not (i) conflict with or violate the
Certificate of Incorporation or By-Laws or the equivalent organizational
documents, in each case as amended or restated, of such Target Company, (ii)
conflict with or violate any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively, "LAWS") in
effect as of the date of this Agreement and applicable to such Target Company or
by which any of their respective properties is bound or subject to, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or require
payment under, or result in the creation of an Encumbrance on, any of the
properties or Assets of such Target Company pursuant to, any note, bond,
mortgage, indenture, Contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which such Target Company is a party or by
which such Target Company or any of its properties is bound or subject.
(b) The execution and delivery of this Agreement by each Target
Company does not, and the performance of this Agreement by such Target Company
will not, require such Target Company to obtain any consent, approval,
authorization or permit of, or to make any filing with or notification to, any
governmental or regulatory authority, domestic or foreign ("GOVERNMENTAL
ENTITIES") based on Laws and other requirements of Governmental Entities in
effect as of the date
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
9
CONFIDENTIAL TREATMENT REQUESTED
of this Agreement, except * * * for applicable requirements, if any, of * * *
the state securities or blue sky laws ("BLUE SKY LAWS"), the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), and the filing
and recordation of appropriate merger documents as required by Delaware Law and
Indiana Law * * *.
SECTION 3.06 PERMITS; COMPLIANCE. Each Target Company is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "TARGET COMPANY PERMITS"), * * *
and there is no action, proceeding or investigation pending or * * * threatened
regarding suspension or cancellation of any of the Target Company Permits. No
Target Company is in conflict with, or in default or violation of (a) any Law
applicable to such Target Company or which any of its properties is bound by or
subject to or (b) any of the Target Company Permits * * *. Since December 31,
1996, no Target Company has received from any Governmental Entity any written
notification with respect to possible conflicts, defaults or violations of Laws.
SECTION 3.07 FINANCIAL STATEMENTS. SCHEDULE 3.07 contains true,
correct and complete copies of (i) the unaudited Balance Sheets of the Target
Companies as of December 31, 1997 (collectively, the "BALANCE SHEETS"), and the
related unaudited Statements of Operations, Statements of Cash Flows and
Statements of Shareholders Equity for the fiscal year then ended, and the notes
and schedules thereto (collectively, the "FINANCIAL STATEMENTS"), and (ii) the
unaudited balance sheets of the Target Companies as of May 31, 1998
(collectively, the "INTERIM BALANCE SHEETS"), and the related unaudited
Statements of Operations, Statements of Cash Flows, and Statements of
Shareholders Equity of the Target Companies for the five months ended May 31,
1998, excluding any adjustments (which will not individually or in the aggregate
have a Target Company Material Adverse Effect) and notes (that, if presented,
would not differ materially from those included in the Balance Sheets), which
would be included in a year-end financial statement (collectively, the "INTERIM
FINANCIAL STATEMENTS"). The Financial Statements and the Interim Financial
Statements have been prepared from books and records of the Target Companies in
accordance with GAAP applied on a basis consistent with preceding years and
throughout the periods involved (except as otherwise noted therein). The
Financial Statements and the Interim Financial Statements fairly present the
financial condition, results of operations and changes in cash flows of the
Target Companies, taken as a whole, as at the dates thereof and for the periods
indicated in the statements of earnings, operations and cash flows, except, in
the case of the Interim Financial Statements, for the absence of notes thereto
and subject to normal year-end audit adjustments. No financial statement of any
Person is required by GAAP to be included in the Financial Statements.
SECTION 3.08 NO UNDISCLOSED LIABILITIES. Except as set forth on
SCHEDULE 3.08, there are no liabilities or other obligations of any Target
Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise ("LIABILITIES"), and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such Liabilities, other than (i) Liabilities fully reflected or
reserved against on the face of the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
10
CONFIDENTIAL TREATMENT REQUESTED
Interim Balance Sheets, (ii) Liabilities incurred in the Ordinary Course of
Business since March 31, 1998 through the Effective Time, and (iii) Liabilities
under this Agreement and fees and expenses related hereto.
SECTION 3.09 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since * * *, there
has not been any material adverse change in the business, financial condition,
operations, results of operations or future prospects of any Target Company.
Without limiting the generality of the foregoing, since that date and except as
otherwise disclosed in SCHEDULE 3.09:
(a) no Target Company has sold, leased, transferred, or assigned any
of its Assets, tangible or intangible, other than sales to its customers for
fair consideration in the Ordinary Course of Business or other than as fully
reflected on the face of the Interim Balance Sheets;
(b) no Target Company has entered into any agreement, Contract, lease
or license (or series of related agreements, Contracts, leases and licenses)
outside the Ordinary Course of Business;
(c) there is no fact, condition or event relating to (i) the
potential loss of the benefit of, or any * * * change in, any relationship with
any customers, clients, suppliers, key employees or insurers, or (ii) price
increases for parts, raw materials, supplies, services or equipment purchased
from present suppliers or vendors which is, with the lapse of time or the
occurrence of such event or condition, reasonably likely to have a Target
Company Material Adverse Effect;
(d) no party (including any Target Company) has accelerated,
terminated, modified or canceled any agreement, Contract, lease or license (or
series of related agreements, Contracts, leases and licenses) to which any
Target Company is a party or by which any of them is bound;
(e) no Target Company has imposed any Security Interest upon any of
its Assets, tangible or intangible;
(f) no Target Company has made any capital expenditure (or series of
related capital expenditures) either involving more than * * * or outside the
Ordinary Course of Business;
(g) no Target Company has made any capital investment in, any loan
to, or any acquisition of the securities or Assets of, any other Person (or
series of related capital investments, loans, and acquisitions);
(h) no Target Company has issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
11
CONFIDENTIAL TREATMENT REQUESTED
(i) no Target Company has delayed or postponed the payment of
accounts payable or other Liabilities * * *;
(j) no Target Company has canceled, compromised, waived or released
any right or claim (or series of related rights and claims) * * *;
(k) no Target Company has granted any license or sublicense of any
rights under or with respect to any Intellectual Property * * *;
(l) there has been no change made or authorized in the Certificate of
Incorporation or By-Laws or equivalent organizational documents, in each case as
amended or restated, of any Target Company;
(m) no Target Company 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
capital stock;
(n) no Target Company has declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(o) no Target Company has experienced any * * * damage, destruction
or Loss (whether or not covered by insurance) to its property;
(p) no Target Company has made any loan to, or entered into any other
transaction with, any of its directors, officers or employees;
(q) no Target Company has entered into any employment Contract or
collective bargaining agreement, written or oral, or modified the terms of any
such Contract or agreement existing as of the date hereof;
(r) no Target Company has granted any increase in the base
compensation of any of its directors, officers or employees;
(s) no Target Company has adopted, amended, modified or terminated
any bonus, profit-sharing, incentive, severance or other plan, Contract or
commitment for the benefit of any of its directors, officers and employees (or
taken any such action with respect to any other Employee Benefit Plan);
(t) no Target Company has made any other change in employment terms
for any of its directors, officers or employees outside the Ordinary Course of
Business;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
12
CONFIDENTIAL TREATMENT REQUESTED
(u) no Target Company (i) has made any charitable or other capital
contribution * * * or (ii) has pledged to make any charitable or other capital
contribution;
(v) there has not been any other occurrence, event, incident, action,
failure to act or transaction outside the Ordinary Course of Business involving
any Target Company * * *; and
(w) no Target Company has committed to any of the foregoing.
SECTION 3.10 ABSENCE OF LITIGATION. Except as set forth on
SCHEDULE 3.10, (a) there is no claim, action, suit, litigation, proceeding,
arbitration or investigation of any kind, at law or in equity (including
actions or proceedings seeking injunctive relief), pending or * * *
threatened against such Target Company or any properties or rights of such
Target Company, and (b) no Target Company is subject to any continuing order
of, consent decree, settlement agreement or other similar written agreement
with or continuing investigation by, any Governmental Entity, or any
judgment, order, writ, injunction, decree or award of any Governmental Entity
or arbitrator. In respect of the matters relating to or arising in
connection with the actions set forth in SCHEDULE 3.10, there is no fact,
event, condition, circumstance or other matter which either has, or is
reasonably likely to have resulted in, an event or determination having a
Target Company Material Adverse Effect. The Target Companies have delivered
to Parent copies of all pleadings, correspondence and other documents
relating to each matter disclosed in SCHEDULE 3.10.
SECTION 3.11 VOTE REQUIRED. The affirmative vote of the holders of
a majority of the outstanding shares of each Target Company's Common Stock is
the only vote of the holders of any class or series of such Target Company's
capital stock necessary to approve the Merger.
SECTION 3.12 BROKERS. No Target Company 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 or for which Parent
or Parent Sub could become liable or obligated.
SECTION 3.13 COMPANY ACTION. The Board of Directors of each Target
Company (at a meeting duly called and held in compliance with Indiana Law or by
written consent) has (a) determined that the Merger is in the best interests of
such Target Company and fair to its Shareholders, and (b) approved the Merger in
accordance with the provisions of Indiana Law, and (c) recommended the approval
of this Agreement and the Merger by the holders of Target Company's Common
Stock.
SECTION 3.14 TAX MATTERS; "POOLING OF INTERESTS".
(a) No Target Company or its Affiliates has taken or agreed to take
any action that would prevent the Merger from constituting (i) a
"reorganization" under Section 368(a)(1)(A) of the Code, by application of
Section 368(a)(2)(D) of the Code, or (ii) a "pooling of interests" in accordance
with GAAP and applicable SEC rules, including, without limitation, the sale of
any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
13
CONFIDENTIAL TREATMENT REQUESTED
shares of such Target Company's Common Stock or Parent Common Stock during the
period commencing on the date which is thirty (30) days prior to the Effective
Time and ending on the Financial Result Date. Each Target Company has timely
filed or will timely file all Tax Returns that it was or is required to file
prior to the Effective Time. All such Tax Returns were correct and complete * *
* when filed. All Taxes owed by each Target Company (whether or not shown on
any Tax Return) have been paid or accrued for on the Interim Balance Sheets. No
Target Company is currently 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 any Target Company 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 the Target Companies that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) Each Target Company 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, shareholder or other third party.
(c) There is no dispute or claim concerning any Tax Liability of any
Target Company claimed or raised by any Governmental Entity. SCHEDULE 3.14(c)
lists all federal, state, local and foreign income Tax Returns filed with
respect to each Target Company for taxable periods ended on or after December
31, 1994, and indicates those Tax Returns that have been audited and those Tax
Returns that currently are the subject of audit by any Governmental Entity. The
Target Companies have delivered to Parent correct and complete copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by each Target Company for taxable periods ended
on or after December 31, 1994.
(d) No Target Company 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.
(e) No Target Company has made any payments, or is obligated to make
any payments, and no Target Company is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code.
(f) SCHEDULE 3.14(f) sets forth the following information with
respect to each Target Company, as of the most recent practicable date: (i) the
tax basis of such Target Company in its Assets; (ii) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to such Target Company;
and (iii) the amount of any intercompany items or any deferred gain or loss
allocable to such Target Company with respect to any intercompany transaction.
(g) The unpaid Taxes of each Target Company (i) do not exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the Interim Balance Sheet for such Target
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
14
CONFIDENTIAL TREATNMENT REQUESTED
Company (rather than in any notes thereto) and (ii) will not exceed that reserve
as adjusted for the passage of time through the Effective Time in accordance
with the past custom and practice of such Target Company in filing their Tax
Returns.
SECTION 3.15 REAL PROPERTY. No Target Company owns or leases any
real property.
SECTION 3.16 INTELLECTUAL PROPERTY.
(a) Each Target Company owns or has the right to use pursuant to
license, sublicense, agreement or permission all Intellectual Property necessary
for the operation of such Target Company's business as presently conducted.
Each item of Intellectual Property owned or used by each Target Company is owned
or available for use by such Target Company on identical terms and conditions
immediately subsequent to the Effective Time. Each Target Company has taken all
reasonably necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns or uses.
(b) * * * such Target Company has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Shareholders and none of the
directors and officers (and employees with responsibility for Intellectual
Property matters) of such Target Company has ever received any oral or written
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including any claim that such
Target Company must license or refrain from using any Intellectual Property
rights of any third party). * * * no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of such Target Company.
(c) SCHEDULE 3.16(c) identifies each patent or trademark and
copyright registration which has been issued to each Target Company or any
Affiliate with respect to any of its Intellectual Property, identifies each
pending patent application or application for registration which such Target
Company or any Affiliate has made with respect to any of its Intellectual
Property, and identifies each license, sublicense, agreement, or other
permission which such Target Company or any Affiliate has granted to any third
party with respect to any of its Intellectual Property (together with any
exceptions). Each Target Company has delivered to Parent correct and complete
copies of all such patents, registrations, applications, licenses, sublicenses,
agreements and permissions (as amended to date). SCHEDULE 3.16(c) also
identifies each trade name or unregistered trademark used by each Target Company
or any Affiliate in connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in SCHEDULE 3.16(c):
(i) such Target Company possesses all right, title, and
interest in and to the item, free and clear of any Security Interest;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
15
CONFIDENTIAL TREATMENT REQUESTED
(ii) such item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or * * * threatened which
challenges the legality, validity, enforceability, use or ownership of such
item; and
(iv) no Target Company has ever agreed to indemnify any
Person for or against any interference, infringement, misappropriation or other
conflict with respect to such item.
(d) SCHEDULE 3.16(d) identifies each item of Intellectual Property
that any third party owns and that each Target Company or any Affiliate uses
pursuant to any license, sublicense, agreement or permission, other than
shrink-wrap licenses for personal computer software. Each Target Company has
delivered to Parent correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to
each item of Intellectual Property required to be identified in SCHEDULE
3.16(d):
(i) the license, sublicense, agreement or permission
covering such item is legal, valid, binding, enforceable and in full force and
effect;
(ii) the license, sublicense, agreement or permission will
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the Effective Time;
(iii) no party to the license, sublicense, agreement, or
permission 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;
(iv) no party to the license, sublicense, agreement or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, the representations
and warranties set forth in items (i) through (iv) above are true and correct
with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling or
charge;
(vii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or * * * threatened which
challenges the legality, validity or enforceability of the underlying item of
Intellectual Property; and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
16
CONFIDENTIAL TREATMENT REQUESTED
(viii) no Target Company has granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
(e) [Reserved]
SECTION 3.17 TANGIBLE ASSETS. Except as set forth on SCHEDULE 3.17, each
Target Company owns and has good and marketable title to the tangible property
and Assets as reflected in such Target Company's books and records and/or on its
Interim Balance Sheet * * *. Each tangible Asset is free from *** practice and
is in good operating condition and repair (subject to normal wear and tear).
SECTION 3.18 CUSTOMERS. SCHEDULE 3.18 lists each current client of each
Target Company and the accounts receivable amount for such client as of June 22,
1998.
SECTION 3.19 CONTRACTS. SCHEDULE 3.19 lists the following Contracts and
other agreements to which each Target Company is a party as of the date hereof:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of * * * or a term of more than one (1) year;
(b) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products or other personal
property, which involves consideration in excess of * * * ;
(c) any partnership or joint venture agreement;
(d) 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, in excess of * * * or under which it has
imposed a Security Interest on any of its Assets, tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement with any of the Shareholders and their respective
Affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other * * * plan or
arrangement (including any Employee Benefit Plan) for the benefit of its current
or former directors, officers and employees;
(h) any collective bargaining agreement;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
17
CONFIDENTIAL TREATMENT REQUESTED
(i) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing annual compensation in
excess of * * * or providing severance benefits;
(j) any agreement under which the consequences of a default or
termination could have a Target Company Material Adverse Effect; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of * * *.
The Target Companies have delivered to Parent a correct and complete copy
of each written agreement listed in SCHEDULE 3.19 and a written summary setting
forth the * * * terms and conditions of each oral agreement referred to in
SCHEDULE 3.19. With respect to each such agreement, and except as otherwise
disclosed in SCHEDULE 3.19: (i) such agreement is legal, valid, binding,
enforceable and in full force and effect * * *; (ii) such agreement will
continue to be legal, valid, binding, enforceable and in full force and effect
* * * respects following the consummation of the transactions contemplated
hereby; (iii) * * * 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 of any * * * term or condition or
acceleration, under such agreement; and (vi) * * * no party has repudiated any
provision of such agreement.
SECTION 3.20 NOTES AND ACCOUNTS RECEIVABLE. Except as set forth on
SCHEDULE 3.20, all notes and accounts receivable of each Target Company are
reflected properly on its books and records and are valid receivables subject to
no setoffs 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 Interim Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Effective Time in accordance with the past custom and practice of such Target
Company.
SECTION 3.21 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of any Target Company.
SECTION 3.22 INSURANCE. SCHEDULE 3.22 sets forth a list of each
current insurance policy (including policies providing property, casualty,
liability and workers' compensation coverage and bond and surety arrangements)
to which any Target Company has been a party, a named insured, or otherwise the
beneficiary of coverage and either a copy of such insurance policy or a summary
of the terms of such policy. With respect to each such insurance policy: (i)
such policy is legal, valid, binding, enforceable and in full force and effect
* * *; (ii) such policy will continue to be legal, valid, binding, enforceable
and in full force and effect * * * following the consummation of the
transactions contemplated hereby; (iii) * * * neither such Target Company 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
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
18
CONFIDENTIAL TREATMENT REQUESTED
constitute such a * * * breach or default, or permit termination, modification,
or acceleration, under such policy; and (iv) * * * no party to the policy has
repudiated any provision thereof. Each Target Company has been covered during
the past three (3) years (or such shorter period during which it was in
existence) by insurance in scope and amount customary and reasonable for the
business in which it has engaged during the aforementioned period. SCHEDULE
3.22 also describes any self-insurance arrangements affecting each Target
Company.
SECTION 3.23 EMPLOYEES. The Target Companies have delivered to
Parent a true and complete list of all employees of each Target Company, their
respective positions, locations, salaries or hourly wages and severance
arrangements, each as of the date hereof. * * * no executive, key employee or
group of employees has any plans to terminate employment with any Target
Company. Each employee of each Target Company is employed on an "at will" basis
and has no right to any * * * compensation following termination of employment.
Each employee of each Target Company has executed a proprietary information and
inventions agreement in the form provided to counsel to Parent. No Target
Company is a party to or bound by any collective bargaining agreement, nor has
it experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. * * * such Target Company has not
committed any unfair labor practice and there is no organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of such Target Company.
SECTION 3.24 EMPLOYEE BENEFITS.
(a) Except as set forth on SCHEDULE 3.24, with respect to all
employees, former employees, directors and independent contractors of each
Target Company and their dependents and beneficiaries, neither such Target
Company nor any ERISA Affiliate presently maintains, contributes to or has any
Liability under or with respect to any Employee Benefit Plan. The plans,
programs and arrangements set forth on SCHEDULE 3.24 are herein referred to as
the "TARGET COMPANY EMPLOYEE BENEFIT PLANS." Each Target Company Employee
Benefit Plan (and each related trust, insurance Contract or other funding
arrangement) complies in form and in operation * * * with the applicable
requirements of ERISA, the Code, other applicable Laws and governing documents
and agreements. With respect to each Target Company Employee Benefit Plan,
there has been no act or omission by any Target Company or any ERISA Affiliate
that would impair the right or ability of any Target Company or ERISA Affiliate
to unilaterally amend in whole or part or terminate such Target Company Employee
Benefit Plan at any time, subject to the terms of any insurance Contract or
other contractual arrangements with third parties, and the Target Companies have
delivered to Parent true and complete copies of: (i) the plan documents,
including any related trust agreements, insurance Contracts or other funding
arrangements and all amendments thereto, or a written summary of the terms and
conditions of the plan if there is no written plan document; (ii) the most
recent IRS Form 5500; (iii) the most recent financial statement and, if
applicable, actuarial valuation; (iv) all correspondence with the Internal
Revenue Service, the Department of Labor and other Governmental Entities with
respect to the past three (3) plan years other than IRS Form 5500
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
19
CONFIDENTIAL TREATMENT REQUESTED
filings; and (v) the most recent summary plan description with a summary of
material modifications to such plan.
(b) No Target Company and none of its directors, officers or
employees has any Liability with respect to any Target Company Employee Benefit
Plan for failure to comply with ERISA, the Code, any other applicable Laws or
any governing documents or agreements.
(c) No Target Company Employee Benefit Plan is an Employee Pension
Benefit Plan, and no Target Company Employee Benefit Plan has any unfunded
Liability. With respect to the Target Company Employee Benefit Plans, all
applicable contributions and premium payments for all periods ending prior to
the Effective Time (including periods from the first day of the then current
plan year to the Effective Time) shall be made prior to the Effective Time in
accordance with past practice or as expressly agreed to in advance by Parent.
(d) No Target Company nor any ERISA Affiliate maintains, maintained,
contributes to, or has any Liability (including, but not limited to, current or
potential withdrawal Liability) with respect to any Multiemployer Plan or
Employee Pension Benefit Plan.
(e) With respect to all employees and former employees of each Target
Company, neither such Target Company nor any ERISA Affiliate presently
maintains, contributes to or has any Liability under any funded or unfunded
medical, health or life insurance plan or arrangement for present or future
retirees or present or future terminated employees except as required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or state
continuation coverage Laws. There has been no act or acts or failure or
failures to act which would result in a disallowance of a deduction or the
imposition of a Tax pursuant to Section 4980B, or any predecessor provision, of
the Code or any related regulations. No event has occurred with respect to
which any Target Company or Affiliate could be liable for a Tax imposed by any
of Sections 4972, 4976, 4977, 4979 or 4980 of the Code, or for a civil penalty
under Section 502(c) of ERISA.
(f) There is no pending, or * * * threatened legal action,
proceeding, audit, examination or investigation against or involving any Target
Company Employee Benefit Plan maintained by such Target Company or any ERISA
Affiliate (other than routine claims for benefits). * * * there is no Basis
for, and there are no facts which could give rise to, any such condition, legal
action, proceeding or investigation. Any bonding required with respect to any
Target Company Employee Benefit Plans in accordance with applicable provisions
of ERISA has been obtained and is in full force and effect.
SECTION 3.25 GUARANTIES. No Target Company is a guarantor or
otherwise is liable for any Liability or obligation (including indebtedness) of
any other Person.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
20
CONFIDENTIAL TREATMENT REQUESTED
SECTION 3.26 ENVIRONMENT, HEALTH AND SAFETY.
(a) Except as set forth on SCHEDULE 3.26 * * * such Target Company
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 Target Company 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 have complied * * * with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all Environmental, Health and
Safety Laws.
(b) Except as set forth on SCHEDULE 3.26 * * * such Target Company
has no Liability (and such Target Company has not 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 such Target Company 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.
(c) * * * all properties owned or leased and equipment used in the
business of such Target Company, and its predecessors and Affiliates, have been
free of asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances.
SECTION 3.27 CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGET
COMPANIES. Except as described in SCHEDULE 3.27, none of the Shareholders and
their Affiliates has been involved in any business arrangement or relationship
with any Target Company (other than in an employment or consulting capacity)
within the past twelve (12) months, and none of the Shareholders and their
Affiliates owns any Asset, tangible or intangible, which is used in the business
of any Target Company.
SECTION 3.28 [RESERVED]
SECTION 3.29 PRODUCT AND SERVICE WARRANTIES. Each product
manufactured, sold, leased or delivered, and each service performed, by each
Target Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and such Target Company has
no 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) for the replacement or repair of any
product, the substandard performance of any service, or other damages in
connection with the products sold or services performed by such Target Company,
subject only to the reserve for product and service warranty claims set forth on
the face
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
21
CONFIDENTIAL TREATMENT REQUESTED
of the Interim Balance Sheets (rather than in any notes thereto) as adjusted for
the passage of time through the Effective Time in accordance with the past
custom and practice of such Target Company. No product manufactured, sold,
leased or delivered, or service performed, by any Target Company is subject to
any guaranty, warranty or other indemnity beyond the applicable standard terms
and conditions of sale, lease or performance. SCHEDULE 3.29 includes copies of
the standard terms and conditions of sale, lease or performance for each Target
Company (containing applicable guaranty, warranty and indemnity provisions).
SECTION 3.30 PRODUCT AND SERVICE LIABILITY. * * * (i) such Target
Company has no Liability and (ii) 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 or damages (whether actual or alleged) to any Person or its property or
its business operations or prospects as a result of the ownership, possession or
use of any product sold, leased or delivered or any service performed by such
Target Company.
SECTION 3.31 CUSTOMER/SUPPLIER RELATIONSHIPS. Each Target Company
enjoys good commercial relationships with its customers and suppliers. Since
* * * no Target Company has received any communication from any of their
customers or suppliers expressing significant dissatisfaction with its
commercial relationship with such Target Company.
SECTION 3.32 CERTAIN BUSINESS PRACTICES. No Target Company, nor
* * * any director, officer, shareholder, agent or employee of such Target
Company has (i) used any funds for unlawful contributions, gifts, entertainment
or other unlawful expenses relating to political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns or violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any other
unlawful payment.
SECTION 3.33 DISCLOSURE. No representation or warranty made by any
Target Company and/or the Shareholders, nor any document, written information,
statement, financial statement, certificate, schedule or exhibit prepared and
furnished or to be prepared and furnished by each Target Company, or its
representatives pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a * * *
fact, or omits or will omit to state a * * * fact necessary to make the
statements of facts contained herein or therein not misleading in light of the
circumstances under which they were furnished.
SECTION 3.34 LIMITATION ON REPRESENTATIONS AND WARRANTIES.
* * * No Target Company or Shareholder makes any representation or
warranty to Parent regarding the probable success or profitability of the
Surviving Corporation.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
22
CONFIDENTIAL TREATMENT REQUESTED
ARTICLE IIIA
REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER
Each Shareholder hereby represents and warrants to Parent and Parent Sub as
follows ***:
SECTION 3.01A. AUTHORIZATION OF TRANSACTION. Such Shareholder has
full power and authority to execute and deliver this Agreement and the Consent
and to perform its obligations hereunder and thereunder. This Agreement
constitutes the valid and legally binding obligation of such Shareholder,
enforceable in accordance with its terms and conditions * * *. Such
Shareholder is a natural person, is over 21 years of age and has not had a legal
representative appointed by a court of law or otherwise act in his or her behalf
or with respect to any of his or her property. Such Shareholder need not give
any notice to, make any filing with, or obtain any authorization, consent or
approval of any Governmental Entity in order to consummate the transactions
contemplated by this Agreement.
SECTION 3.02A. NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement and the Consent, nor the consummation of the
transactions contemplated hereby and thereby, will (a) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge
or other restriction of any government, Governmental Entity, or court to which
such Shareholder is subject or (b) 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 such Shareholder is a party, by which it is bound or to
which any of its Assets is subject.
SECTION 3.03A. BROKERS. Such Shareholder has no Liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement or for which Parent
or Parent Sub could become liable or obligated.
SECTION 3.04A. COMPANY SHARES. Such Shareholder holds of record and
owns beneficially the number of shares of the Target Companies' Common Stock set
forth next to his name on the signature page hereto, free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities laws and the restrictions in that certain Shareholders'
Agreement (as defined herein) which are to be terminated pursuant to Section
6.08), Encumbrances, Security Interests, options, warrants, purchase rights,
Contracts, commitments and/or equities. Except for the Shareholders' Agreement,
such Shareholder is not a party to any option, warrant, purchase right or other
Contract or commitment that could require such Shareholder to sell, transfer or
otherwise dispose of any capital stock of the Target Companies (other than this
Agreement). Such Shareholder is not a party to any voting trust, proxy or other
agreement or understanding with respect to the voting of any capital stock of
any Target Company (other than this Agreement).
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
23
CONFIDENTIAL TREATMENT REQUESTED
SECTION 3.05A. ACCREDITED INVESTOR. Such Shareholder (a) is an
"accredited investor" as that term is defined in Regulation D of the Securities
Act or (b) in the case of Jennifer Arthur, hereby designates D. Parker Hinshaw
as her purchaser representative and, either alone or together with such
purchaser representative, has sufficient knowledge and experience in financial
and business matters that she is capable of evaluating the merits and risks of
the transactions contemplated by this Agreement and making an informed business
decision. Such Shareholder represents and warrants that he or she has had the
opportunity to ask questions and receive answers concerning the terms and
conditions of the Merger and this Agreement and to obtain any additional
information that is necessary to verify the accuracy of the information
furnished pursuant to Section 3.09A. In addition, such Shareholder acknowledges
that Parent has informed him or her that Parent is pursuing potential
acquisitions of other companies, some of which are larger than the Target
Companies, and the consummation or success of such potential acquisitions cannot
be assured.
SECTION 3.06A. INVESTMENT INTENTION. Such Shareholder has no present
intention to dispose of any shares of Parent Common Stock to be issued in the
Merger.
SECTION 3.07A. EMPLOYMENT. In the event that such Shareholder is
entering into an employment agreement pursuant to Section 7.02(h), such
Shareholder currently intends to remain in the employ of the Surviving
Corporation (and/or Parent and its Subsidiaries) and has no * * * intention to
seek other employment opportunities. Each of the Shareholders has no * * *
intention to compete with the Surviving Corporation (and/or Parent and its
Subsidiaries).
SECTION 3.08A. LIMITATION ON REPRESENTATIONS AND WARRANTIES. The
Shareholders make no representation or warranty to Parent regarding the probable
success or profitability of the Surviving Corporation.
SECTION 3.09A. DELIVERY OF INFORMATION. Each of the Shareholders has
received a copy of the following documents relating to Parent: (i) the Annual
Report on Form 10-KSB for the year ended December 31, 1997; (ii) the Quarterly
Report on Form 10-Q for the quarter March 31, 1998; and (iii) the Current
Reports on Form 8-K filed by Parent with the SEC on the following dates since
December 31, 1997: April 2, 1998, April 14, 1998, May 8, 1998, May 19, 1998 and
June 19, 1998. Such Shareholder acknowledges that he has reviewed carefully the
risk factors contained in the above referenced annual report.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
24
CONFIDENTIAL TREATMENT REQUESTED
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
Parent and Parent Sub hereby represent and warrant, jointly and severally,
to each Target Company and each Shareholder that:
SECTION 4.01 ORGANIZATION AND QUALIFICATION. Each of Parent and
Parent Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, and Parent
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by it or the ownership or leasing of
its properties makes such qualification necessary, except for such failures to
be so qualified or licensed and in good standing as would not, individually or
in the aggregate, have a Parent Material Adverse Effect.
SECTION 4.02 CERTIFICATES OF INCORPORATION AND BY-LAWS. Neither
Parent nor Parent Sub is in violation of any of the provisions of its
Certificate of Incorporation or By-Laws, respectively, in each case as amended
or restated.
SECTION 4.03 PARENT COMMON STOCK; CAPITALIZATION.
(a) The shares of Parent Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights created by statute, Parent's Certificate of
Incorporation or By-Laws or any agreement to which Parent is a party or is
bound.
(b) The authorized capital stock of Parent consists of Fifty Million
(50,000,000) shares of Parent Common Stock and Five Million (5,000,000) shares
of preferred stock, par value $.001 per share (the "PARENT PREFERRED STOCK").
As of June 25, 1998, (i) Fourteen Million Seven Hundred Twenty-Three Thousand
Fifteen (14,723,015) shares of Parent Common Stock were issued and outstanding,
all of which are duly authorized, validly issued, fully paid and nonassessable,
(ii) no shares of Parent Preferred Stock were outstanding, (iii) no shares of
Parent Common Stock were held in treasury of Parent and (iv) Four Million
(4,000,000) shares of Parent Common Stock were reserved for issuance pursuant to
option and employee benefit plans and in connection with the exercise of
outstanding warrants.
(c) The authorized capital stock of Parent Sub consists of one
thousand (1,000) shares of Parent Sub Common Stock, of which one hundred (100)
shares are issued and outstanding and held by Parent.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
25
CONFIDENTIAL TREATMENT REQUESTED
SECTION 4.04 AUTHORITY. Each of Parent and Parent Sub has all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its respective obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no other corporate proceeding
on the part of Parent or Parent Sub is necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. No vote of Parent's
stockholders is needed to approve the Merger. This Agreement has been duly
executed and delivered by Parent and Parent Sub and, assuming the due
authorization, execution and delivery thereof by the Shareholders and each
Target Company, constitutes a legal, valid and binding obligation of each of
Parent and Parent Sub enforceable in accordance with its terms.
SECTION 4.05 REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and Parent
Sub do not, and the performance of this Agreement by Parent and Parent Sub will
not, (i) conflict with or violate the Certificate of Incorporation or By-Laws,
as amended or restated, of Parent or Parent Sub, (ii) conflict with or violate
any Laws in effect as of the date of this Agreement applicable to Parent or
Parent Sub or by which any of their respective properties is bound, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or require
payment under, or result in the creation of a Lien or Encumbrance on, any of the
properties or Assets of Parent or Parent Sub pursuant to, any note, bond,
mortgage, indenture, Contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Parent Sub is a party or by
which Parent or Parent Sub or any of their respective properties is bound by or
subject to, except for breaches, defaults, events, rights of termination,
amendment, acceleration or cancellation, payment obligations or Liens or
Encumbrances that would not have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Parent
Sub do not, and the performance of this Agreement by Parent and Parent Sub will
not, require Parent or Parent Sub to obtain any consent, approval, authorization
or permit of, or to make any filing with or notification to, any Governmental
Entities, except (i) for applicable requirements, if any, of the Securities Act,
the Exchange Act, Blue Sky Laws, * * *, the Nasdaq and the filing and
recordation of appropriate merger documents as required by Delaware Law and
Indiana Law and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
either individually or in the aggregate, prevent Parent or Parent Sub from
performing its obligations under this Agreement.
SECTION 4.06 REPORTS; FINANCIAL STATEMENTS.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
26
CONFIDENTIAL TREATMENT REQUESTED
(a) Since February 12, 1997, Parent has timely filed all forms,
reports, statements and other documents required to be filed with the SEC
(collectively, the "PARENT SEC REPORTS"). The Parent SEC Reports, including all
Parent SEC Reports filed after the date of this Agreement and prior to the
Effective Time, were or will be prepared in all material respects in accordance
with the requirements of applicable Law (including, the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports). As of their respective
dates, the Parent SEC Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports filed prior
to, on or after the date of this Agreement (i) have been or will be prepared in
accordance with, and complied or will comply as to form with, the published
rules and regulations of the SEC and GAAP applied on a consistent basis
throughout the periods involved (except as otherwise noted therein) and (ii)
fairly present or will fairly present the consolidated financial position of
Parent and its Subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their cash flows for the periods
indicated, except that any unaudited interim financial statements were or will
be subject to normal and recurring year-end adjustments.
SECTION 4.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and to
the extent disclosed in the Parent SEC Reports filed prior to the date of this
Agreement or as contemplated in this Agreement or as otherwise disclosed in
writing by Parent to the Shareholders prior to the Effective Time, since March
31, 1998, there has not been * * * any significant change by Parent in its
accounting methods, principles or practices.
SECTION 4.08 OWNERSHIP OF PARENT SUB; NO PRIOR ACTIVITIES.
(a) Parent Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement. All of the outstanding capital
stock of Parent Sub is owned directly by Parent.
(b) Except for obligations or liabilities incurred in connection with
its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Parent Sub has not and will not have incurred,
directly or indirectly, through any Subsidiary or Affiliate, any obligations or
liabilities or engaged in any business activities or any type or kind whatsoever
or entered into any agreements or arrangements with any Person.
SECTION 4.09 BROKERS. There is no broker, finder or investment
banker which is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Parent
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
27
CONFIDENTIAL TREATMENT REQUESTED
Sub. Notwithstanding anything herein to the contrary, the Shareholders shall
not be liable or obligated for any such brokerage, finder's or other fee or
commission.
SECTION 4.10 [RESERVED]
SECTION 4.11 LIMITATION ON REPRESENTATIONS AND WARRANTIES.
(a) Except as and to the extent expressly set forth in this Article
IV, included on any schedule hereto or included in any writing delivered by
Parent to the Target Companies concurrently herewith or subsequent hereto
expressly pursuant to this Agreement, each of Parent and Parent Sub makes no
other representation or warranty and disclaims all Liability and responsibility
for any representation, warranty, statement or information (financial or
otherwise) made or communicated (orally or in writing) to the Company or any of
its shareholders, employees, agents, consultants or representatives.
(b) Parent makes no representation or warranty to any Target Company
or the Shareholders regarding the probable success or profitability of Parent.
Without limiting the foregoing, Parent makes no representation or warranty to
any Target Company or any of the Shareholders with respect to the revenues or
profitability of Parent for the quarter ending June 30, 1998.
ARTICLE V
COVENANTS
SECTION 5.01 AFFIRMATIVE COVENANTS OF TARGET COMPANIES. Each Target
Company hereby covenants and agrees that, prior to the Effective Time, unless
otherwise expressly contemplated by this Agreement or consented to in writing by
Parent, such Target Company will: (a) operate only in the Ordinary Course of
Business; and (b) use its best efforts to (i) preserve and/or maintain, in all
material respects and consistent with past custom and practice, its business and
properties, including its present operations, physical facilities, working
conditions and relationships with its present employees and Persons having
significant business relations with it, including, without limitation, suppliers
and customers, (ii) maintain and keep its properties and Assets in as good
repair and condition as at present, ordinary wear and tear excepted, and (iii)
keep in full force and effect insurance and bonds comparable in amount and scope
of coverage to that currently maintained.
SECTION 5.02 NEGATIVE COVENANTS OF THE TARGET COMPANIES. Except as
expressly contemplated by this Agreement or as previously disclosed to Parent in
writing on SCHEDULE 5.02, or otherwise consented to in writing by Parent, from
the date of this Agreement until the Effective Time, each Target Company shall
not, directly or indirectly through any Affiliate or otherwise (and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
28
CONFIDENTIAL TREATMENT REQUESTED
the Shareholders shall not and shall not cause such Target Company to), and
shall not permit any Affiliate to directly or indirectly, do any of the
following:
(a) (i) increase the compensation payable to, or to become payable
to, any employee, director or executive officer; (ii) grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or employee; (iii) establish, adopt, enter into, amend,
modify or terminate any Employee Benefit Plan or arrangement except as may be
required by applicable Law; or (iv) hire any salaried person earning annual
compensation, including salary, cash bonuses and commissions, in excess of
* * *;
(b) declare or pay any dividend on or make any other distribution in
respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock, or any options, warrants or conversion or
other rights to acquire any shares of its capital stock or any such securities
or obligations; (ii) effect any reorganization or recapitalization; or (iii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale (including the grant of any
Security Interests, Liens, claims, pledges, limitations in voting rights,
charges or other Encumbrances) of, any shares of any class of its capital stock
(including shares held in treasury), any securities convertible into or
exercisable or exchangeable for any other shares, or any rights, warrants or
options to acquire, any such shares; and (ii) amend or otherwise modify the
terms of any such rights, warrants or options the effect of which shall be to
make such terms more favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in, all or a portion of the Assets of, or by any
other manner, any corporation, partnership, association or other business,
organization or division thereof, or otherwise acquire or agree to acquire any
Assets of any other Person (other than the purchase of Assets from suppliers or
vendors in the Ordinary Course of Business) * * *;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its * * * Assets;
(g) initiate, solicit or encourage (including by way of furnishing
information or assistance), respond to, or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Competing Transaction, or enter into discussions or
negotiate with any person or entity in furtherance of such inquiries to obtain
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
29
CONFIDENTIAL TREATMENT REQUESTED
a Competing Transaction, or enter into an agreement with respect to any
Competing Transaction or agree to or endorse any Competing Transaction, or
authorize or permit any of the officers, directors or employees of such Target
Company or any investment banker, financial advisor, attorney, accountant or
other representative retained by such Target Company to take any such action,
and such Target Company shall promptly notify Parent of all relevant terms of
any such inquiries and proposals received by such Target Company or by any such
officer, director, employee, investment banker, financial advisor or attorney,
and if such inquiry or proposal is in writing, such Target Company shall deliver
or cause to be delivered to Parent a copy of such inquiry or proposal;
(h) propose or adopt any amendments to its Certificate of
Incorporation or its By-Laws;
(i) (A) change any of its methods of accounting in effect as of * * *
or (B) make or rescind any material election relating to Taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes (except where the amount
of such settlements or controversies, individually or in the aggregate, does not
exceed * * *), or change in any material respect any of its methods of
reporting income or deductions for federal income Tax purposes from those
employed in the preparation of the federal income Tax Return for the taxable
year ended December 31, 1997, except, in the case of clause (A) or clause (B),
as may be required by Law or GAAP;
(j) enter into any Contract outside the Ordinary Course of Business;
(k) create, or permit the creation of, any Lien upon any Assets
outside the Ordinary Course of Business;
(l) enter into any employment Contract or collective bargaining
agreement, or modify the terms of any existing such Contract or agreement;
(m) sell, lease, exchange, mortgage, pledge, transfer, assign or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer, assign or otherwise dispose of, any Assets with a Fair Market Value of
* * * or more, or Assets with an aggregate Fair Market Value of * * * or more,
in each case tangible or intangible;
(n) make any capital expenditures other than in the Ordinary Course
of Business, or make any capital expenditures in the aggregate in excess of
* * * ;
(o) amend or renew, or enter into any Contract involving operations
outside of the United States;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
30
CONFIDENTIAL TREATMENT REQUESTED
(p) take or agree to take any action that would or is reasonably
likely to result in any representations and warranties of the Target Companies
set forth in this Agreement being untrue or in any of the conditions to the
Merger not being satisfied; or
(q) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03 NEGATIVE COVENANTS OF PARENT. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by each
Target Company, from the date of this Agreement until the Effective Time, Parent
will not do any of the following:
(a) amend any of the terms or provisions of the Parent Common Stock
which amendment would have a material adverse effect on the Shareholders;
(b) knowingly take any action which would result in a failure to
maintain the quotation of the Parent Common Stock on Nasdaq;
(c) declare or pay any dividends or other distribution (whether in
cash, stock or other property) on outstanding shares of capital stock;
(d) take or agree to take any action that would or is reasonably
likely to result in any of Parent's representations and warranties set forth in
this Agreement being untrue in any material respect or in any of the conditions
to the Merger not being satisfied in any material respect; or
(e) agree in writing or otherwise to do any of the foregoing.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
31
CONFIDENTIAL TREATMENT REQUESTED
SECTION 5.04 ACCESS AND INFORMATION. Each Target Company shall
provide Parent and its officers, directors, employees, agents, counsel,
accountants, financial advisors, consultants and other representatives
(collectively, the "PARENT REPRESENTATIVES"), with full access, upon reasonable
prior notice, to all officers, employees and accountants of such Target Company
and to its Assets, properties, Contracts, books, records and all such other
information and data concerning the business and operations of such Target
Company as Parent or any of the Parent Representatives reasonably may request in
connection with such investigation. Such investigation will involve, among
other things, Parent's review and confirmation of such Target Company's
Financial Statements, the legal review of the Contracts and leases of the such
Target Company, the review of the client lists of such Target Company and
reference checks of such Target Company. Parent will provide the Shareholders
with all information reasonably requested by them to enable them to evaluate the
merits of the Merger.
SECTION 5.50 ESCROW AGREEMENT. At or before the Effective Time, D.
Parker Hinshaw and Larry Collins, as joint representatives and attorneys-in-fact
for the Shareholders (the "SHAREHOLDERS' REPRESENTATIVES"), Parent, and a third
party acceptable to Parent and the Shareholders' Representatives, as escrow
agent, shall execute and deliver the escrow agreement, substantially in the form
of EXHIBIT 5.05 hereof (the "ESCROW AGREEMENT"). Each Shareholder hereby
authorizes and appoints the Shareholders' Representatives to serve as his or her
joint attorneys-in-fact to execute the Escrow Agreement, and agrees to be bound
by the provisions thereof.
SECTION 5.06 * * *
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) Each Target Company, Parent and Parent Sub shall each use its
best efforts to: (i) take, or cause to be taken, all appropriate action, and do,
or cause to be done, all things necessary, proper or advisable under applicable
Law or otherwise to consummate and make effective the transactions contemplated
by this Agreement; (ii) obtain from any Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Parent, Parent Sub or any Target Company in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated herein, including, without limitation, the
Merger; (iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
Delaware Law and Indiana Law (including holding a shareholders meeting and/or
sending notice of merger and appraisal rights) and the federal securities laws
and the rules and regulations thereunder, if any, and any other applicable
federal or state securities laws, and (B) the HSR Act, and (C) any other
applicable Law; provided that Parent, Parent Sub and the Target Companies
shall
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
32
CONFIDENTIAL TREATMENT REQUESTED
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and
its advisors prior to filing and, if requested, accepting all reasonable
additions, deletions or changes suggested in connection therewith. Each
Target Company, Parent and Parent Sub shall furnish all information required
for any application or other filing to be made pursuant to the rules and
regulations of any applicable Law in connection with the transactions
contemplated by this Agreement.
(b) (i) Each Target Company, Parent and Parent Sub shall give,
and shall cause each of their respective Subsidiaries to give, any notices to
third parties, and use, and cause each of their respective Subsidiaries to use,
its best efforts to obtain any third party consents (A) necessary, proper or
advisable to consummate the transactions contemplated in this Agreement, (B)
disclosed or required to be disclosed in the schedules contained herein, (C)
otherwise required under any Contracts, licenses, leases or other agreements in
connection with the consummation of the transactions contemplated herein or (D)
required to prevent a Target Company Material Adverse Effect from occurring
prior to or after the Effective Time or a Parent Material Adverse Effect from
occurring prior to or after the Effective Time.
(ii) In the event that any party shall fail to obtain any
third party consent described in subsection (b) (i) above, such party shall use
its best efforts, and shall take any such actions reasonably requested by the
other party hereto, to minimize any adverse effect upon each Target Company,
Parent, Parent Sub and their respective businesses resulting, or which could
reasonably be expected to result after the Effective Time, from the failure to
obtain such consent.
SECTION 6.02 TAX TREATMENT; POOLING OF INTERESTS; AFFILIATES. Each
Target Company, Parent and Parent Sub shall use their best efforts, and shall
cause their respective Subsidiaries and Affiliates to use their best efforts, to
cause the Merger to qualify, and will not take any actions which would prevent
the Merger from qualifying, as a "reorganization" under Section 368(a)(1)(A) of
the Code, by application of Section 368(a)(2)(D) of the Code. Each Target
Company, Parent and the Shareholders shall, and shall cause each of their
respective Subsidiaries and Affiliates to, use their best efforts not to take
any action (regardless of whether such action would otherwise be permitted or
not prohibited hereunder) that would prevent Parent from accounting for the
Merger as a "pooling of interests." Each Shareholder agrees and undertakes that
from the date hereof until such time as financial results (including combined
sales and net income) covering at least thirty (30) days of post-Merger
operations have been published (the date on which such financial results are
published shall be the "FINANCIAL RESULT DATE"), such Shareholder shall not sell
or in any other way alter his risk relative to any shares of Parent Common Stock
received in the Merger (within the meaning of the Codification of Financial
Reporting Policies 201.01 (reprinted in 7 Fed. Sec. L. Rep. (CCH) 72,951)).
Each Shareholder understands that Parent will advise it when the Financial
Result Date shall have occurred. Each Shareholder undertakes to inform each
Target Company and Parent of any transactions involving Company Common Stock or
Parent Common Stock that he or she may wish to consummate during any time prior
to the Financial Result Date and will not consummate such transaction unless
Parent shall consent thereto in writing.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
33
CONFIDENTIAL TREATMENT REQUESTED
SECTION 6.03 PUBLIC ANNOUNCEMENTS.
(a) Any public announcement or similar publicity with respect to this
Agreement or the transactions contemplated hereby will be issued, if at all, at
such time and in such manner as Parent determines. Subject to Section 6.03(b)
below and prior to the Effective Time, each of the Shareholders and Parent
shall, and the Shareholders shall cause each Target Company to, keep this
Agreement and the transactions contemplated hereby strictly confidential and
shall not make any disclosure of this Agreement or the transactions contemplated
hereby to any Person. The parties hereto shall consult with each other
concerning the means by which each Target Company's employees, customers and
suppliers and other Persons having dealings with such Target Company will be
informed of the transactions contemplated hereby and Parent will have the right
to be present for any such communication.
(b) Each party hereto acknowledges that, as a publicly traded
company, Parent has disclosure obligations under the federal securities laws
and, depending on the facts and circumstances, may be required to announce the
existence of this Agreement and/or the Merger prior to the Effective Time. If
so required, Parent will first consult with each Target Company regarding the
timing and contents of any such announcement. Each of the parties hereto
further acknowledges that this Agreement and/or the Merger may constitute
material, non-public information and agrees that it or he shall not, and shall
cause its respective representatives or Affiliates to not, engage in or effect
any transaction of Parent's securities until the Effective Time, subject to the
additional restrictions imposed by the federal securities laws concerning the
purchase or sale of securities.
SECTION 6.04 OBLIGATIONS OF PARENT SUB. Parent shall take all
action necessary to cause Parent Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
SECTION 6.05 RESTRICTIVE LEGEND. Each of the Shareholders
acknowledges and agrees that the certificates of Parent Common Stock issued to
the Shareholders pursuant to the Merger shall bear a restrictive legend in
substantially the following form and a stop-transfer order may be placed against
their transfer:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended.
The securities have been acquired for investment and may not
be sold, transferred or assigned in the absence of an
effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of
counsel that registration is not required under said Act or
unless sold pursuant to Rule 144.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
34
CONFIDENTIAL TREATMENT REQUESTED
The legend set forth above shall be removed and Parent shall issue a
certificate without such legend to the holder of the shares of Parent Common
Stock upon which it is stamped, if, unless otherwise required by applicable
state securities laws, (a) the such shares are included in an effective
registration statement under the Securities Act covering the resale thereof, or
(b) such holder provides Parent with an opinion of legal counsel, in form,
substance and scope reasonably acceptable to Parent and its legal counsel, to
the effect that a public sale or transfer of such shares may be made without
registration under the Securities Act and such shares are being sold or
transferred in accordance with the method described therein, or (c) such holder
provides Parent with reasonable assurances that such shares can be sold pursuant
to Rule 144 under the Securities Act (or a successor rule thereto) without any
restriction as to the number of shares acquired as of a particular date that can
then be immediately sold. Each of the Shareholders agrees to sell all of the
shares of Parent Common Stock acquired pursuant to the Merger, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with the prospectus delivery requirements, if any, under applicable
securities Laws.
SECTION 6.06 * * *
SECTION 6.07 DELIVERY OF SEC FILINGS. Parent shall promptly deliver
to the Target Companies and to their counsel a copy of all filings of the Parent
SEC Reports with the SEC, from the date hereof to the Effective Time, or any
other document which Parent deems to be appropriate for provision to the
Shareholders. Upon delivery of any such document by Parent to Target Company,
such Target Company shall promptly deliver to each holder of capital stock of
such Company a copy of such document, including all exhibits thereto, and an
officer of such Company shall promptly provide to Parent an affidavit of
delivery of such copies.
SECTION 6.08 TERMINATION OF SHAREHOLDERS' AGREEMENT. In the event
not previously terminated, each of the Shareholders (as applicable) and the
Target Companies hereby agree to, and approve of the termination, effective as
of immediately before the Effective Time, of: (a) that certain Buy-Sell
Agreement, dated as of December 14, 1993, by and among RHI and the Shareholders
named therein; (b) those certain Buy-Sell Agreements, dated as of January 7,
1998, by and among the Target Companies and the Shareholders named therein; and
(c) any buy-sell agreement, first refusal agreement or other agreement or
arrangement similar to the foregoing agreements between and among such parties
(any and all of the foregoing agreements, as so executed and amended from time
to time, shall collectively be referred to herein as the "SHAREHOLDERS'
AGREEMENTS").
SECTION 6.09 BEST EFFORTS. The parties hereto shall use their best
efforts to consummate the Merger and the other transactions contemplated hereby
as soon as reasonably practicable after the date of this Agreement. The parties
hereto agree to execute such amendments to this Agreement, the Escrow Agreement
and any other document as may be necessary to enable the Merger to qualify for
"pooling of interests" accounting treatment; provided that such amendments or
documents do not adversely affect such party.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
35
CONFIDENTIAL TREATMENT REQUESTED
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated herein shall be subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part, to the extent permitted by applicable
Law:
(a) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(b) CONSENTS AND APPROVALS. All material consents, approvals and
authorizations legally required to be obtained to consummate the Merger shall
have been obtained from all required Governmental Entities.
SECTION 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT. The
obligations of Parent to effect the Merger and the other transactions
contemplated herein are also subject to the following conditions, each of which
may be waived by Parent, in whole or in part, to the extent permitted by
applicable Law:
(a) Representations and Warranties.
(i) Notwithstanding any due diligence performed by Parent
and the Parent Representatives, each of the representations and warranties of
the Target Companies contained in Article III of this Agreement shall be true
and correct when made and on and as of the Effective Time, as if made on and as
of such date, except where failure to be so true and correct would not have a
Company Material Adverse Effect, individually or in the aggregate, and except
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, except where the
failure to be so true and correct would not have a Company Material Adverse
Effect. Parent shall have received a certificate of the President of each of
the Target Companies to such effect in the form attached hereto as EXHIBIT
7.02(a)(i); and
(ii) Notwithstanding any due diligence performed by Parent
and the Parent Representatives, each of the representations and warranties of
the Shareholders contained in Article IIIA of this Agreement shall be true and
correct when made and on and as of the Effective
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
36
CONFIDENTIAL TREATMENT REQUESTED
Time, as if made on and as of such date, except that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date.
(b) AGREEMENTS AND COVENANTS. Each Target Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Effective Time. Parent shall have received a certificate of the President
or Chief Financial Officer of such Target Company to that effect.
(c) "POOLING OF INTERESTS". The Merger shall qualify for "pooling of
interests" accounting treatment and Parent shall have received a letter, dated
as of the Effective Time, from Ernst & Young LLP regarding such firm's
concurrence with Parent's conclusion as to the appropriateness of "pooling of
interests" accounting treatment for the Merger under Accounting Principles Board
Opinion No. 16 if the Merger is closed and consummated in accordance with this
Agreement.
(d) THIRD PARTY CONSENTS AND WAIVERS. Each Target Company shall have
obtained consents and waivers, in form and substance reasonably satisfactory to
Parent, in respect of the Contracts or agreements set forth on SCHEDULE 7.02(d).
(e) COMPANY MATERIAL ADVERSE EFFECT. The Target Companies shall not
have become subject to any action or event which resulted in or may likely
result in a Company Material Adverse Effect.
(f) LEGAL OPINION. Parent shall have received the legal opinion of
Harrison & Moberly, covering the matters set forth on EXHIBIT 7.02(f) hereto.
(g) AFFILIATE AGREEMENTS. Parent shall have received from each
Affiliate of each Target Company and any other Person who may be deemed to have
become an Affiliate of such Target Company (under Rule 145 under the Securities
Act or otherwise under applicable SEC accounting releases with respect to
"pooling of interests" accounting treatment) after the date of this Agreement
and or prior to the Effective Time a signed Affiliate Agreement in the form of
EXHIBIT 7.02(g). Each such Affiliate agrees to execute and deliver similar
Affiliate Agreements upon the reasonable request of Parent (or any of its
Subsidiaries or Affiliates) in connection with future business transactions of
Parent (or any of its Subsidiaries or Affiliates).
(h) EMPLOYMENT AND CONSULTING AGREEMENTS. D. Parker Hinshaw shall
execute the employment agreement in the form attached hereto as EXHIBITS
7.02(h)(i), and each of Darryl Bollinger, Carol R. Selvey, Daniel W. Murry
and Charles G. Shelley, Jr. shall execute the employment agreement in the
form attached hereto as EXHIBITS 7.02(h)(ii) (collectively, the "EMPLOYMENT
AGREEMENTS"), and each of Larry Collins and Eileen M. Weldon shall execute
the consulting agreement in the form attached hereto as EXHIBIT 7.02(h)(iii)
(collectively, the "CONSULTING AGREEMENTS").
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
37
CONFIDENTIAL TREATMENT REQUESTED
(i) NONCOMPETITION AGREEMENTS. Each of D. Parker Hinshaw, Darryl
Bollinger, Carol R. Selvey, Daniel W. Murry, Jennifer Arthur and Charles G.
Shelley, Jr. shall execute the noncompetition agreement in the form attached
hereto as EXHIBIT 7.02(i)(i), and each of Larry Collins and Eileen M. Weldon
shall execute the noncompetition agreement in the form attached hereto as
EXHIBIT 7.02(i)(ii).
(j) SPOUSAL CONSENTS. Parent shall have obtained from each of the
spouses of the Shareholders, respectively, the executed consent, in the form
attached hereto as EXHIBIT 7.2(j), in respect of the consummation of the Merger
and the transactions contemplated by this Agreement.
(k) * * *
SECTION 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Target Companies to effect the Merger and the other
transactions contemplated in this Agreement is subject to the following
conditions, each of which may be waived, in whole or in part, to the extent
permitted by applicable Law, by the Target Companies:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Parent and Parent Sub contained in this Agreement shall be true
and correct when made and on and as of the Effective Time as if made on and as
of such date, except where the failure to be so true and correct would not have
a Parent Material Adverse Effect, and except that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date, except where the failure to be so true and correct
would not have a Parent Material Adverse Effect. The Target Companies shall
have received a certificate of the President of Parent to such effect in the
form attached hereto as EXHIBIT 7.03(a).
(b) AGREEMENTS AND COVENANTS. Parent shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time. The Target Companies shall have received a certificate of the
President of Parent to that effect.
(c) PARENT MATERIAL ADVERSE EFFECT. Parent shall not have become
subject to any action or event which resulted in or may likely result in a
Parent Material Adverse Effect.
(d) LEGAL OPINION. The Target Companies shall have received the
legal opinion of Baker & McKenzie, covering the matters set forth on EXHIBIT
7.03(d).
(e) AFFILIATE AGREEMENTS. Parent shall have received from each
Affiliate of Parent and any other Person who may be deemed to have become an
Affiliate of Parent (under Rule 145 under the Securities Act or otherwise under
applicable SEC accounting releases with respect to
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
38
CONFIDENTIAL TREATMENT REQUESTED
"pooling of interests" accounting treatment) after the date of this Agreement
and or prior to the Effective Time a signed Affiliate Agreement in the form of
EXHIBIT 7.03(e).
(f) EMPLOYMENT AND CONSULTING AGREEMENTS. Parent Sub shall execute
and deliver each of the Employment Agreements and the Consulting Agreements.
(g) * * *
ARTICLE VIII
TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION
SECTION 8.01 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time:
(a) by mutual consent of Parent and the Target Companies;
(b) by Parent, upon a material breach of any covenant or agreement on
the part of any Target Company set forth in this Agreement;
(c) by the Target Companies, upon a material breach of any covenant
or agreement on the part of Parent or Parent Sub set forth in this Agreement;
(d) by either Parent or any of the Target Companies, if there shall
be any order of a Governmental Entity which is final and nonappealable
preventing the consummation of the Merger;
(e) [reserved;]
(f) by either Parent or the Target Companies, if the Merger shall not
have been consummated before July 15, 1998 (unless the failure to consummate the
Merger by such date shall be due to the action or failure to act of the party
seeking to terminate this Agreement);
(g) by Parent, upon a material breach of a representation and
warranty made by the Target Companies or the Shareholders which has resulted in
a Target Company Material Adverse Effect, or which constitutes a material breach
of any representation and warranty set forth in Article IIIA; or
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
39
CONFIDENTIAL TREATMENT REQUESTED
(h) by the Target Companies, upon a material breach of a
representation and warranty made by Parent which has resulted in a Parent
Material Adverse Effect.
SECTION 8.02 INVESTIGATION. Notwithstanding any of the foregoing,
the right of any party hereto to terminate this Agreement pursuant to Section
8.01 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party hereto, any Person controlling
any such party or any of their respective officers or directors, whether prior
to or after the execution of this Agreement.
SECTION 8.03 AMENDMENT. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
SECTION 8.04 WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of any party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Agreement or the documents referred to in
this Agreement can be discharged by one party hereto, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other party or parties hereto; (b) no waiver that may be given by a party hereto
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement. All rights and
remedies existing under this Agreement are in addition to, and not exclusive of,
any rights or remedies otherwise available.
SECTION 8.05 * * *
SECTION 8.06 SHAREHOLDER INDEMNIFICATION, HOLD BACK AND ESCROW.
(a) Each of the Shareholders jointly and severally shall indemnify
and defend each of Parent and Parent Sub, and hold it harmless, from and against
any and all losses, damages, Liabilities, claims, demands, judgments,
settlements, costs and expenses of any nature whatsoever (including reasonable
attorneys' fees) (collectively, "LOSS"), * * * resulting from or arising out of
any: (i) breach of any representation or warranty or agreement of any Target
Company or any Shareholder contained herein * * *; or (ii) Liability of any
Target Company, whether or not addressed by a representation or warranty, which
was created, incurred or arose from facts, events, conditions or circumstances
existing on or before the Effective Time, to the extent that, but only to the
extent that, such Liability was not reflected or reserved against on the face of
the Interim Balance Sheets as adjusted for Liabilities incurred in the Ordinary
Course of Business since May 31, 1998 (provided that the items listed on
SCHEDULE 3.08 shall be deemed to be incurred in the Ordinary Course of
Business) * * *. No claim for indemnification pursuant to this Section 8.06(a)
may be
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
40
CONFIDENTIAL TREATMENT REQUESTED
made subsequent to the date which is * * * after the Effective Time or in
respect of a Loss in respect of accounts receivable or for which Parent has
otherwise been previously reimbursed by the Shareholders.
(b) (i) If any third party shall notify Parent with respect to
any third party claim (a "THIRD PARTY CLAIM") that may give rise to a Loss, then
Parent shall promptly notify the Shareholders' Representatives thereof in
writing; PROVIDED, HOWEVER, that no delay on the part of Parent in notifying the
Shareholders' Representatives shall relieve the Shareholders from any obligation
hereunder unless (and then solely to the extent) such Shareholders thereby are
prejudiced.
(ii) The Shareholders will have the right to defend Parent
against the Third Party Claim with counsel of their choice reasonably
satisfactory to Parent, so long as: (A) the Shareholders so notify Parent in
writing within thirty (30) days, acknowledging that such claim is in respect of
a Loss described in Section 8.06(a); (B) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief; (C)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of Parent, likely to establish a precedential
custom or practice materially adverse to the continuing business interests of
Parent; and (D) the Shareholders conduct the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Shareholders are conducting the defense
of the Third Party Claim in accordance with Section 8.06(b)(ii), (A) Parent may
retain separate co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (B) Parent will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior unanimous written consent of the Shareholders'
Representatives; and (C) the Shareholders 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 Parent (which consent will not be withheld
unreasonably).
(iv) In the event that any of the conditions in Section
8.06(b)(ii) is or becomes unsatisfied, (A) Parent may defend against the Third
Party Claim in any manner it reasonably may deem appropriate; PROVIDED, HOWEVER,
that Parent shall not consent to the entry of any judgment or enter into any
settlement or agreement to settle a Third Party Claim without the prior
unanimous written consent of the Shareholders' Representatives, which consent
shall not be unreasonably withheld; (B) Parent shall be reimbursed from the
Escrow Account promptly and periodically for the costs of defending against the
Third Party Claim (including reasonable attorneys' fees and expenses); and (C)
the Shareholders will remain responsible for any Loss that Parent actually
suffers 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 8.06.
(c) (i) Each Shareholder of the Target Companies hereby agrees
that, at the Effective Time, Parent shall hold back and place into escrow
pursuant to the Escrow Agreement (the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
41
CONFIDENTIAL TREATMENT REQUESTED
"ESCROW ACCOUNT"), a number of Parent Shares equal to * * * rounded to the
nearest whole share, of the total number of shares of Parent Common Stock to be
received by such Shareholder (the total value of all such shares as valued at
the Market Price to be collectively referred to as the "INDEMNIFICATION
AMOUNT"), as partial security for such Shareholder's indemnity obligations
herein.
(ii) At any time Parent shall have a claim for
indemnification, Parent shall submit such claim to the Shareholders'
Representatives and within sixty (60) calendar days thereof the Shareholders'
Representatives shall notify Parent, in writing, whether they agree with such
claim; PROVIDED, HOWEVER, that in the event that the Shareholders'
Representatives fail to so notify Parent, the Shareholders' Representatives
shall be deemed to have agreed to the release of securities or cash from the
Escrow Account. In the event that the Shareholders' Representatives notify
Parent that they disagree with such claim, the Shareholders' Representatives
shall provide Parent with a written notice specifying the Basis for such
disagreement and, if the Shareholders' Representatives and Parent shall be
unable to reach agreement within thirty (30) days, the matter will be submitted
to arbitration pursuant to the terms of Section 9.11.
(iii) For purposes of calculating quantities of shares to be
paid to Parent pursuant to this Section 8.06, each share of Parent Common Stock
shall be valued at the Market Price at the time of the notification pursuant to
Section 8.06(b)(i). Any and all distributions to and from the Escrow Account
shall be allocated among the Shareholders, pro rata, based on each Shareholder's
interest in shares of Parent Common Stock to be issued pursuant to the Merger,
as separate subaccounts for each holder. In the event that the Escrow Account
no longer contains any funds and/or shares of Parent Common Stock, and Parent
and/or Parent Sub seek indemnification pursuant to this Section 8.06, each of
the Shareholders may elect to fulfill his or her indemnity obligations hereunder
through the delivery of cash, duly endorsed shares of Parent Common Stock or
combination thereof ***.
(iv) Each of the Shareholders hereby acknowledges and agrees
that the indemnity obligations set forth above shall not be the exclusive remedy
of Parent and Parent Sub with respect to such Shareholder's indemnity
obligations herein and the Indemnification Amount in no way limits the amount or
sources of recovery of Parent and Parent Sub with respect to such indemnity
obligations * * *.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
42
CONFIDENTIAL TREATMENT REQUESTED
(d) For the purposes of this Section 8.06, holders of a majority of
the shares of Parent Common Stock in the Escrow Account may, by written notice
signed by them and delivered to Parent, appoint any other individual to act in
the place and stead of either of the Shareholders' Representatives.
(e) In connection with this Agreement and the Escrow Agreement and
the transactions contemplated hereby and thereby, respectively, the Target
Companies and the Shareholders agree that the Shareholders' Representatives
shall not be liable for any error of judgment or for any act done or omitted by
the Shareholders' Representatives in good faith or for any mistake in fact or
law, except its own willful misconduct or gross negligence.
(f) In discharging his duties and responsibilities hereunder and
under the Escrow Agreement, the Shareholders' Representatives shall have all
rights and powers necessary and incident to the proper discharge thereof,
including, without limitation, the right and power to engage and pay for
professional and other services. Without limitation upon the foregoing, the
Shareholders' Representatives shall have the duty and authority on behalf of the
Shareholders to do anything required of the Shareholders' Representatives under
this Agreement and the Escrow Agreement, including without limitation:
(i) To interpret and construe the provisions of Section
8.06 of this Agreement and the provisions of the Escrow Agreement;
(ii) To determine and resolve any disputes that may arise
under Section 8.06 of this Agreement and the Escrow Agreement, using his best
efforts to dispose of all such disputes by agreed settlement;
(iii) To give any and all written instructions to the Escrow
Agent for disbursement of the escrow Account; and
(iv) To perform all other acts as deemed appropriate by the
Shareholders' Representatives on behalf of the Shareholders to fully effectuate
and carry out the provisions of this Agreement and the Escrow Agreement.
(g) All expenses of the Shareholders' Representatives in connection
with the performance of the Escrow Agreement shall be borne by the Shareholders
pro rata. To the extent that any funds are held by the Shareholders'
Representatives after all of their duties hereunder are discharged, such funds
and/or shares shall be distributed to the Shareholders pro rata in accordance
with the Escrow Agreement. The Shareholders' Representatives shall not receive
compensation for service as Shareholders' Representatives pursuant to this
Agreement and the Escrow Agreement.
(h) The right to indemnification, payment of damages or other remedy
based on the representations, warranties, covenants and obligations of the
Target Companies and the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
43
CONFIDENTIAL TREATMENT REQUESTED
Shareholders contained herein will not be affected by any investigation
conducted by Parent or the Parent Representatives with respect to, or any
Knowledge acquired (or capable of being acquired) by Parent or the Parent
Representatives, at any time whether before or after the execution and delivery
of this Agreement or the Effective Time, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant or
obligation.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as set forth below in Section 9.01(b), the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any Person controlling any such party or
any of its officers or directors, whether prior to or after the execution of
this Agreement.
(b) The representations, warranties and agreements in this Agreement,
as updated by the certificate delivered pursuant to Section 7.02(a)(i) shall
survive the Effective Time and terminate (i) with respect to the Shareholders
and the Target Companies, on the * * * anniversary of the Effective Time and
(ii) with respect to Parent and Parent Sub, at the Effective Time; PROVIDED,
HOWEVER, that the representations, warranties and agreements set forth in * * *
shall not so terminate.
SECTION 9.02 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the facsimile number
specified below:
(a) If to Parent or Parent Sub:
DAOU Systems, Inc.
5120 Shoreham Place
San Diego, CA 92122
ATTENTION: President and Chief Financial Officer
Facsimile No.: (619) 452-2789
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
44
CONFIDENTIAL TREATMENT REQUESTED
with a copy to:
Baker & McKenzie
101 West Broadway, Twelfth Floor
San Diego, California 92101
ATTENTION: John J. Hentrich, Esq.
Facsimile No.: (619) 236-0429
(b) If to the Target Companies:
Resources in Healthcare Innovations, Inc.
Healthcare Transition Resources, Inc.
Ultitech Resources Group, Inc.
Innovative Systems Solutions, Inc.
Grand Isle Consulting, Inc.
4040 East 82nd Street, Suite C9 #205
Indianapolis, IN 46250-4209
ATTENTION: D. Parker Hinshaw
Facsimile No.: (317) 251-9220
with a copy to:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
ATTENTION: D. Bradley Peck, Esq.
Facsimile No.: (619) 453-3555
(c) If to the Shareholders:
D. Parker Hinshaw
2260 El Amigo Road
Del Mar, CA 92014
Facsimile No.: (619) 350-8027
SECTION 9.03 CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
* * *;
"AAA" as defined in Section 9.11;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
45
CONFIDENTIAL TREATMENT REQUESTED
"AFFILIATE" means a Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned Person;
"AGREEMENT" as defined in the preamble to this Agreement;
"ARTICLES OF MERGER" as defined in Section 1.02;
"ASSETS" means any and all properties and assets (real, personal or
mixed, tangible or intangible) of any Person;
"BALANCE SHEETS" as defined in Section 3.07;
"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;
* * *;
"BLUE SKY LAWS" as defined in Section 3.05(b);
"BUSINESS DAY" means any day other than a day on which banks in the
State of California are authorized or obligated to be closed;
"CERTIFICATE OF MERGER" as defined in Section 1.02;
"CERTIFICATES" as defined in Section 2.02(b);
"CODE" means the Internal Revenue Code of 1986, as amended;
"COMPETING TRANSACTION" means any of the following involving any
Target Company or any Affiliate of such Target Company: (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction (other than the transactions contemplated by this Agreement); (ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of
ten percent (10%) or more of the Assets of such Target Company in a single
transaction or series of transactions; (iii) any offer (whether cash or
securities) for ten percent (10%) or more of the outstanding shares of capital
stock of such Target Company; or (iv) any public announcement of a proposal,
plan or intention to do any of the foregoing;
"CONSENT" as defined in Section 2.01A;
"CONSULTING AGREEMENTS" as defined in Section 7.02(h);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
46
CONFIDENTIAL TREATMENT REQUESTED
"CONTRACT" of any Person means any contract, agreement or instrument
of any type whatsoever (i) to which such Person is a party and by which such
Person either has made a binding undertaking to perform an obligation or is
entitled to any property or right, or (ii) by which any of the Assets of such
Person is bound;
"CONTROL" (including the terms "CONTROLLED," "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or as
trustee or executor, by Contract or credit arrangement or otherwise;
"DELAWARE LAW" as defined in the recitals to this Agreement;
"DISSENTING SHARES" as defined in Section 2.04;
* * *;
"EFFECTIVE TIME" as defined in Section 1.02;
"EMPLOYEE BENEFIT PLAN" means (a) any bonus, incentive compensation,
profit sharing, retirement, pension, group insurance, death benefit, group
health, medical expense reimbursement, workers' compensation, dependent care,
flexible benefits or cafeteria, stock option, stock purchase, stock appreciation
rights, savings, deferred compensation, consulting, severance pay or termination
pay, vacation pay, life insurance, disability, welfare or other employee benefit
or fringe benefit plan, program or arrangement; or (b) any plan, program or
arrangement which is an Employee Pension Benefit Plan, Employee Welfare Benefit
Plan or Multiemployer Plan;
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2);
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1);
"EMPLOYMENT AGREEMENTS" as defined in Section 7.02(h);
"ENCUMBRANCES" means any Security Interests, Liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature whatsoever;
"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
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
47
CONFIDENTIAL TREATMENT REQUESTED
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 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;
"ERISA AFFILIATE" means each person (as defined in Section 3(9) of
ERISA) that together with a Target Company (or any person whose Liabilities such
Target Company has assumed or is otherwise subject to) would be considered or
has been a single employer under Section 4001(b) of ERISA or would be considered
or has been a member of the same "controlled group," under common control, a
member of the same affiliated service group or otherwise a single employer
within the meaning of Section 414(b), (c), (m) and (o) of the Code (PROVIDED,
HOWEVER, that when the subject of the provision is a Multiemployer Plan only
subsections (b) and (c) of Section 414 of the Code shall be taken into account);
"ESCROW ACCOUNT" as defined in Section 8.06(c);
"ESCROW AGREEMENT" as defined in Section 5.05;
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended;
"EXCHANGE AGENT" as defined in Section 2.02(a);
"EXCHANGE FUND" as defined in Section 2.02(a);
"EXCHANGE RATIO" means, subject to adjustment as set forth in Sections
2.01(b), with respect to each of the Target Companies, the quotient obtained
from dividing (i) as the numerator of such quotient, 1,839,381, 275,662,
282,551, 308,583 and 223,645 shares of Parent Common Stock in connection with
the Merger of RHI, HTR, URG, ISS and GIC, respectively, by (ii) as the
denominator of such quotient, the total number of shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time (excluding any
Dissenting Shares, if applicable) of RHI, HTR, URG, ISS and GIC, respectively.
All calculations made to determine the Exchange Ratio shall be made through the
fourth decimal place (i.e., rounded to the closest ten-thousandth);
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended;
"FAIR MARKET VALUE" of any Asset means the value that would be
obtained in an arm's length transaction between an informed and willing buyer
and an informed and willing seller;
"FINANCIAL RESULT DATE" as defined in Section 6.02;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
48
CONFIDENTIAL TREATMENT REQUESTED
"FINANCIAL STATEMENTS" as defined in Section 3.07;
"GAAP" means United States generally accepted accounting principles as
in effect from time to time;
"GIC" as defined in the preamble to this Agreement;
"GOVERNMENTAL ENTITIES" as defined in Section 3.05(b);
"HSR ACT" as defined in Section 3.05(b);
"HTR" as defined in the preamble to this Agreement;
"INDEMNIFICATION AMOUNT" as defined in Section 8.06(c);
"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 translations,
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 mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary rights,
and (h) all copies and tangible embodiments thereof (in whatever form or
medium);
"INTERIM BALANCE SHEETS" as defined in Section 3.07;
"ISS" as defined in the preamble to this Agreement;
"KNOWLEDGE" or "KNOWN" means, with respect to a particular fact or
other matter, that (i) an individual is aware of such fact or other matter or
(ii) * * * such individual could reasonably be expected to discover or otherwise
become aware of such fact or other matter; a Person (other than an individual)
will be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving, or who has at any time served, as a director,
officer, partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
49
CONFIDENTIAL TREATMENT REQUESTED
"LAWS" as defined in Section 3.05(a);
"LIABILITIES" as defined in Section 3.08;
"LIEN" means any lien, charge, Encumbrance, mortgage, conditional
sale agreement, title retention agreement, financing lease, pledge or
Security Interest of any kind or type and whether arising by Contract or
under Law;
"LOSS" as defined in Section 8.06(a);
"MARKET PRICE" means the average of the * * * prices of the Parent
Common Stock as reported on the Nasdaq National Market Quotation System for the
* * * trading days prior to the Effective Time;
"MERGER" as defined in the recitals to this Agreement;
"MERGER CONSIDERATION" as defined in Section 2.02(b);
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37);
"NASDAQ" means The Nasdaq Stock Market, Inc.;
"ORDINARY COURSE OF BUSINESS" with respect to any entity, means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency) of that entity;
"PARENT" as defined in the preamble to this Agreement;
"PARENT COMMON STOCK" as defined in Section 2.01(a);
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change or effect that,
individually or when taken together with all such other changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
Assets, condition (financial or otherwise), liabilities, operations or prospects
of Parent and its Subsidiaries, taken as a whole at the time of such change or
effect. A Parent Material Adverse Effect shall be deemed to exist if there
shall occur any event which causes or may reasonably be expected to cause or
result in estimable monetary loss which, individually or when aggregated with
all other events, exceeds ***;
"PARENT PREFERRED STOCK" as defined in Section 4.03(b);
"PARENT REPRESENTATIVES" as defined in Section 5.04;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
50
CONFIDENTIAL TREATMENT REQUESTED
"PARENT SEC REPORTS" as defined in Section 4.06(a);
"PARENT SUB" as defined in the preamble to this Agreement;
"PARENT SUB COMMON STOCK" means Parent Sub's common stock, par value
$0.001 per share;
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a Governmental Entity (or any
department, agency, or political subdivision thereof) or any other entity;
* * *;
* * *;
* * *;
"PROXY" as defined in Section 2.02A;
* * *;
"RHI" as defined in the preamble to this Agreement;
"RULES" as defined in Section 9.11;
"SEC" means the Securities and Exchange Commission;
* * *;
"SECURITIES ACT" means the Securities Act of 1933, 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, (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;
"SHAREHOLDERS" as defined in the preamble to this Agreement;
"SHAREHOLDERS' AGREEMENT" as defined in Section 6.08;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
51
CONFIDENTIAL TREATMENT REQUESTED
"SHAREHOLDERS' REPRESENTATIVES" as defined in Section 5.05;
* * *;
"SUBSIDIARY" or "SUBSIDIARIES" of Parent, the Surviving Corporation or
any other Person, means any corporation, partnership, joint venture or other
legal entity of which Parent, the Surviving Corporation or such other Person, as
the case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, fifty percent (50%) or more of the capital stock
or other equity interests which the holders thereof are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity;
"SURVIVING CORPORATION" as defined in Section 1.01;
"TARGET COMPANIES" as defined in the preamble to this Agreement;
"TARGET COMPANY COMMON STOCK" as defined in Section 2.01(a);
"TARGET COMPANY EMPLOYEE BENEFIT PLAN" as defined in Section 3.24;
"TARGET COMPANY MATERIAL ADVERSE EFFECT" means any change or effect
that, individually or when taken together with all other such changes or
effects, is or is reasonably likely to be materially adverse to the business,
properties, Assets, condition (financial or otherwise), liabilities, operations
or prospects of the Target Companies at the time of such change or effect. A
Target Company Material Adverse Effect shall be deemed to exist if there shall
occur any event which causes or may reasonably be expected to cause or result in
estimable monetary loss which, individually or when aggregated with all other
events, exceeds * * *;
"TARGET COMPANY PERMITS" as defined in Section 3.06;
"TAX" or "TAXES" shall mean any and all taxes, charges, fees or
levies, payable to any federal, state, local or foreign taxing authority or
agency, including, without limitation, (i) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, AD VALOREM, value added,
sales, use, service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers compensation,
unemployment compensation, utility, severance, excise, stamp, windfall profits,
transfer and capital gains taxes, (ii) custom duties, imposts, charges, levies
or other similar assessments of any kind, and (iii) interest, penalties and
additions to tax imposed with respect thereto;
"TAX RETURN" shall mean 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;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
52
CONFIDENTIAL TREATMENT REQUESTED
"THIRD PARTY CLAIM" as defined in Section 8.06(b); and
"URG" as defined in the preamble to this Agreement.
SECTION 9.04 HEADINGS; CONSTRUCTION. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
SECTION 9.05 SEVERABILITY. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties hereto as closely
as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 9.06 ENTIRE AGREEMENT; AMENDMENT. This Agreement (together
with the exhibits and schedules) and that certain Nondisclosure Agreement dated
January 27, 1998, constitute the entire agreement of the parties and supersedes
all prior agreements and undertakings, both written and oral, among the parties
hereto, or any of them, with respect to the subject matter hereof. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
SECTION 9.07 ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise except Parent Sub may, without any Target
Company's approval, assign its interests to a wholly-owned Subsidiary of Parent.
SECTION 9.08 PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 9.09 FURTHER ASSURANCES. The parties hereto agree (a) to
furnish upon request to each other such further information, (b) to execute and
deliver to each other such other documents, and (c) to do such other acts and
things, all as another party hereto may reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to in this
Agreement.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
53
CONFIDENTIAL TREATMENT REQUESTED
SECTION 9.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW.
SECTION 9.11 BINDING ARBITRATION. Subject to the arbitration
provisions set forth below, the parties hereto agree that all disputes arising
out of or related to the terms and conditions of this Agreement or to the
performance, breach or termination thereof, shall be submitted to binding
arbitration pursuant to the Expedited Procedures of the Commercial Arbitration
Rules (the "RULES") of the American Arbitration Association (the "AAA"). The
arbitration will take place in San Diego, California at the offices of the AAA.
The dispute will be resolved by a single arbitrator appointed by the AAA in
accordance with the list procedure described in Paragraph 13 of the Rules,
except that the AAA will transmit the list within ten (10) Business Days of the
filing of the demand for arbitration, and the parties thereto will have five (5)
Business Days to return the list to the AAA with their objections and
preferences. Discovery will be limited to no more than seven (7) depositions by
each side and written document requests, requesting the production of specific
documents. The parties to the dispute will voluntarily produce any and all
documents that they intend to use at the hearing before the close of discovery,
subject to supplementation for purposes of rebuttal or good cause shown. The
period for taking discovery will be sixty (60) Business Days, commencing upon
the day that the answer is due under the Rules. The arbitrator will hold a
pre-hearing conference within three (3) Business Days of the close of discovery
and will schedule the hearing within thirty (30) Business Days of the close of
discovery. After the arbitrator is selected, the arbitrator will have sole
jurisdiction to hear such applications, except that any measure ordered by the
arbitrator may be immediately and specifically enforced by a court otherwise
having jurisdiction over the parties. All fees and costs will be allocated to
the parties to the arbitration as determined by the arbitrator. Each party will
pay its own fees and costs associated with the arbitration and each party will
pay one-half the estimated arbitrator's fees up front and if either party fails
to do so a default will be entered against such party solely with respect to
such fees. Any determination of the arbitrator shall be final and binding on
the parties hereto. Nothing in this Agreement will prevent a party hereto from
applying to a court that would otherwise have jurisdiction for provisional or
interim injunctive or other equitable measures.
SECTION 9.12 WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of any party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right. To the maximum extent permitted by applicable Law, (a) no
claim or right arising out of this Agreement or the documents referred to in
this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving notice or demand
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
54
CONFIDENTIAL TREATMENT REQUESTED
to take further action without notice or demand as provided in this Agreement or
the documents referred to in this Agreement. All rights and remedies existing
under this Agreement are in addition to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 9.13 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 9.14 REPRESENTATION BY COUNSEL. Each party hereto
represents and agrees with the other that it has been represented by, or had the
opportunity to be represented by, independent counsel of its own choosing, and
that it has had the full right and opportunity to consult with its respective
attorneys, that to the extent, if any, that it desired, it availed itself of
this right and opportunity, that its authorized officers have carefully read and
fully understand this Agreement in its entirety and have had it fully explained
to them by such party's respective counsel, that each party is fully aware of
the contents thereof and its meaning, intent and legal effect, and that such
party or such party's legal guardian is competent to execute this Agreement and
has executed this Agreement free from coercion, duress or undue influence.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
55
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date first written above by their respective
officer thereunto duly authorized.
DAOU SYSTEMS, INC.
By: /s/ Daniel J. Daou
----------------------------------------
Daniel J. Daou, President
DAOU-RHI, INC.
By: /s/ Daniel J. Daou
----------------------------------------
Daniel J. Daou, President
RESOURCES IN HEALTHCARE INNOVATIONS, INC.
By: /s/ Larry Collins
----------------------------------------
Larry Collins, President
HEALTHCARE TRANSITION RESOURCES, INC.
By: /s/ Darryl Bollinger
----------------------------------------
Darryl Bollinger, President
ULTITECH RESOURCES GROUP, INC.
By: /s/ Carol R. Selvey
----------------------------------------
Carol R. Selvey, President
INNOVATIVE SYSTEMS SOLUTIONS, INC.
By: /s/ Daniel W. Murry
----------------------------------------
Daniel W. Murry, President
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
56
CONFIDENTIAL TREATMENT REQUESTED
GRAND ISLE CONSULTING, INC.
By: /s/ Charles G. Shelley, Jr.
----------------------------------------
Charles G. Shelley, Jr., President
SHAREHOLDERS OF RESOURCES IN HEALTHCARE
INNOVATIONS, INC.:
/s/ D. Parker Hinshaw
--------------------------------------------
D. Parker Hinshaw, 100,000 shares
/s/ Eileen M. Weldon
--------------------------------------------
Eileen M. Weldon, 75,000 shares
/s/ Larry Collins
--------------------------------------------
Larry Collins, 27,780 shares
SHAREHOLDERS OF HEALTHCARE TRANSITION
RESOURCES, INC.:
/s/ Darryl Bollinger
--------------------------------------------
Darryl Bollinger, 40 shares
/s/ D. Parker Hinshaw
--------------------------------------------
D. Parker Hinshaw, 20 shares
/s/ Eileen M. Weldon
--------------------------------------------
Eileen M. Weldon, 20 shares
/s/ Larry Collins
--------------------------------------------
Larry Collins, 20 shares
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
57
CONFIDENTIAL TREATMENT REQUESTED
SHAREHOLDERS OF ULTITECH RESOURCES GROUP,
INC.:
/s/ Carol R. Selvey
--------------------------------------------
Carol R. Selvey, 40 shares
/s/ D. Parker Hinshaw
--------------------------------------------
D. Parker Hinshaw, 20 shares
/s/ Eileen M. Weldon
--------------------------------------------
Eileen M. Weldon, 20 shares
/s/ Larry Collins
--------------------------------------------
Larry Collins, 20 shares
SHAREHOLDERS OF INNOVATIVE SYSTEMS SOLUTIONS,
INC.:
/s/ Daniel W. Murry
--------------------------------------------
Daniel W. Murry, 40 shares
/s/ D. Parker Hinshaw
--------------------------------------------
D. Parker Hinshaw, 15 shares
/s/ Eileen M. Weldon
--------------------------------------------
Eileen M. Weldon, 18 shares
/s/ Larry Collins
--------------------------------------------
Larry Collins, 18 shares
/s/ Jennifer Arthur
--------------------------------------------
Jennifer Arthur, 9 shares
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
58
CONFIDENTIAL TREATMENT REQUESTED
SHAREHOLDERS OF GRAND ISLE CONSULTING, INC.:
/s/ Charles G. Shelley, Jr.
--------------------------------------------
Charles G. Shelley, Jr., 49 shares
/s/ D. Parker Hinshaw
--------------------------------------------
D. Parker Hinshaw, 17 shares
/s/ Eileen M. Weldon
--------------------------------------------
Eileen M. Weldon, 17 shares
/s/ Larry Collins
--------------------------------------------
Larry Collins, 17 shares
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
59