Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
by and among
CRDENTIA CORP.,
NAS ACQUISITION CORPORATION,
NEW AGE STAFFING, INC.,
and
THE SHAREHOLDERS OF NEW AGE STAFFING, INC.
dated September 15, 2003
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS 2
1.1 Defined Terms 2
1.2 Construction of Certain Terms and Phrases 10
ARTICLE II THE MERGER 11
2.1 The Merger 11
2.2 Effective Time 11
2.3 Effect of the Merger 11
2.4 Certificate of Incorporation; Bylaws 11
2.5 Directors and Officers 11
2.6 Effect on Capital Stock/Merger Consideration 11
2.7 Actions at the Effective Time 13
2.8 Manner of Payment 14
2.9 Authorization of the Stockholder Representative 14
2.10 Exchange Procedure 15
2.11 Closing 16
2.12 Exemption from Registration 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 19
3.1 Organization of the Company 19
3.2 Capital Stock of the Company 19
3.3 Ownership of Shares 20
3.4 Authority of the Company 20
3.5 No Affiliates 20
3.6 No Conflicts 20
3.7 Consents and Governmental Approvals and Filings 21
3.8 Books and Records 21
3.9 Company Financial Statements 21
3.10 Absence of Changes 21
3.11 No Undisclosed Liabilities 21
3.12 Tangible Personal Property 22
3.13 Benefit Plans; ERISA 22
3.14 Real Property 23
3.15 Intellectual Property Rights 23
3.16 Proprietary Information of Third Parties 25
3.17 Compliance with Legal Requirements;
Governmental Authorizations 26
3.18 Legal Proceedings; Orders 27
3.19 Contracts 28
3.20 Environmental Matters 30
3.21 Inventory 32
3.22 Accounts Receivable 32
3.23 Equipment 32
TABLE OF CONTENTS
(continued)
3.24 Insurance 32
3.25 Tax Matters 33
3.26 Labor and Employment Relations 35
3.27 Certain Employees 36
3.28 Absence of Certain Developments 36
3.29 Customers and Suppliers 38
3.30 Bank Accounts 38
3.31 Regulatory Compliance 38
3.32 Third Party Consents 38
3.33 Relationships with Related Persons 39
3.34 Certain Payments 39
3.35 Brokers 39
3.36 Material Misstatements and Omissions 39
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUISITION CO 40
4.1 Organization 40
4.2 Authority 40
4.3 Litigation 40
4.4 Reports and Financial Statements 40
4.5 Absence of Changes 41
4.6 Brokers 41
4.7 Tax Matters 41
4.8 No Investigations 41
4.9 Parent Capitalization 42
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
STOCKHOLDERS 42
5.1 Requisite Power and Authority 42
5.2 Investment Representations 42
5.3 Transfer Restrictions 43
ARTICLE VI ADDITIONAL AGREEMENTS 44
6.1 Operation of Business Prior to Effective Time 44
6.2 No Solicitation or Negotiation 47
6.3 Access to Information 47
6.4 Notification of Certain Matters 48
6.5 Fees and Expenses 48
6.6 Confidentiality 48
6.7 Right of First Offer 49
6.8 Observer Rights 50
6.9 Tax Matters 50
TABLE OF CONTENTS
(continued)
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER 51
7.1 Conditions to Each Party's Obligations to
Effect the Merger 51
7.2 Conditions to the Obligations of the Company 51
7.3 Conditions to the Obligations of Parent and
Acquisition Co 51
ARTICLE VIII TERMINATION; AMENDMENT; WAIVER 52
8.1 Termination 52
8.2 Effect of Termination 53
8.3 Amendment 53
8.4 Break-Up Fee 53
8.5 Extension; Waiver 54
ARTICLE IX ACTIONS BY THE PARTIES AFTER THE CLOSING 54
9.1 Survival of Representations, Warranties, Etc 54
9.2 Indemnification 54
9.3 Certificate of Incorporation and Bylaws 57
9.4 Exclusivity 57
ARTICLE X MISCELLANEOUS 57
10.1 Restriction on Transferability of the Parent
Common Shares 57
10.2 Further Assurances 58
10.3 Notices 58
10.4 Entire Agreement 59
10.5 Waiver 59
10.6 Amendment 60
10.7 No Third Party Beneficiary 60
10.8 No Assignment; Binding Effect 60
10.9 Headings 60
10.10 Severability 60
10.11 Governing Law 60
10.12 Arbitration 60
10.13 Construction 60
10.14 Counterparts 61
SCHEDULES AND EXHIBITS
Schedules
Schedule 1.1(a) - Accredited Stockholders
Schedule 1.1(b) - Non-Accredited Stockholders
Schedule 1.1(c) - Key Employees
Schedule 2.11(b)(iv) - Parties to Non-Competition Agreements
Schedule 2.11(b)(xiii) - Excluded Parties from Lock-Up Agreements
Schedule 2.11(c)(i) - Allocation of Stock Consideration and Cash
Consideration
Company Disclosure Schedule
Exhibits
Exhibit A - Articles of Merger
Exhibit B - Certificate of Merger
Exhibit C - Form of Subordinated Promissory Note
Exhibit D - Employment Agreement
Exhibit E - Non-Competition and Non-Solicitation Agreement
Exhibit F - Company Officer's Certificate
Exhibit G - Company Secretary Certificate
Exhibit H - Release
Exhibit I Letter of Transmittal
Exhibit J - Opinion of Company Counsel to Company
Exhibit K - Registration Rights Agreement
Exhibit L - Lock-Up Agreement
Exhibit M - Parent Officer's Certificate
Exhibit N - Parent Secretary Certificate
Exhibit O - Opinion of Counsel to Parent and Acquisition Co.
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made and
entered into as of September 15, 2003 (the "Effective Date"), by and among
Crdentia Corp., a Delaware corporation ("Parent"), NAS Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Acquisition Co."), New Age Staffing, Inc., a Texas corporation (the
"Company"), Nick Liuzza, Sr. and Nick Liuzza, Jr. (collectively, the
"Principal Stockholders") and the remainder of the Company Stockholders
whose names are set forth in the signature page hereto (together with the
Principal Stockholders, the "Company Stockholders").
RECITALS:
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the Delaware General Corporation Law (the "DGCL") and
the Texas Business Corporation Act (the "TBCA"), Parent and the Company
will enter into a business combination transaction pursuant to which the
Company will merge with and into Acquisition Co. (the "Merger").
B. The Board of Directors of Parent (i) has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Parent and fair to, and in the best interests of, Parent and its stockholders,
and (ii) has approved this Agreement, the Merger and the other transactions
contemplated by this Agreement.
C. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business
strategy of the Company and fair to, and in the best interests of, the
Company and its stockholders, and (ii) has approved this Agreement, the
Merger and the other transactions contemplated by this Agreement.
D. The stockholders of the Company have approved this Agreement, the
Merger and the other transactions contemplated by this Agreement.
E. The stockholder of Acquisition Co. has approved this Agreement,
the Merger and other transactions contemplated by this Agreement.
F. Parent, Acquisition Co. and the Company desire to make certain
representations and warranties and other agreements in connection with the
Merger.
G. The parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Code, and to
cause the Merger to qualify as a reorganization under the provisions of
Sections 368(a)(1)(A) and (a)(2)(D) of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following defined
terms have the meanings indicated below:
"Accounts Receivable" has the meaning set forth in Section 3.22.
"Accredited Stockholders" shall mean those stockholders who qualify as
accredited investors pursuant to Regulation D as promulgated under the S
ecurities Act and as set forth on Schedule 1.1(a) hereto.
"Acquisition Co." has the meaning set forth in the first paragraph of
this Agreement.
"Acquisition Co. Common Stock" has the meaning set forth in Section 2.7(c).
"Actions or Proceedings" means any action, suit, proceeding, arbitration,
Order, inquiry, hearing, assessment with respect to fines or penalties or
litigation (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental or Regulatory Authority.
"Affiliate" means, with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person.
"Agreement" has the meanings set forth in the first paragraph of this
Agreement and in Section 2.2.
"Articles of Merger" has the meaning set forth in Section 2.2.
"Assets and Properties" and "Assets or Properties" of any Person each
means all assets and properties of every kind, nature, character and
description (whether real, personal or mixed, whether tangible or
intangible, whether absolute, accrued, contingent, fixed or otherwise
and wherever situated), including the goodwill related thereto, operated,
owned or leased by such Person, including, without limitation, cash,
cash equivalents, accounts and notes receivable, chattel paper, documents,
instruments, general intangibles, real estate, equipment, inventory, goods
and Intellectual Property.
"Benefit Plan" means any Plan established, arranged or maintained by
the Company or any corporate group of which the Company is or was a
member, existing at the Closing Date or prior thereto, to which the
Company contributes or has contributed, or under which any employee,
officer, director or former employee, officer or director of the
Company or any beneficiary thereof is covered, is eligible for
coverage or has benefit rights.
"Books and Records" of any Person means all files, documents,
instruments, papers, books, computer files (including but not limited
to files stored on a computer's hard drive
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or on floppy disks), electronic files and records in any other medium
relating to the business, operations or condition of such Person.
"Breach" means a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement or any other agreement or document
will be deemed to have occurred if there is or has been (a) any
inaccuracy in a breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other
provision, or (b) any other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation,
or other provision, and the term "Breach" means any such inaccuracy,
breach, failure, claim, occurrence or circumstance.
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State of California are authorized or
obligated to close.
"Cash Consideration" has the meaning set forth in Section 2.6(b).
"Certificate of Merger" has the meaning set forth in Section 2.2.
"Closing" has the meaning set forth in Section 2.11(a).
"Closing Date" has the meaning set forth in Section 2.11(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of
this Agreement.
"Company Common Stock" has the meaning set forth in Section 3.2(a)
of this Agreement.
"Company Disclosure Schedule" means the disclosure schedule attached
hereto which sets forth the exceptions to the representations and
warranties contained in Article III hereof and certain other
information called for by this Agreement.
"Company Financial Statements" means (i) the audited balance sheets
of the Company and the related audited statements of income and
retained earnings for the fiscal periods ended December 31, 2002,
December 31, 2001 and December 31, 2000, including the footnotes
thereto and (ii) the Interim Financial Statements.
"Company Shares" has the meaning set forth in Section 2.9(a).
"Company Stockholders" means the holders of Outstanding Common
Stock, including the Principal Stockholders.
"Consent" means any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
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"Contemplated Transactions" means all of the transactions
contemplated by this Agreement, including: (a) the Merger; (b) the
execution, delivery, and performance of the Lock-Up Agreement, the
Employment Agreement, the Non-Competition Agreements, and the Releases;
(c) the performance by Parent and the Company of their respective
covenants and obligations under this Agreement; and (d) Parent's
acquisition and ownership of the Company Shares and exercise of
control over the Company.
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied)
that is legally binding.
"Copyrights" has the meaning set forth in the definition of
"Intellectual Property."
"Damages" has the meaning set forth in Section 9.2(a).
"Defined Benefit Plan" means each Benefit Plan which is subject
to Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"DGCL" has the meaning set forth in the first recital of this Agreement.
"EBITDA" means earnings before Interest, taxes, depreciation and
amortization as reported by a certified public accounting firm acceptable
to and engaged by Parent and calculated in accordance with GAAP.
"Effective Time" has the meaning set forth in Section 2.2.
"Employment Agreement" has the meaning set forth in Section 2.11.
"Encumbrances" means any mortgage, pledge, assessment, security
interest, deed of trust, lease, lien, adverse claim, equitable interest,
levy, charge, community property interest, right of first refusal or other
encumbrance of any kind, or any conditional sale or title retention
agreement or other agreement to give any of the foregoing in the future.
"Environment" has the meaning set forth in Section 3.20.
"Environmental Laws" has the meaning set forth in Section 3.20.
"Environmental Notice" has the meaning set forth in Section 3.20.
"Environmental Permits" has the meaning set forth in Section 3.20.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any entity which is a member of a "controlled
group of corporations" or which is or was under "common control" with
the Company as defined in Section 414 of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Final Date" has the meaning set forth in Section 8.1(b).
"First Installment Payment" has the meaning set forth in Section 2.6(d).
"GAAP" means United States generally accepted accounting principles,
as currently defined by the Financial Accounting Standards Board ("FASB")
and other agencies permitted by law to issue such pronouncements.
"Governmental Authorization" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental
or Regulatory Authority or pursuant to any Legal Requirement.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other
instrumentality of the United States or other country, any state,
county, city or other political subdivision.
"Inbound License Agreements" has the meaning set forth in Section 3.15(e).
"Information Statement" shall mean the Information Statement, as
amended, furnished to each of the stockholders of the Company
"Initial Consideration" means $10,280,000.
"Installment Payments" has the meaning set forth in Section 2.6(d).
"Intellectual Property" means (i) 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 (collectively,
"Patents"); (ii) 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 (collectively, "Trademarks"),
(iii) copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith and mask works
and all applications, registrations and renewals in connection
therewith (collectively, "Copyrights"); (iv) trade secrets and
confidential business information (including without limitation,
product specifications, data, know-how, inventions and ideas, past,
current and planned research and development, customer lists, current
and anticipated customer requirements, price lists, market studies,
business plans), however documented; (v) proprietary computer
software and programs (including object code and source code) and
other proprietary rights and copies and tangible embodiments thereof
(in whatever form or medium); (vi) database technologies, systems,
structures and architectures (and related processes, formulae,
compositions, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information)
and any other related information, however, documented; (vii)
any and all information concerning the business and affairs of
a Person (which includes historical financial statements,
financial projections and budgets, historical and projected
sales, capital spending budgets and plans, the names and
backgrounds of key personnel and personnel training and
techniques and materials), however documented; (viii) any and
all notes, analysis, compilations, studies, summaries, and other
5
material prepared by or for a Person containing or based, in whole
or in part, on any information included in the foregoing, however
documented; (ix) all industrial designs and any registrations and
applications therefor; (x) all databases and data collections and
all rights therein (items (iv)-(x) shall be referred to as "Trade
Secrets and Other Proprietary Information"); and (xi) any similar
or equivalent rights to any of the foregoing anywhere in the world.
"Interest" means money paid to factoring or other lending sources
and shall not, by way of clarification, include any interest paid or
payable to the Internal Revenue Service or state taxing authority.
"Interim Financial Statements" means the unaudited balance sheet
and the related unaudited statement of income and retained earnings
for the Company, in each case for the three month period ended July
31, 2003, along with appropriate supporting schedules.
"Key Employees" means those employees of the Company designated
as "key employees" on Schedule 1.1(c) attached hereto.
"Knowledge of the Company" or "Known to the Company" means the
knowledge of Nick Liuzza, Jr. and Nick Liuzza, Sr., each of whom
shall be deemed to have Knowledge of a particular fact or other
matter only if he is actually aware of such fact or other matter;
or (ii) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course
of conducting a reasonably comprehensive investigation concerning
the existence of such fact or other matter.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute or treaty.
"Letter of Transmittal" has the meaning set forth in Section 2.11.
"Lock-Up Agreement" has the meaning set forth in Section 2.11.
"Material" has the meaning set forth in Section 3.20.
"Material Adverse Effect" means, for any Person, a material adverse
effect whether individually or in the aggregate (a) on the business,
operations, financial condition, Assets and Properties, liabilities or
prospects of such Person, or (b) on the ability of such Person to
consummate the transactions contemplated hereby.
"Merger" has the meaning set forth in the first recital of this
Agreement.
"Merger Consideration" has the meaning set forth in Section 2.6(b).
"Non-Accredited Stockholders" shall mean those stockholders of the
Company who do not qualify as "accredited investors" as defined in
Regulation D promulgated under the Securities Act, as set forth on
Schedule 1.1(b) hereto.
"Non-Competition Agreements" has the meaning set forth in Section 2.11.
6
"Nurses" means all nurses engaged by the Company to provide nursing
services to the Company's customers as arranged by the Company.
"Order" means any award, decision, writ, judgment, decree, ruling,
subpoena, verdict, injunction or similar order of any Governmental or
Regulatory Authority (in each such case whether preliminary or final).
"Ordinary Course of Business" means the action of a Person that is
(i) consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person;
(ii) not required to be authorized by the board of directors of the
Company; and (iii) similar in nature and magnitude to actions customarily
taken, without the action of the board of directors or similar body,
in the ordinary course of the normal day-to-day operations of other
similarly situated Persons that are in the same line of business as
the Company.
"Outbound License Agreement" has the meaning set forth in Section 3.15(e).
"Outstanding Company Common Stock" has the meaning set forth in Section
2.6(a).
"Parent" has the meaning set forth in the first paragraph of this
Agreement.
"Parent Acquisition" shall mean the acquisition of a temporary nurse
staffing company or travel nurse company by Parent.
"Parent Common Stock" means the shares of common stock of Parent,
$0.0001 par value.
"Parent Group" has the meaning set forth in Section 9.2(a).
"Parent SEC Documents" means each form, report, schedule, statement
and other document required to be filed by the Parent since November
16, 2000 through the date of this Agreement under the Exchange Act or
the Securities Act, including any amendment or supplement to such
document, whether or not such amendment or supplement is required to
be so filed.
"Patents" has the meaning set forth in the definition of
"Intellectual Property."
"Permitted Encumbrance" means (a) any Encumbrance for taxes not
yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in
accordance with GAAP, (b) mechanic's, laborer's, contractor's,
landlord's, and other similar statutory liens arising in the Ordinary
Course of Business, and (c) any easements, encroachments, encumbrances,
rights of ways, zoning restrictions or other minor imperfection of
title or similar Encumbrance which individually or in the aggregate
with other such Encumbrances does not impair the value of the
property subject to such Encumbrance or the use of such property
in the conduct of the business of the Company.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other
business organization, trust, union, association or Governmental or
Regulatory Authority.
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"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, accident, disability,
workers' compensation or other insurance, severance, separation
or other employee benefit plan, practice, policy or arrangement
of any kind, whether written or oral, including, but not limited
to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"Principal Stockholders" has the meaning set forth in the first
paragraph of this Agreement.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental or Regulatory Authority.
"Qualified Plan" means each Benefit Plan which is intended to
qualify under Section 401 of the Code.
"Real Property" has the meaning set forth in Section 3.14.
"Registration Rights Agreement" has the meaning set forth in
Section 2.10(b)(xii).
"Related Person" means with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or one
or more members of such individual's Family serve as a director,
officer, partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person;
(b) any Person that holds a Material Interest in
such specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in
a similar capacity);
(d) any Person in which such specified Person holds
a Material Interest;
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(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar
capacity); and
(f) any Related Person of any individual described
in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former
spouses, (iii) any other natural person who is related to the individual
or the individual's spouse within the second degree, and (iv) any other
natural person who resides with such individual, and (b) "Material
Interest" means direct or indirect benefit ownership (as defined in
Rule 13d-3 under the Exchange Act) of voting securities or other
voting interests representing at least 10% of the outstanding voting
power of a Person or equity securities or other equity interests
representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"Release" has the meaning set forth in Section 2.11(b)(viii).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Second Installment Payment" has the meaning set forth in Section 2.6(d).
"Senior Debt" means (a) any indebtedness of Parent (plus interest,
premium and penalties due from or arising out of such indebtedness, or
any refinancing thereof, whether convertible into equity of the Parent
or not): (i) for borrowed funds; (ii) due to the sellers or lessors of
any real or personal property to Parent; or (iii) for reimbursement
obligations with respect to letters of credit; (b) any other indebtedness
of Parent, except to the extent that the holder of such indebtedness
otherwise agrees in writing; and (c) any debentures, notes or other
evidences of indebtedness issued in exchange for any of the foregoing
indebtedness, or any indebtedness arising from the satisfaction of such
indebtedness by a guarantor; provided, however, that any indebtedness
owed by Parent to any owner or former owner of a Person previously or
hereafter acquired, directly or indirectly, in whole or in part, by
Parent in a Parent Acquisition is excluded from "Senior Debt" for all
purposes under this Agreement.
"Software" has the meaning set forth in Section 3.15(k).
"Stockholder Representative" has the meaning set forth in Section 2.9.
"Stock Certificates" has the meaning set forth in Section 2.10.
"Stock Consideration" has the meaning set forth in Section 2.6(c).
"Stock Consideration Value" has the meaning set forth in Section 2.6(c).
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Surviving Representations" has the meaning set forth in Section 9.1.
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"Tax" (and, with correlative meaning, "Taxes," "Taxable" and "Taxing")
means (i) any federal, state, local or foreign income, alternative or
add-on minimum tax, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental
or windfall profit tax, custom, duty or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount
imposed by any Governmental or Regulatory Authority responsible for
the imposition of any such tax (domestic or foreign), (ii) any liability
for payment of any amounts of the type described in (i) as a result of
being a member of an affiliated, consolidated, combined, unitary or other
group for any Taxable period and (iii) any liability for the payment of
any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other person.
"Tax Return" means any return, report, information return, schedule
or other document (including any related or supporting information)
filed or required to be filed with respect to any taxing authority
with respect to Taxes.
"TBCA" shall mean the Texas Business Corporation Act.
"Terminating Transaction" has the meaning set forth in Section 2.6(e).
"Third Party Expenses" has the meaning set forth in Section 6.5.
"Threatened" means a claim, Proceeding, dispute, action or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or if any other event has occurred
or any other circumstances exist that would lead a prudent Person to
conclude that such a claim, proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"Threshold Amount" has the meaning set forth in Section 9.2(b)..
"Trademarks" has the meaning set forth in the definition of
"Intellectual Property."
"Trade Secrets and Other Proprietary Information" has the meaning
set forth in the definition of "Intellectual Property."
1.2 Construction of Certain Terms and Phrases. Unless the context
of this Agreement otherwise requires, (a) words of any gender include
each other gender; (b) words using the singular or plural number also
include the plural or singular number, respectively; (c) the terms
"hereof," "herein," "hereby" and derivative or similar words refer
to this entire Agreement; (d) the terms "Article" or "Section" refer
to the specified Article or Section of this Agreement; (e) the term
"or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or;" and (f) "including" means "including
without limitation." Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. All accounting terms used herein and not expressly defined
herein shall have the meanings given to them under GAAP.
10
ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time and subject to and upon the
terms and conditions of this Agreement and the applicable provisions
of the DGCL and the TBCA, the Company shall be merged with and into
Acquisition Co., the separate corporate existence of the Company shall
cease and Acquisition Co. shall continue as the surviving corporation.
Acquisition Co. as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
2.2 Effective Time. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by the
filing of the articles of merger substantially in the form attached
hereto as Exhibit A (the "Articles of Merger") with the Secretary of
State of the State of Texas and a certificate of merger substantially
in the form attached hereto as Exhibit B (the "Certificate of Merger")
with the Secretary of State of the State of Delaware, in each case in
accordance with the relevant provisions of the TBCA and the DGCL (the
time of effectiveness as specified in the Articles of Merger being the
"Effective Time") as soon as practicable on the Closing Date. Unless
the context otherwise requires, the term "Agreement" as used herein
refers collectively to this Agreement, the Articles of Merger and the
Certificate of Merger.
2.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable
provisions of the DGCL and the TBCA. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and
Acquisition Co. shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Acquisition Co. shall become
the debts, liabilities and duties of the Surviving Corporation.
2.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
Acquisition Co. shall be the Certificate of Incorporation of the
Surviving Corporation, except that: (i) Article I thereof shall be
amended to read in its entirety as follows: "The name of the
Corporation is New Age Staffing, Inc.;" (ii) Article IV regarding
the initial Board of Directors shall be deleted; and (iii) Article
VII regarding the incorporator shall be deleted.
(b) At the Effective Time, the Bylaws of Acquisition Co. shall
be the Bylaws of the Surviving Corporation, except that the Bylaws
shall be amended to reflect that the name of the Surviving Corporation
shall be "New Age Staffing, Inc."
2.5 Directors and Officers. The directors of Acquisition Co.
immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, to serve until their respective successors
are duly elected or appointed and qualified. The officers of Acquisition
Co. immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, to serve until their successors are duly
elected or appointed or qualified.
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2.6 Effect on Capital Stock/Merger Consideration.
(a) Company Common Stock.
(i) Conversion of Company Common Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of
any Person, each share of the Company Common Stock issued and
outstanding immediately prior to the Effective Time (the "Outstanding
Company Common Stock") shall be canceled and automatically converted
into the right to receive, upon surrender of the certificates
representing such shares and a Letter of Transmittal, a ratable
portion of the Stock Consideration and Cash Consideration as
determined in this Section 2.6. At the Effective Time, all rights
in respect of such Outstanding Company Common Stock shall cease to
exist, other than the right to receive the Stock Consideration and
Cash Consideration, and all such shares shall be cancelled and retired.
(ii) No Fractional Shares. In lieu of fractional shares that
would otherwise be issued to holders of Company Common Stock under
this Agreement, each holder of Company Common Stock that would have
been entitled to receive a fractional share shall receive such whole
number of shares of Parent Common Stock as is equal to the precise
number of shares of Parent Common Stock to which such person would
be entitled rounded down to the nearest whole number.
(b) Merger Consideration Generally. The aggregate merger
consideration (the "Merger Consideration") shall equal (i) the
Initial Consideration plus (ii) the Installment Payments (as defined
in Section 2.6(d) below) for an aggregate merger consideration of
$11,000,000, all of which shall be deemed earned at Closing.
(c) Initial Consideration. The "Initial Consideration" of
$10,280,000 shall consist of the following:
(i) Stock Consideration. $8,950,000 (the "Stock Consideration
Value") shall be paid in Parent Common Stock, the share number of which
shall be equal to the quotient obtained by dividing (A) the Stock
Consideration Value by (B) $1.30. For purposes of this Agreement,
"Stock Consideration" shall mean that number of shares of Parent
Common Stock issuable on the Closing Date together with the additional
Parent Common Stock due under Section 2.6(d).
(ii) Cash Consideration. $1,330,000 (together with all
additional cash due under Section 2.6(d), the "Cash Consideration"),
(w) $400,000 of which shall be paid on the Closing Date , (x) $265,000
of which shall be paid on October 15, 2003 or, if earlier, within five
(5) business days after the closing of a financing with third party
investors sufficient to fund said amount (exclusive of up to $675,000
raised in the convertible note financing recently consummated by the
Company), (y) $332,500 of which shall be paid on or before 180 days
from the Closing Date, and (z) $332,500 of which shall be paid on or
before the first anniversary of the Closing Date. The Cash
Consideration payable pursuant to subsection (x) shall not bear
interest and the Cash Consideration payable pursuant to subsections
(y) and (z) of the preceding sentence shall bear interest, at the prime
or reference rate as quoted from time to time in the Wall Street Journal.
The obligations to pay additional Cash Consideration set forth in this
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Section 2.6(c)(ii), as well as the obligation to pay additional Cash
Consideration set forth in Section 2.6(d)(i) and (ii) below, shall be
evidenced by a subordinated promissory note payable to the order of
the Stockholder Representative, as agent for the Company Stockholders,
in the form attached as Exhibit C (the "Promissory Note"). The
Company Stockholders acknowledge and agree that the Promissory Note
shall be subordinated to all Senior Debt. No payment of principal
or interest shall be made on the Promissory Note if, but only so
long as, there exists any default, or the existence of any event
which, with the giving of notice, would constitute a default, on
the payment of Senior Debt, as determined by the terms of any such
Senior Debt and the Company shall not be deemed to be in default
under the Promissory Note; provided, however, that such payment
prohibition may not continue in effect for more than six months,
and after the expiration of such six month period, the holder of
the Promissory Note may avail himself of all legal remedies against
Parent accruing as the result of any continuing failure by Parent
to make all payments then due under the Promissory Note. The
Promissory Note shall be payable pari passu with all other seller
financing incurred in connection with Parent Acquisitions
consummated prior to, or following, the Closing, and no such
seller financing shall constitute Senior Debt. The Stockholder
Representative hereto agrees to execute, at or following the
Closing, as the case may be, all subordination documents required
by the holders of Senior Debt to evidence the foregoing
subordination terms.
(d) Installment Payments. As additional installments of
the Merger Consideration following the Closing Date, the First
Installment Payment (as defined in Section 2.6(d)(i) below) shall
be payable on the first anniversary of the Closing Date and the
Second Installment Payment (as defined in Section 2.6(d)(ii) below)
shall be payable on the second anniversary of the Closing Date in
accordance with the provisions hereof:
(i) First Installment Payment. The "First Installment Payment"
shall consist of: additional Cash Consideration of $360,000. The
obligation to pay additional Cash Consideration as of the First
Installment Payment shall be evidenced by a non-interest bearing
Promissory Note delivered to the Stockholder Representative, as agent
for the Company Stockholders, as of the Closing.
(ii) Second Installment Payment. The "Second Installment
Payment" shall consist of: additional Cash Consideration of $360,000.
The obligation to pay additional Cash Consideration as of the Second
Installment Payment shall be evidenced by a non-interest bearing
Promissory Note delivered to the Stockholder Representative, as agent
for the Company Stockholders, as of the Closing. The First Installment
Payment and the Second Installment Payment are collectively referred
to as the "Installment Payments."
(iii) Terminating Transaction. If (i) Parent merges or
otherwise consolidates with another Person and Parent is not the
survivor of such merger or consolidation or (ii) Parent is acquired
or all or substantially all of its assets are acquired and, in any
such instance, either or both of the First Installment Payment or
the Second Installment Payment is not scheduled to be paid under
Section 2.6(d) prior to the effective date of such transaction
(each, a "Terminating Transaction"), the then unpaid Installment
Payment(s) shall be accelerated and shall be due, payable and
delivered on the 10th day following the effective date of such
Terminating Transaction.
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2.7 Actions at the Effective Time. At the Effective Time:
(a) Except for the securities referred to in Section 2.7(b) below,
each share of Outstanding Company Common Stock will automatically, by
virtue of the Merger and without any action on the part of the holder
thereof, be canceled and converted into a right to receive from Parent
the Stock Consideration and Cash Consideration in the amount as
determined pursuant to Section 2.6, allocated among the Company
Stockholders in proportion to the number of shares of Outstanding
Company Common Stock owned by each Company Stockholder on the Closing
Date.
(b) Each share of Company Common Stock held in the treasury of
the Company shall be canceled and retired without payment of any
consideration therefor.
(c) Each share of common stock of Acquisition Co. ("Acquisition
Co. Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly
issued, fully paid and non-assessable share of common stock of the
Surviving Corporation and shall constitute the only shares of capital
stock of the Surviving Corporation outstanding immediately after the
Effective Time. Each stock certificate of Acquisition Co. evidencing
ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
2.8 Manner of Payment. The Initial Consideration and the Installment
Payments shall be payable to the Company Stockholders in accordance with
each such Company Stockholder's respective share ownership in the Company
on the Closing Date. The Initial Consideration and the Installment
Payments shall be paid as follows: (i) for Cash Consideration, by wire
transfer to the Stockholder Representative (as defined in Section 2.9),
and (ii) for certificates representing the Stock Consideration due as
part of the Initial Consideration or the Installment Payments, by
delivery to the Stockholder Representative.
2.9 Authorization of the Stockholder Representative.
(a) Nick Liuzza Jr. (and each successor appointed in accordance
with this Section 2.9) hereby is appointed, authorized and empowered
to act as the stockholder representative (when acting in such capacity,
the "Stockholder Representative") on behalf of each of the Company
Stockholders, in connection with the and to facilitate the consummation
of the transactions contemplated by this Agreement, which powers
shall include, without limitation: (i) to deliver all certificates
representing the Company Common Stock tendered therewith to Parent
and to collect and receive all consideration payable to the Company
Stockholders and to disburse and pay the same to each of the Company
Stockholders in accordance with the terms of this Agreement; (ii) to
negotiate, agree to, enter into settlements and comprises of, and
comply with orders of courts and awards of arbitrators with respect
to indemnification claims under this Agreement; (iii) to resolve any
indemnification claims under this Agreement; and (iv) to make, execute,
acknowledge and deliver all such other agreements, guarantees, orders,
receipts, endorsements, notices, requests, instructions, certificates,
stock powers, letters and other writings, and, in general, do to any
and all things and to take any and all actions that the Stockholder
Representative in his sole and absolute discretion, may consider
necessary or proper
14
or convenient in connection with the consummation of the transactions
contemplated by this Agreement.
Accordingly, the Stockholder Representative shall have unlimited
authority and power to act on behalf of each of Company Stockholder
with respect to this Agreement and the disposition, settlement or
other handling of all indemnification claims, and other rights or
obligations arising from or taken pursuant to this Agreement. The
Company Stockholders will be bound by all actions taken by the
Stockholder Representative in connection with this Agreement.
The grant of authority provided for in this Section 2.9 is coupled
with an interest and is being granted, in part, as an inducement to
Parent and Acquisition Co. to enter into this Agreement, and shall
be irrevocable and survive the death, incompetency, bankruptcy or
liquidation of any Company Stockholder and shall be binding upon any
successor thereto.
Parent, Acquisition Co. and the Surviving Corporation shall have
the right to rely upon all actions taken or omitted to be taken by
the Stockholder Representative pursuant to this Agreement or any
applicable ancillary document, and notwithstanding anything herein
to the contrary, Parent, Acquisition Co. and the Surviving
Corporation shall not have any responsibility or obligation
whatsoever to any Company Stockholder or to any other party with
respect to or arising out of the actions taken or any inaction by
the Stockholder Representative.
(b) If the Stockholder Representative is unable or unavailable
to perform his duties hereunder, a successor Stockholder Representative
shall be selected by a majority of the Company Stockholders.
2.10 Exchange Procedure.
(a) At the Closing and pursuant to the Letter of Transmittal,
Parent shall deliver to the Stockholder Representative, on behalf of
each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented Company Common Stock (the "Stock
Certificates") whose shares are being converted into a ratable portion
of the Cash Consideration and Stock Consideration pursuant to Section
2.6 above, certificates representing the number of Parent Common Stock
due to each Company Stockholder. Parent's delivery of certificates is
conditioned upon each Company Stockholder's surrender of a Stock
Certificate for cancellation to Parent or to such other agent or
agents as may be appointed by Parent, duly endorsed in blank (or
accompanied by duly executed stock powers), together with a Letter
of Transmittal duly executed. The Stock Certificates so surrendered
shall forthwith be canceled. No interest will accrue or be paid to
the holder of any Company Common Stock. From and after the Effective
Date, until surrendered as contemplated by this Section 2.9, each
Stock Certificate shall be deemed for all corporate purposes to
evidence the amount of the Cash Consideration and Stock Consideration
into which the Company Common Stock represented by such Stock
Certificate have been converted.
(b) The Cash Consideration and Stock Consideration delivered
under Section 2.6 and Section 2.7 in exchange of Company Common
Stock in accordance with the terms hereof shall be deemed to have
been delivered in full satisfaction of all rights pertaining to
15
such Company Common Stock. There shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation
of Company Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Stock Certificates
are presented to the Surviving Corporation for any reason, they shall
be canceled and exchanged as provided in this Section 2.9, provided
that the presenting holder is listed on the Company's stockholder
list as a holder of Company Common Stock.
(c) In the event that any Stock Certificates evidencing Company
Common Stock shall have been lost, stolen or destroyed, Parent shall
pay in exchange for such lost, stolen or destroyed Stock Certificates,
upon the making of an affidavit of that fact by the holder thereof,
such Cash Consideration and Stock Consideration as required pursuant
to Section 2.6 and Section 2.7 above; provided, however, that Parent
may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Stock
Certificates to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against Parent
with respect to the Stock Certificates alleged to have been lost,
stolen or destroyed.
(d) Notwithstanding anything to the contrary in this Section 2.9,
none of the Surviving Corporation or any party hereto shall be liable
to a holder of Company Common Stock for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat
or similar law.
(e) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of
the Code.
(f) Each of the Parent, Acquisition Co. and the Company will
take all such reasonable and lawful acts as may be necessary or
desirable in order to effectuate the Merger in accordance with
this Agreement as promptly as possible. If, at any time after
the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the
Company, the officers and directors of the Company and Acquisition
Co. are fully authorized in the name of the respective corporations
or otherwise to take, and will take, all such lawful and necessary
action so long as such action is not inconsistent with this Agreement.
2.11 Closing.
(a) Time and Place. The consummation of the Merger under this
Agreement (the "Closing") shall take place at the offices of Morrison
& Foerster LLP, 3811 Valley Centre Drive, San Diego, CA 92130, at
10:00 a.m. on September 15, 2003, or at such time and in such manner
as the parties mutually agree (the "Closing Date").
(b) Closing Deliveries by the Company and the Principal Stockholders.
At the Closing, the Company and the Principal Stockholders, as the case
may be, shall have delivered or caused to be delivered to Parent and/or
Acquisition Co., as the case may be:
(i) the Certificate of Merger, duly executed by the Company;
16
(ii) the Articles of Merger, duly executed by the Company;
(iii) the Employment Agreement in the form of Exhibit D, by
and between the Surviving Corporation and Nick Liuzza, Jr. duly executed
by such parties;
(iv) the Non-Competition and Non-Solicitation Agreement by and
between Parent and each of the individuals set forth on Schedule 2.11(b)
(iv), substantially in the form of Exhibit E (the "Non-Competition
Agreements"), duly executed by each of such parties;
(v) a certificate of an officer of the Company substantially
in the form of Exhibit F attached hereto, duly executed by the Company;
(vi) a certificate of the Secretary of the Company substantially
in the form of Exhibit G attached hereto, certifying as of the Closing
Date (A) a true and complete copy of the organizational documents of
the Company certified as of a recent date by the Secretary of States of
Texas, (B) a certificate of each appropriate Secretary of State
certifying the good standing of the Company in its state of
incorporation and all states in which it is qualified to do business,
(C) a true and complete copy of the resolutions of the board of
directors of the Company and the resolutions of the stockholders of
the Company, each authorizing the execution, delivery and performance
of this Agreement by the Company and the consummation of the
transactions contemplated hereby and (D) incumbency matters;
(vii) a Release by each of the Principal Stockholders,
substantially in the form of Exhibit H attached hereto (the "Release"),
duly executed by each Principal Stockholder;
(viii) documentation evidencing the payment in full of all
shareholder receivables contained in the Company Financial Statements
in good funds as of the Closing and the extinguishment of all
shareholder payables contained in the Company Financial Statements;
(ix) resignation letter of each of the officers and directors
of the Company, dated effective as of the Closing;
(x) executed letters of transmittal from each Company Stockholder
in the form of Exhibit I (the "Letters of Transmittal");
(xi) an opinion of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre, LLP, counsel to the Company substantially in the form attached
hereto as Exhibit J;
(xii) a Registration Rights Agreement by and between Parent and
each of the Principal Stockholders, substantially in the form of Exhibit
K (the "Registration Rights Agreement"), duly executed by each of the
Principal Stockholders;
(xiii) The Lock-Up Agreement substantially in the form of Exhibit
L (the "Lock-Up" Agreement), duly executed by each Company Stockholder
other than those individuals set forth on Schedule 2.11(b)(xiii);
17
(xiv) executed releases regarding the right to be issued shares
of capital stock in the Company by James Canto, Regina Hampton, Julie
Hampton, Tanya Bourg, Ivory Robinson, Inez Ellis, and Tarshia Brown;
(xv) executed releases regarding the right to be paid cash
bonuses upon Closing of the Contemplated Transactions by James, Canto,
Laurie Rielley Butler, and Fred Butler; and
(xvi) such other documents as Parent may reasonably request
for the purpose of facilitating the consummation of the Contemplated
Transactions.
(c) Closing Deliveries By Parent. At the Closing, Parent and/or
Acquisition Co., as the case may be, shall have delivered or caused to
be delivered to the Company and/or the Company Stockholders, as the
case may be:
(i) the amount of Stock Consideration and Cash Consideration
to be issued and paid at the Closing to each Person entitled to receive
a portion thereof pursuant to the terms hereof to be attached as
Schedule 2.11(c)(i) hereto;
(ii) the Promissory Note;
(iii) the Employment Agreement, duly executed by Parent;
(iv) the Non-Competition Agreements, duly executed by Parent;
(v) a certificate of an officer of Parent, substantially in
the form of Exhibit M attached hereto, duly executed by Parent;
(vi) the Registration Rights Agreement, duly executed by Parent;
(vii) a certificate of the Secretary of the Parent substantially
in the form of Exhibit N attached hereto, certifying as of the Closing
Date (A) a true and complete copy of the organizational documents of
Parent and Acquisition certified as of a recent date by the Secretary
of State of Delaware, (B) a certificate of the Delaware Secretary of
State certifying the good standing of each of Parent and Acquisition
Co. in its state of incorporation, (C) a true and complete copy of
the resolutions of the board of directors of Parent authorizing the
execution, delivery and performance of this Agreement by Parent and
the consummation of the transactions contemplated hereby and (D)
incumbency matters;
(viii) an opinion of Morrison & Foerster LLP, counsel to Parent
and Acquisition substantially on the form attached hereto as Exhibit O.
2.12 Exemption from Registration. The issuance of the Parent Common
Stock issuable as Stock Consideration will be exempt from registration
requirements of the Securities Act pursuant to the private placement
exemption provided by Rule 505 and/or 506 of Regulation D promulgated
under the Securities Act and/or Section 4(2) of the Securities Act,
and applicable state securities laws.
18
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Acquisition Co.
as of the date hereof and as of the Closing Date, except as set forth
on the Company Disclosure Schedule furnished to Parent specifically
identifying the relevant subparagraph hereof, which exceptions shall
be deemed to be representations and warranties as if made hereunder,
as follows:
3.1 Organization of the Company. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Texas. The Company is duly authorized to conduct business
and is in good standing in Alabama, Louisiana, Rhode Island, and
Tennessee and each jurisdiction where such qualification is required
except for any jurisdiction where failure so to qualify would not have
a Material Adverse Effect upon the Company. The Company has full power
and authority to own and use the Assets and Properties owned and used
by the Company except where the failure to have such power and authority
would not have a Material Adverse Effect on the Company's business.
The Company has delivered to Parent correct and complete copies of its
charter documents and organizational documents, each as amended to date.
3.2 Capital Stock of the Company.
(a) The authorized capital stock of the Company consists solely of
11,000 shares of common stock, par value $0.001 per share ("Company
Common Stock"), of which 10,241 shares are issued and outstanding as of
the date hereof; and (ii) no shares of capital stock of the Company in
treasury. The Company has no authorized or outstanding preferred stock.
Each share of the issued and outstanding Company Common Stock of the
Company is duly authorized, validly issued, fully paid and nonassessable.
Section 3.2(a) of the Company Disclosure Schedule sets forth a complete
and accurate list specifying the number of shares of Company Common Stock
held by each Company Stockholder.
(b) The Company has no subscriptions, options, warrants, calls,
commitments and other rights of any kind for the purchase or acquisition
of, and any securities convertible or exchangeable for, any capital stock
of the Company.
(c) There are no agreements to which the Company is a party or by
which it is bound with respect to the voting (including voting trusts or
proxies), registration under the Securities Act, or sale or transfer
(including agreements relating to pre-emptive rights, rights of first
refusal, co-sale rights or "drag-along" rights) of any securities of
the Company. To the Knowledge of the Company, there are no agreements
among other parties, to which the Company is not a party and by which
it is not bound, with respect to the voting (including voting trusts or
proxies) or sale or transfer (including agreements relating to rights of
first refusal, co-sale rights or "drag-along" rights) of any securities
of the Company.
(d) All of the shares of the Company's Common Stock issued, sold
and delivered prior to the Closing were duly and validly issued, fully
paid, nonassessable, free of
19
restrictions on transfer (other than pursuant to applicable securities
laws) and were issued in full compliance with all applicable federal
and state securities laws.
(e) The Information Statement, together with true and complete
copies of the Parent SEC documents were delivered by the Company to
each of its stockholders on September 6, 2003. The first addendum to
the Information Statement was delivered by the Company to each of its
Stockholders prior to the execution of this Agreement.
3.3 Ownership of Shares. Each of the Company Stockholders owns of
record that number of shares of Company Common Stock listed opposite such
stockholder's name in Section 3.2(a) of the Company Disclosure Schedule.
Each record owner of Company Common Stock is also the beneficial owner
of such Company Common Stock, free and clear of all Encumbrances, and
has good and valid title to such shares. The delivery of the stock
certificate(s) representing the Outstanding Common Stock in the manner
provided in Section 2.6 will transfer to the Parent good and valid
title thereto free and clear of all Encumbrances.
3.4 Authority of the Company. The Company has all necessary power
and authority and has taken all action necessary to enter into this A
greement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder and no other proceedings on the part
of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement
of creditors' rights generally and (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other
equitable remedies.
3.5 No Affiliates. The Company does not have any Affiliates or
subsidiaries and is not a partner in any partnership or a party to
a joint venture.
3.6 No Conflicts. The execution and delivery by the Company of
this Agreement does not, and the performance by the Company of its
obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:
(a) conflict with or result in a violation or Breach of any
of the terms, conditions or provisions of the charter documents,
bylaws or other organizational documents of the Company;
(b) conflict with or result in a violation or Breach of, other
than those violations or Breaches that would not be reasonably likely
to have a Material Adverse Effect, or, except as disclosed in Section
3.6 of the Company Disclosure Schedule, give any Governmental or
Regulatory Authority the right to revoke, withdraw, suspend, cancel,
termination or modify any term or provision of any Order or Governmental
Authorization applicable to the Company, the business or Assets or
Properties of the Company or the capital stock of the Company, the
loss of which is reasonably likely to have a Material Adverse Effect;
(c) result in a Breach of, or default under (or give rise to right
of termination, modification, cancellation or acceleration) under any of
the terms, conditions or provisions of
20
any note, bond, mortgage, indenture, license, agreement, lease or other
similar instrument or obligation to which the Company, any of its Assets
and Properties or the Company Common Stock may be bound, except for such
breaches or defaults as set forth in Section 3.6(c) of the Company
Disclosure Schedule;
(d) cause any of the Assets or Properties of the Company to be
reassessed or revalued by any taxing authority or any Governmental or
Regulatory Authority;
(e) result in an imposition or creation of any Encumbrance or
Tax on the business or Assets or Properties of the Company or the
Company Common Stock.
3.7 Consents and Governmental Approvals and Filings. Except as set
forth on Schedule 3.7, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of
the Company is required in connection with the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby.
3.8 Books and Records. The Company has made its minute books available
to the Parent. The Company has delivered or made available true and
complete copies of each document which has been requested by Parent or
its counsel in connection with their legal and accounting review of the
Company.
3.9 Company Financial Statements. The Company has previously delivered
to Parent the Company Financial Statements. The Company Financial
Statements (i) are true, correct and complete in all material respects,
(ii) have been prepared in accordance with the Books and Records of the
Company, (iii) have been prepared in conformity with GAAP, and (iv) fairly
present the financial condition and results of operations of the Company
as of the respective dates thereof and for the periods covered thereby;
provided that the Interim Financial Statements are subject to normal
year-end adjustments and lack footnotes and certain other presentation
items.
3.10 Absence of Changes. Except for the execution and delivery of
this Agreement and the transactions to take place pursuant hereto on or
prior to the Closing Date, since December 31, 2002, there has not been
any material adverse change, or any event or development relating to
the Company (but excluding national economic conditions, international
events, and other events and developments affecting all participants in
the nurse staffing industry) which, individually or together with other
such events, could reasonably be expected to result in a Material Adverse
Effect on the Company, and since December 31, 2002, the Company has not
taken any action which if taken after the date of this Agreement, without
Parent's consent, would violate Section 3.28 hereof.
3.11 No Undisclosed Liabilities. Except as disclosed in Section 3.11
of the Company Disclosure Schedule or in the Company Financial Statements,
there are no liabilities not reflected on the Company Financial Statements
which GAAP (i) required to be disclosed on the Company Financial Statements
(including the footnotes thereto) as of the date thereof or (ii) would
require disclosed on the Company Financial Statements if the Company
Financial Statements (including the footnotes thereto) had been prepared
as of the Closing Date, other than such liabilities
21
incurred after December 31, 2002 in the Ordinary Course of Business which
have not had, and could not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect on the
Company.
3.12 Tangible Personal Property. The Company is in possession of
and has good and marketable title to, or has valid leasehold interests
in or valid rights under written agreements to use, all tangible
personal property, equipment, plants, buildings, structures, facilities
and all other Assets and Properties used in or reasonably necessary for
the conduct of the Company's business, including all tangible personal
property reflected on the Company Financial Statements and any tangible
personal property acquired since that date other than property disposed
of since such date in the Ordinary Course of Business.
3.13 Benefit Plans; ERISA.
(a) Section 3.13(a) of the Company Disclosure Schedule lists each
Benefit Plan. The Company has no commitment, proposal, or communication
to employees regarding the creation of an additional Plan or any increase
in benefits under any Benefit Plan. The Company has provided to Parent
(i) a copy of each Benefit Plan (including amendments) or, where
substantially similar arrangements exist, a sample copy and a list of
persons participating in such arrangement, (ii) the three most recent
annual reports on the Form 5500 series for each Benefit Plan required
to file such report and (iii) the most recent trustee's report for each
Benefit Plan funded through a trust.
(b) Neither the Company, an ERISA Affiliate or predecessor thereof
has ever maintained, contributed to or been obligated to contribute to
any Qualified Plan or any Defined Benefit Plan or multiemployer plan
(as defined in Section (3)(37) or 4001(a)(3) of ERISA) and no condition
exists that presents a material risk to the Company or an ERISA Affiliate
of incurring a liability under Title IV of ERISA.
(c) Each Benefit Plan has been operated and administered in all
material respects in accordance with its terms and, as of the Closing
Date, will be in compliance, in form and operation, with all applicable
laws (including but not limited to ERISA and the Code). The reserves
reflected in the Company Financial Statements for the obligations of the
Company under all Benefit Plans are adequate and were determined in
accordance with GAAP.
(d) Each Qualified Plan has received a determination letter from
the Internal Revenue Service confirming that it qualifies under Section
401(a) of the Code and nothing has occurred since the issuance of that
letter which would adversely affect such qualified status or the plan
sponsor's ability to rely on such determination letter.
(e) No Benefit Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to
current or former employees of the Company or any ERISA Affiliate beyond
their termination of service (other than (i) coverage mandated by
applicable law, (ii) benefits under a Qualified Plan, (iii) deferred
compensation benefits accrued as liabilities on the books of the Company
or any ERISA Affiliate or (iv) benefits the full cost of which is borne
by any current or former employee (or his or her beneficiary).
22
(f) The consummation of the transactions contemplated by this
Agreement will not, either immediately or upon the occurrence of any
event thereafter, (i) entitle any current or former employee or officer
or director of the Company or any ERISA Affiliate to severance pay, or
(ii) accelerate the time of payment or vesting, or increase the amount
of compensation otherwise due any such individual.
(g) There are no pending or, to the Knowledge of the Principal
Stockholders and the Company, anticipated or threatened claims by or
on behalf of any Benefit Plan, by any employee or beneficiary covered
under any such Benefit Plan, or otherwise involving any such Benefit
Plan (other than routine claims for benefits).
3.14 Real Property. The Company does not own any real property.
Section 3.14 of the Company Disclosure Schedule contains a complete list
of the municipal addresses of each parcel of real property leased by the
Company (as lessee or lessor) with the exception of residential
apartments for Nurses subject to leases with a term of less than one
year (the "Real Property") and all Encumbrances (other than Permitted
Encumbrances) relating to or affecting the Company's leasehold interest
in the Real Property. The Company has a valid leasehold interest in,
all real property used in or relating to the conduct of the Company's
business, free and clear of all Encumbrances other than Permitted
Encumbrances. The Company has rights of ingress and egress with respect
to the Real Property, and all buildings, structures, facilities, fixtures
and other improvements thereon material for the operation of the Company's
business. To the Knowledge of the Company, there is no pending,
contemplated or threatened condemnation of any of the respective parcels
of Real Property or any part thereof. To the Knowledge of the Company,
none of such Real Property, buildings, structures, facilities, fixtures
or other improvements, or the use thereof, contravenes or violates any
building, zoning, fire protection, administrative, occupational safety
and health or other applicable law, rule, or regulation except for any
contravention or violation which individually or in the aggregate could
not reasonably be expected to result in a Material Adverse Effect on the
Company. Each lease with respect to the Real Property is a legal, valid
and binding agreement of the Company subsisting in full force and effect
enforceable in accordance with its terms, and except as set forth in
Section 3.14 of the Company Disclosure Schedule, there is no, and the
Company has not received notice of any, default (or any condition or
event which, after notice or lapse of time or both, would constitute a
default) thereunder.
3.15 Intellectual Property Rights.
(a) Generally. Section 3.15(a) of the Company Disclosure Schedule
sets forth, for the Intellectual Property owned, in whole or in part,
including jointly with others (such schedule specifies if such Intellectual
Property is owned jointly), by the Company, a complete and accurate list
of all United States and foreign (a) Patents and Patent applications; (b)
Trademark registrations and applications and unregistered Trademarks; (c)
copyright registrations and applications, indicating for each, the
applicable jurisdiction, registration number (or application number) and
date issued (or date filed); and (d) all other Intellectual Property to
which the Company has any ownership rights (including common law rights).
23
(b) Trademarks.
(i) The Company has no Trademarks that are registered with the
United States Patent & Trademark Office or any equivalent state office.
(ii) To the Knowledge of the Company, there has been no prior
use of any of the Company's Trademarks by any third party that confers
upon said third party superior rights in any such Trademark.
(c) Patents. The Company owns no Patents.
(d) Trade Secrets and Other Proprietary Information. Section 3.15
(d) of the Company Disclosure Schedule sets forth a list of employees,
consultants, contractors and other entities who have executed proprietary
information and confidentiality agreements and a list of employees, and
consultants (other than Nurses) who have not executed such proprietary
information and confidentiality agreements. Except under confidentiality
obligations, to the Knowledge of the Company, there has been no disclosure
by the Company of confidential information or Trade Secrets and Other
Proprietary Information which disclosure could reasonably be anticipated
to have a Material Adverse Effect.
(e) License Agreements. Section 3.15(e)(1) of the Company Disclosure
Schedule sets forth a complete and accurate list of all license agreements
granting to the Company any right to use or practice any rights under any
Intellectual Property other than over-the-counter "shrink wrap" software
but including all such agreements that are otherwise material to the
Company (collectively, the "Inbound License Agreements"), indicating for
each the title and the parties thereto. Section 3.15(e)(2) of the Company
Disclosure Schedule also sets forth a complete and accurate list of all
license agreements under which the Company grants licenses or other rights
in or to use or practice any rights under any Intellectual Property
(collectively, the "Outbound License Agreements"), indicating for each the
title and the parties thereto. There is no outstanding or, to the
Knowledge of the Company, threatened dispute or disagreement with respect
to any Inbound License Agreement or any Outbound License Agreement.
(f) Ownership and Other Rights; Sufficiency of Intellectual Property
Assets. The Company owns or possesses adequate licenses, re-marketing or
sublicensing rights, or other rights to use, free and clear of Encumbrances,
orders and arbitration awards, all of its Intellectual Property used in
its business.
(g) Protection of Intellectual Property. Section 3.15(g) of the
Company Disclosure Schedule sets forth a summary of practices employed by
the Company to protect its Intellectual Property.
(h) No Infringement by the Company. To the Knowledge of the Company,
the products used, manufactured, marketed, sold or licensed by the Company,
and all Intellectual Property used in the conduct of the Company's business
as currently conducted, do not infringe upon, violate or constitute the
unauthorized use of any rights owned or controlled by any third party,
including any Intellectual Property of any third party.
24
(i) No Pending or Threatened Infringement Claims. No litigation is
now or, within the three years prior to the date of this Agreement, was
pending and no notice or other claim in writing has been received by the
Company, (A) alleging that the Company has engaged in any activity or
conduct that infringes upon, violates or constitutes the unauthorized use
of the Intellectual Property rights of any third party or (B) challenging
the ownership, use, validity or enforceability of any Intellectual Property
owned or exclusively licensed by or to the Company. No Intellectual
Property that is owned or licensed by the Company is subject to any
outstanding Order, stipulation or agreement restricting the use thereof
by the Company or, in the case of Intellectual Property licensed by the
Company to others, restricting the sale, transfer, assignment or licensing
thereof by the Company to any Person.
(j) No Infringement by Third Parties. To the Knowledge of the
Company, no third party is misappropriating, infringing, diluting or
violating any Intellectual Property owned or licensed by the Company,
and no such claims have been brought against any third party by the
Company.
(k) Software. The Software (as defined below) owned or purported
to be owned by the Company, was either (i) developed by employees of the
Company within the scope of their employment; (ii) except as set forth
in Section 3.15(k) of the Company Disclosure Schedule developed by
independent contractors who have assigned their rights to the Company
pursuant to written agreements; or (iii) otherwise acquired by the
Company from a third party. To the Knowledge of the Company, such
Software does not contain any programming code, documentation or other
materials or development environments that embody Intellectual Property
rights of any person other than the Company, except for such materials
or development environments obtained by the Company from other persons
who make such materials or development environments generally available
to all interested purchasers or end-users on standard commercial terms.
For purposes of this Section 3.15(k), "Software" means any and all (i)
computer programs, including any and all software implementations of
algorithms, models and methodologies, whether in source code or object
code, (ii) databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise, (iii)
descriptions, schematics, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing, and (iv) all
documentation, including user manuals and training materials, relating
to any of the foregoing.
(l) Product Liability Claims. No product liability claims have
been communicated in writing to, or to the Company's Knowledge,
Threatened against the Company.
3.16 Proprietary Information of Third Parties. Except as disclosed
in Section 3.16 of the Company Disclosure Schedule, no third party has
claimed in writing to the Company or, to the Knowledge of the Company,
has reason to claim that any person employed by or affiliated with the
Company in connection with and during the Company's ownership and
operation of its business has (i) violated or may be violating any of
the terms or conditions of such person's employment, non-competition
or non-disclosure agreement with such third party, (ii) disclosed or
may be disclosing or utilized or may be utilizing any Trade Secret or
Other Proprietary Information or documentation of such third party, or
(iii) interfered or may be interfering in the employment relationship
between such third party and any of its present or former employees.
Except as disclosed in Section 3.16 of the Company Disclosure Schedule,
no third party has
25
requested information from the Company which relates to such a claim.
To the Knowledge of the Company, no person employed by or affiliated
with the Company in connection with and during the Company's ownership
and operation of its business has employed or proposes to employ any
trade secret or any information or documentation proprietary to any
former employer and no person employed by or affiliated with the
Company in connection with and during the Company's ownership and
operation of its business has violated any confidential relationship
which such person may have had with any third party, in connection
with the development, manufacture or sale of any product or proposed
product or the development or sale of any service or proposed service
of the Company.
3.17 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Section 3.17 (a) of the Company
Disclosure Schedule:
(i) the Company is in material compliance with each Legal
Requirement that is applicable to it or to the conduct or operation of
its business or the ownership or use of any of its Assets;
(ii) to the Knowledge of the Company, no event has occurred
or circumstance exists that (with or without notice or lapse of time)
(A) may reasonably be anticipated to constitute or result in a material
violation by the Company of, or failure on the part of the Company to
comply with, any Legal Requirement, or (B) may reasonably be anticipated
to give rise to any obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial action of any
nature; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental or
Regulatory Authority or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged, possible,
or potential obligation on the part of the Company to undertake, or
to bear all or any portion of the cost of, any remedial action of
any nature.
(b) Section 3.17(b) of the Company Disclosure Schedule contains
a complete and accurate list of each Governmental Authorization that
is held by the Company or that otherwise relates to the business of,
or to any of the assets owned or used by, the Company. To the Knowledge
of the Company, each Governmental Authorization listed or required to be
listed in Section 3.17(b) of the Company Disclosure Schedule is valid
and is in full force and effect. Except as set forth on Section 3.17(b)
of the Company Disclosure Schedule:
(i) the Company is in material compliance with all of the terms
and requirements of each Governmental Authorization identified or required
to be identified in Section 3.17(b) of the Company Disclosure Schedule;
(ii) to the Knowledge of the Company, no event has occurred or
circumstance exists that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a material violation of or
a failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Section 3.17(b)
26
of the Company Disclosure Schedule, or (B) result directly or indirectly
in the revocation, withdrawal, suspension, cancellation, or termination
of, or any modification to, any Governmental Authorization listed or
required to be listed in Section 3.17(b) of the Company Disclosure
Schedule;
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental or
Regulatory Authority or any other Person regarding (A) any actual,
alleged, possible, or potential violation of or failure to comply with
any term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Section 3.17(b) of the Company Disclosure Schedule have been
duly filed on a timely basis with the appropriate Governmental or
Regulatory Authority, and all other filings required to have been made
with respect to such Governmental Authorizations have been duly made on
a timely basis with the appropriate Governmental or Regulatory Authority.
The Governmental Authorizations listed in Section 3.17(b) of the
Company Disclosure Schedule collectively constitute all of the
Governmental Authorizations necessary to permit the Company to lawfully
conduct and operate its business in the manner it currently conducts
and operates such business and to permit the Company to own and use its
assets in the manner in which it currently owns and uses such assets.
3.18 Legal Proceedings; Orders.
(a) Except as set forth in Section 3.18(a) of the Company Disclosure
Schedule, there is no pending Proceeding:
(i) that has been commenced by or against the Company, notice of
which has been served upon the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of the Company, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that
may reasonably be anticipated to serve as a valid basis for the
commencement of any such Proceeding. The Company has delivered to
Parent copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Section 3.18(a) of the Company
Disclosure Schedule. The Proceedings listed in Section 3.18(a) of
the Company Disclosure Schedule will not have a material adverse effect
on the business, operations, assets, condition, or prospects of the
Company.
(b) Except as set forth in Section 3.18(b) of the Company
Disclosure Schedule:
27
(i) there is no Order to which the Company, or any of the assets
owned or used by the Company, is subject;
(ii) the Company is not subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the Company is
subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company.
(c) Except as set forth in Section 3.18(c) of the Company Disclosure
Schedule:
(i) the Company is, and at all times has been, in full compliance
with all of the terms and requirements of each Order to which it, or any
of the assets owned or used by it, is or has been subject;
(ii) to the Knowledge of the Company, no event has occurred or
circumstance exists that may constitute or result in (with or without
notice or lapse of time) a material violation of or failure to comply
with any term or requirement of any Order to which the Company, or any
of the assets owned or used by the Company, is subject; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental or
Regulatory Authority or any other Person regarding any actual, alleged,
possible, or potential violation of, or failure to comply with, any term
or requirement of any Order to which the Company, or any of the assets
owned or used by the Company, is or has been subject.
3.19 Contracts.
(a) Section 3.19 of the Company Disclosure Schedule contains a
true and complete list of each of the following Contracts to which the
Company is a party or by which any of its Assets and Properties is bound
(and, to the extent oral, accurately describes the terms of such
Contracts):
(i) all collective bargaining or similar labor Contracts;
(ii) all Contracts for the employment of any officer, employee
or other person (other than Nurses) on a full time, part time, consulting
or other basis;
(iii) all Contracts (including loan agreements, indentures,
debentures, notes or letters of credit) relating to the borrowing of
money or to mortgaging, pledging or otherwise placing a lien on any
material asset or material group of assets of the Company;
(iv) each written warranty, guaranty, or other similar
undertaking with respect to contractual performance extended by the
Company and in effect as of the Closing;
28
(v) other than apartment leases of Nurses entered into in the
Ordinary Course of Business, all leases or agreements under which the
Company is lessee or lessor of, or holds, or operates, any property, real
or personal, owned by any other party;
(vi) all Contracts or groups of related Contracts with the same
party or any group or affiliated parties which require or may in the
future require payment of any consideration by the Company in excess of
$25,000;
(vii) other than "shrink wrap" and similar form licenses for
off-the-shelf software, all license agreements, distribution agreements
or any other Contracts involving any of the Company's Intellectual
Property, including agreements with current and former employees,
consultants or contractors regarding the appropriation or the
non-disclosure of any Intellectual Property;
(viii) each joint venture partnership and other Contract
(however named) involving a sharing of profits, losses, costs or
liabilities by the Company with any other Person);
(ix) any Contract for payments to or by any Person by the
Company based on sales, purchases or profits, other than direct
payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
(xii) each Contract for capital expenditures in excess of $10,000;
(xiii) all subscription or other agreements related to the equity
ownership of the Company;
(xiv) all Contracts that in any way restrict the Company from
carrying on its business anywhere in the world;
(xv) all other Contracts that (A) involve the payment or potential
payment in excess of $25,000, pursuant to the terms of any such Contract,
by the Company and (B) cannot be terminated within 30 days after giving
notice of termination without resulting in any cost or penalty to the
Company;
(xvi) all Contracts that in any way grants a third party a right
of first refusal for the purchase of the Company or any of its Assets or
Properties;
(xvii) all Contracts of the Company (whether oral or written)
paid or payable by any of the Company Stockholders, including the Principal
Stockholders; and
(xviii) each amendment, supplement, and modification (whether
oral or written) in respect to any of the foregoing.
29
(b) A correct and complete copy of each written Contract disclosed
in the Company Disclosure Schedule has been previously provided to Parent.
Except as set forth in the Company Disclosure Schedule, each Contract
disclosed in the Company Disclosure Schedule is in full force and effect
and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Company, and to the Knowledge of the
Company, the other parties thereto; and the Company has performed all
of its required obligations under, and is not in material violation or
material Breach of or default under, any such Contract. To the
Knowledge of the Company, the other parties to any such Contract are not
in violation or Breach of or default under any such Contract. To the
Knowledge of the Company, except as disclosed on Schedule 3.19(b), none
of the present or former employees, officers, directors or stockholders
of the Company is a party to any oral or written contract or agreement
prohibiting any of them from freely competing with other parties or
engaging in the Company's business as now operated. No event has
occurred or circumstance exists that (with or without notice or the
lapse of time) contravenes, conflicts with, or results in a violation
or Breach of, or gives the Company or any other Person the right to
declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, termination, or modify, any
Contract to which the Company is a party. The Company has not given
to or received from any other Person any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or
potential violation or Breach of, or default under any Contract. There
are no renegotiations of, attempts to renegotiate or outstanding rights
to renegotiate any material amounts paid or payable to the Company under
current or complete Contract with any Person and, to the Knowledge of
the Company, no such Person has made written demand for such renegotiation.
To the Knowledge of the Company, the Contracts relating to the sale, design,
manufacture or provisions of products or services of the Company have been
entered into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other Person,
or any consideration having been paid or promised, that would be in
violation of any Legal Requirement. Except as disclosed on Schedule 3.19
(b), each Contract with any hospital is in full force and effect and
constitutes a legal, valid and binding agreement of the Company and has
not otherwise been cancelled, terminated or modified.
3.20 Environmental Matters.
(a) The Company is in material compliance with all applicable
"Environmental Laws" (as defined below) and there are no circumstances
which may materially prevent or interfere with such compliance in the
future. The Company has not received any communication (whether written
or oral), whether from a Governmental or Regulatory Authority, citizen
group, employee or otherwise, that alleges that the Company or any of
the Assets or Properties used in the Company's business is not in full
compliance with Environmental Laws. All Governmental Authorizations
currently held by the Company pursuant to Environmental Laws (collectively,
"Environmental Permits") are identified in Section 3.20(a) of the Company
Disclosure Schedule. The Company has not been notified by any relevant
Governmental or Regulatory Authority that any Environmental Permit will
be modified, suspended or revoked or cannot be renewed in the Ordinary
Course of Business, and, to the Knowledge of the Company, no Environmental
Permit will be modified, suspended or revoked, or cannot be renewed in the
Ordinary Course of Business of the Company.
30
(b) There is no "Environmental Notice" (as defined below) that is
(i) pending or, to the Knowledge of the Company, Threatened against the
Company or (ii) to the Knowledge of the Company, pending or threatened
against any Person whose liability for such Environmental Notice may have
been retained or assumed by or could reasonably be imputed or attributed
to the Company.
(c) To the Knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or incidents arising
from the operation, ownership or use of any property currently or formerly
owned, operated or used by the Company (or any entity formerly an Affiliate
of the Company), including, without limitation, the release, emission,
discharge or disposal of any "Material" (as defined below) into the
"Environment" (as defined below), that (i) could reasonably be expected
to result in the incurrence of costs under Environmental Laws or (ii)
could reasonably be expected to form the basis of any Environmental
Notice against or with respect to the Company or against any Person whose
liability for any Environmental Notice may have been retained or assumed
by or could be imputed or attributed to the Company.
(d) Without in any way limiting the generality of the foregoing,
(i) all underground storage tanks, and the capacity and contents of such
tanks, located on property at any time owned, leased or used by the
Company are identified in Section 3.20(d) of the Company Disclosure
Schedule, (ii) to the Knowledge of the Company, there is no asbestos
contained in or forming part of any building, building component,
structure or office space owned, leased or used by the Company, (iii)
to the Knowledge of the Company, no polychlorinated biphenyls (PCB's)
are used or stored on any property owned, leased or used by the Company
and (iv) all locations currently owned, leased or used by the Company
(or any former Affiliate of the Company) at which any Material generated,
used, owned or controlled by the Company or any former Affiliate of the
Company (or by any previous owner or operator) may have been disposed of
or released into the Environment are identified and described in Section
3.20(d) of the Company Disclosure Schedule.
(e) For purposes of this Section 3.20:
(i) "Environment" means any surface water, ground water, drinking
water supply, land surface or subsurface strata, ambient air and any indoor
workplace.
(ii) "Environmental Notice" means any written notice by any Person
alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental costs, harm
or damages to person, property, natural resources or other fines or
penalties) arising out of, based on or resulting from (a) the emission,
discharge, disposal, release or threatened release in or into the
Environment of any Material or (b) circumstances forming the basis of
any violation, or alleged violation, of any applicable Environmental Law.
(iii) "Environmental Laws" means all national, state, local and
foreign laws, codes, regulations, common law, requirements, directives,
Orders, and administrative or judicial interpretations thereof, all as in
effect on the date hereof or on the Closing Date, that may be enforced by
any Governmental or Regulatory Authority, relating to pollution, the
protection
31
of the Environment or the emission, discharge, disposal, release or
threatened release of Materials in or into the Environment.
(iv) "Material" means pollutants, contaminants or chemical,
industrial, hazardous or toxic materials or wastes, including, without
limitation, petroleum and petroleum products.
3.21 Inventory. The inventory of the Company is in good and
merchantable condition, and is suitable and useable at its carrying
value in the Ordinary Course of Business for the purposes for which
intended. To the Knowledge of the Company, there is no material adverse
condition affecting the supply of materials available to the Company.
Except as disclosed in Section 3.21 of the Company Disclosure Schedule,
all inventories used in or relating to the conduct of the Company's
business are owned by the Company free and clear of any Encumbrances
other than Permitted Encumbrances. All inventories not written off have
been priced at the lower of cost or net realizable value on a last in
first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process or finished goods) are not excessive, but are
reasonable in the present circumstances of the Company.
3.22 Accounts Receivable. All accounts receivable of the Company that
are reflected on the Company Financial Statements or the accounting
records of the Company as of the Closing (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from
sales actually made or services actually performed in the Ordinary Course
of Business. Unless paid prior to the Closing, the Accounts Receivable
are or will be as of the Closing current and collectible, net of the
respective reserves shown on the Company Financial Statements or on the
accounting records of the Company as of the Closing (which reserves are
adequate and calculated consistent with past practice and, in the case
of the reserve as of the Closing, will not represent a greater percentage
of the Accounts Receivable as of the Closing than the reserve reflected
in the Company Financial Statements and will not represent a material
adverse change in the composition of such Accounts Receivable in terms
of aging). Subject to such reserves, each of the Accounts Receivable
either has been or will be collected in full, without any set-off, in
the Ordinary Course of Business. To the Knowledge of the Company and
except as set forth in Section 3.22 of the Company Disclosure Schedule,
there is no contest, claim, or right of set-off, other than routine
invoice adjustments in the Ordinary Course of Business under any contract
with any obligor of Accounts Receivable relating to the amount or validity
of such Accounts Receivable. Section 3.22 of the Company Disclosure
Schedule contains a complete and accurate list of all Accounts Receivable
as of May 31, 2003, which lists sets forth the aging of such Accounts
Receivable.
3.23 Equipment. To the Knowledge of the Company, all tangible personal
property and equipment used by the Company in the conduct of its business
are structurally sound with no known material defects and are in good
operating condition and repair (subject to normal wear and tear) so as
to permit the operation of its business as presently conducted, (ii) no
such equipment or tangible personal property is in need of maintenance
or repairs except for ordinary, routine maintenance and repairs which
are not material in nature or cost, and (iii) with respect to each item
of equipment and tangible personal property, the Company has not received
notification that it is in violation, in any material respect, of any
applicable building, zoning,
32
subdivision, fire protection, health or other law, Order, ordinance or
regulation and no such violation exists.
3.24 Insurance. Section 3.24 of the Company Disclosure Schedule either
(i) sets forth a complete and accurate list of all primary, excess and
umbrella policies, bonds and other forms of insurance currently owned or
held by or on behalf of and/or providing insurance coverage to the Company
or the Assets and Properties of the Company, including the following
information for each such policy: type(s) of insurance coverage provided;
name of insurer; effective dates; policy number; per occurrence and annual
aggregate deductibles or self-insured retentions; per occurrence and
annual aggregate limits of liability and the extent, if any, to which the
limits of liability have been exhausted or (ii) indicates that copies of
such policies have been delivered to Parent. To the Knowledge of the
Company, all policies set forth on the Company Disclosure Schedule are
in full force and effect, and with respect to such policies, all premiums
currently payable or previously due have been paid, and no notice of
cancellation or termination has been received with respect to any such
policy. To the Knowledge of the Company, all such policies are sufficient
for compliance with all requirements of law and all agreements to which
the Company is a party or otherwise bound and will remain in full force
and effect through the respective dates set forth in the Company
Disclosure Schedule or, if the policy was delivered to Parent, in the
policy. To the Knowledge of the Company and except as set forth in
Section 3.24 of the Company Disclosure Schedule, none of such policies
contains a provision that would permit the termination, limitation,
lapse, exclusion or change in the terms of coverage of such policy
(including, without limitation, a change in the limits of liability) by
reason of the consummation of the transactions contemplated by this
Agreement. The Company's workers' compensation insurance premiums
currently payable or previously due have not increased by more than
twenty percent since December 31, 2002. Complete and accurate copies
of all such policies have previously been provided to the Parent.
3.25 Tax Matters.
(a) The Company has filed on a timely basis (after taking into
account all applicable extensions of time for such filings) all material
Tax Returns that it was required to file, and all such Tax Returns were
complete and accurate in all material respects. The Company is not and
has never been a member of a group of corporations with which it has
filed (or been required to file) consolidated, combined or unitary Tax
Returns. Except as set forth in Section 3.25 of the Company Disclosure
Schedule, the Company has paid on a timely basis all Taxes that were due
and payable including, without limitation, employment taxes and any fines,
interest and penalties thereon. The unpaid Taxes of the Company for tax
periods through December 31, 2002 do not exceed the accruals and reserves
for Taxes (excluding accruals and reserves for deferred Taxes established
to reflect timing differences between book and Tax income) set forth on
the Most Recent Balance Sheet. The Company has no actual or potential
liability for any Tax obligation of any other taxpayer (including any
affiliated group of corporations or other entities that included the
Company during a prior period). All Taxes that the Company is or was
required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental or Regulatory Authority.
33
(b) The Company has delivered to Parent complete and accurate
copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company.
The federal income Tax Returns of the Company have been audited by the
Internal Revenue Service or are closed by the applicable statute of
limitations for all taxable years through the taxable year specified
in Section 3.25(b) of the Company Disclosure Schedule. The Company has
delivered or made available to Parent complete and accurate copies of
all other Tax Returns of the Company, together with all related
examination reports and statements of deficiency for all periods from
and after incorporation. No examination or audit of any Tax Return of
the Company by any Governmental or Regulatory Authority is currently in
progress or, to the Knowledge of the Company, threatened or contemplated.
The Company has not been informed by any jurisdiction that the
jurisdiction believes that the Company was required to file any Tax
Return that was not filed. The Company has not waived any statute of
limitations with respect to Taxes or agreed to an extension of time
with respect to a Tax assessment or deficiency.
(c) The Company is not a "consenting corporation" within the meaning
of Section 341(f) of the Code, and none of its assets is subject to an
election under Section 341(f) of the Code. The Company has not been a
United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(l)(A)(ii) of the Code. It has not made any payments, is
not obligated to make any payments, and is not a party to any agreement
that could obligate it to make any payments that may be treated as an
"excess parachute payment" under Section 280G of the Code. It has no
actual or potential liability for any Taxes of any person (other than
the Company) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee
or successor, by contract, or otherwise. It is not and has not been
required to make a basis reduction pursuant to Treasury Regulation
Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Company: (i) is property that is
required to be treated as being owned by any other person pursuant to
the provisions of former Section 168(f)(8) of the Code; (ii) is
"tax-exempt use property" within the meaning of Section 168(h) of the
Code; or (iii) directly or indirectly secures any debt the interest on
which is tax exempt under Section 103(a) of the Code.
(e) The Company has not undergone a change in its method of
accounting resulting in an adjustment to its taxable income pursuant
to Section 481 of the Code
(f) No state or federal "net operating loss" of the Company
determined as of the Closing Date will be subject to limitation on
its use pursuant to Section 382 of the Code or comparable provisions
of state law as a result of any "ownership change" within the meaning
of Section 382(g) of the Code or comparable provisions of any state
law occurring prior to the Closing Date.
(g) Section 3.25(g) of the Company Disclosure Schedule sets forth,
as of the most recent practicable date, (i) the basis of the Company in
its assets and (ii) the amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or
34
excess charitable contribution allocable to the Company, or indicates
that such information has been previously provided to the Parent.
(h) Neither the Company nor any person "related" to the Company
has, directly or indirectly through any transaction, agreement, or
arrangement with any other Person, acquired stock of the Company in
connection with the Merger with consideration other than shares of the
Parent or Company. For purposes of this representation, "related"
shall be defined by Treasury Regulation Section 1.368-1(e)(3), without
regard to Treasury Regulation Section 1.368-1(e)(3)(i)(A)
(i) The Company has not made distributions with respect to Company
stock in connection with the Merger.
(j) Immediately following the Merger, the Surviving Corporation
will hold at least 90 percent of the fair market value of the net assets
and at least 70 percent of the fair market value of the gross assets held
by the Company immediately prior to the Merger. For purposes of this
representation, amounts used by Company to pay Merger expenses, and all
redemptions and distributions (except for regular, normal dividends)
made by Company preceding the Merger will be included as assets of
Company held immediately prior to the Merger.
(k) The Company has not sold, transferred or otherwise disposed of
assets that would prevent the Surviving Corporation from either
continuing the historic business of the Company or using a significant
portion of Company's historic assets in a business following the Merger,
both within the meaning of Treasury Regulation Section 1.368-1(d).
(l) The Company has not paid and will not pay, directly or
indirectly, any expenses incurred by any holder of Company Common Stock
in connection with or as part of the Merger. The Company has not agreed
to assume, nor will it directly or indirectly assume, any expense or other
liability, whether fixed or contingent, of any holder of Company Common Stock.
3.26 Labor and Employment Relations. To the Knowledge of the Company,
no officer, executive or group of five or more employees of the Company has
or have any plans to terminate his, her or their employment with the Company.
The Company is not a party to or bound by any collective bargaining
agreement with any labor organization, group or association covering any of
its employees, and to the Knowledge of the Company, there are no attempts
to organize any of the Company's employees by any person, unit or group
seeking to act as their bargaining agent. To the Knowledge of the Company
and except as disclosed in Section 3.26 of the Company Disclosure Schedule,
the Company has complied in all material respects with all applicable laws
relating to the employment of labor, including provisions thereof relating
to wages, hours, equal opportunity, collective bargaining, discrimination
against race, color, national origin, religious creed, physical or mental
disability, sex, age, ancestry, medical condition, marital status or
sexual orientation, occupational health and safety and the withholding and
payment of social security and other Taxes. The Company is not liable for
the payment of any compensation, damages, taxes, fines, penalties or other
amounts, however designated, for the failure to comply with any of the
foregoing Legal Requirements. To the Company's Knowledge and except as
disclosed in Section 3.26 of the Disclosure Schedule, no employees of the
35
Company are in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any restrictive
covenant to a former employer relating to any such employee to be employed
by the Company because of the nature of the business conducted or
presently proposed to be conducted by the Company or the use of trade
secrets or proprietary information of others. The officers, employees
and consultants of the Company listed in Section 3.26 of the Company
Disclosure Schedule have signed a confidentiality agreement and copies
of such confidentiality agreements have been provided to the Parent.
There are no pending or, to the Knowledge of the Company, threatened
charges (by employees, their representatives or governmental authorities)
of unfair labor practices or of employment discrimination or of any
other wrongful action with respect to any aspect of employment of any
person employed or formerly employed by the Company. To the Knowledge
of the Company, no union representation elections relating to the
Company's employees have been scheduled by any Governmental or
Regulatory Authority, no organizational effort is being made with
respect to any of such employees, and no investigation of the Company's
employment policies or practices by any Governmental or Regulatory
Authority pending or, to the Knowledge of the Company, threatened.
The Company is not currently, and in the past has not been, involved
in labor negotiations with any unit or group seeking to become the
bargaining unit for any employees of the Company. The Company has
never experienced any work stoppages and, to the Knowledge of the
Company, no work stoppage has been threatened or is planned.
3.27 Certain Employees. Set forth in Section 3.27 of the Company
Disclosure Schedule is a list of the names of the Company's employees
and consultants (other than Nurses) as of the date hereof involved in
the management and operation of the Company's business, together with
the title or job classification of each such person and the total
compensation (with wages and bonuses, if any, separately detailed)
paid in 2002 (if applicable) and the current rate of pay for each such
person on the date of this Agreement. Except as set forth in Section
3.27 of the Company Disclosure Schedule, none of such persons has an
employment agreement or understanding, whether oral or written, with
the Company which is not terminable on notice by the Company without
cost or other liability to the Company.
3.28 Absence of Certain Developments. Since December 31, 2002 and
except as disclosed in Section 3.28 of the Company Disclosure Schedule,
the Company has not:
(a) issued any stock, bonds or other corporate securities or any
right, options or warrants with respect thereto;
(b) borrowed any amount, obtained any letters of credit or incurred
or become subject to any liabilities in excess of $25,000 in the aggregate;
(c) discharged or satisfied any lien or Encumbrance or paid any
obligation or liability, other than current liabilities paid in the
Ordinary Course of Business and other than current federal income Tax
liabilities;
(d) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or
redeemed any shares of its capital stock;
36
(e) mortgaged or pledged any of its Assets or Properties, or
subjected them to any lien, charge or any other Encumbrance, except
liens for current property Taxes not yet due and payable;
(f) sold, leased, subleased, assigned or transferred any of its
Assets or Properties, except in the Ordinary Course of Business, or
cancelled any debts or claims in excess of $10,000;
(g) made any changes in any employee compensation, severance or
termination agreement, commitment or transaction other than routine
salary increases consistent with past practice or offered employment to
any individuals;
(h) entered into any material transaction, or modified any existing
transaction (the aggregate consideration for which is in excess of
$25,000) except in the Ordinary Course of Business;
(i) suffered any damage, destruction or casualty loss, whether or not
covered by insurance;
(j) made any capital expenditures, additions or improvements or
commitments for the same, except those made in the Ordinary Course of
Business which in the aggregate do not exceed $25,000;
(k) entered into any material transaction or operated the
Company's business, not in the Ordinary Course of Business;
(l) except as required or recommended by the Parent's auditor, made
any material change in its accounting methods or practices or ceased
making accruals for taxes, obsolete inventory, vacation and other
customary accruals;
(m) ceased from reserving cash to pay taxes, principal and interest
on borrowed funds, and other customary expenses and payments;
(n) caused to be made any reevaluation of any of its Assets or
Properties;
(o) caused to be entered into any amendment or termination of any
lease, customer or supplier contract or other material contract or
agreement to which it is a party, other than in the Ordinary Course
of Business;
(p) made any material change in any of its business policies,
including, without limitation, advertising, distributing, marketing,
pricing, purchasing, personnel, sales, returns, budget or product
acquisition or sale policies;
(q) terminated or failed to renew, or received any written threat
(that was not subsequently withdrawn) to terminate or fail to renew,
any contract or other agreement that is or was material to the Company's
business or its financial condition;
37
(r) permitted to occur or be made any other event or condition of
any character which has had a Material Adverse Effect on it;
(s) waived any rights material to its financial or business condition;
(t) made any illegal payment or rebates;
(u) entered into any agreement to do any of the foregoing;
(v) incurred any bad debt expenses other than in the Ordinary
Course of Business or as recommended by the Parent's auditor; or
(w) increased any employee salaries or paid any bonuses other than
in the Ordinary Course of Business.
3.29 Customers and Suppliers. The Company has previously provided to
Parent a true and correct list of the Company's current customers and the
Company's customers during the 2000, 2001 and 2002 fiscal years related to
the Company business in each instance, with billings of more than $10,000
during any of such fiscal years. Since January 1, 2003 and except as
disclosed in Section 3.29 of the Company Disclosure Schedule, no single
customer or group of affiliated customers contributing more than $10,000
per annum to the gross revenues of the Company's business has stopped
doing business with the Company, and no such customer has given notice
to the Company of an intention to discontinue doing business or reduce
the level of gross revenues from that in fiscal year 2002 with the Company.
The Company has not received any notice or has any reason to believe that a
ny significant supplier will not sell raw materials, supplies, merchandise
and other goods to the Company at any time after the Effective Time on terms
and conditions substantially similar to those used in its current sales to
the Company, subject only to general and customary price increases, unless
comparable raw materials, supplies, merchandise or other goods are readily
available from other sources on comparable terms and conditions.
3.30 Bank Accounts. Section 3.30 of the Company Disclosure Schedule
contains a complete and accurate list of each deposit account or asset
maintained by or on behalf of the Company with any bank, brokerage house
or other financial institution, specifying with respect to each the name
and address of the institution, the name under which the account is
maintained, the account number, and the name and title or capacity of
each Person authorized to have access thereto.
3.31 Regulatory Compliance.
(a) To the Knowledge of the Company, the Company has timely filed
or otherwise provided all registrations, reports, data, and other
information and applications required by any Governmental or Regulatory
Authority with jurisdiction over the has complied with all applicable
requirements of any Governmental or Regulatory Authority with respect to
its business (including but not limited to the Federal Food, Drug, and
Cosmetic Act, the Medicare Anti-Kickback Statute, the Health Insurance
Portability and Accountability Act, the Federal False Claims Act, the
Federal laws concerning physician self-referral known as "Stark I" and
"Stark II", and the rules and regulations of the Joint Commission on
Accreditation of Healthcare
38
Organizations), and all regulatory licenses or approvals in respect
thereof are in full force and effect.
(b) To the Knowledge of the Company, neither the Company, nor any
officer, employee or agent of the Company has made an untrue statement
of a material fact or fraudulent statement to any Governmental or
Regulatory Authority, or failed to disclose a material fact that was
required under applicable law to be disclosed to any Governmental or
Regulatory Authority.
3.32 Third Party Consents. No consent, approval or authorization of
any third party on the part of the Company is required in connection with
the consummation of the transactions contemplated hereunder except as
otherwise provided in Section 3.32 of the Company Disclosure Schedule.
3.33 Relationships with Related Persons. No Principal Stockholder or any
Related Person of the Company has or since January 1, 2002 has had, any
interest in the property, whether real, personal or mixed, or whether
tangible or intangible, used in or pertaining to the Company's businesses.
No Principal Stockholder or any Related Person of the Company owns, or,
except as set forth in Section 3.33 of the Company Disclosure Schedule,
since January 1, 2002 has owned (of record or as beneficial owner) an
equity interest or any other financial or profit interest in a Person
that has (i) had business dealings or a material financial interest in
any transaction with the Company or (ii) engaged in competition with the
Company with respect to any line of the products or services of the Company.
Except as set forth in Section 3.33 of the Company Disclosure Schedule,
no Principal Stockholder nor any Related Person of the Company is a party
to any Contract with or has any right or claim against the Company.
3.34 Certain Payments. Since the date of the Company's organization
and to the Knowledge of the Company, except as set forth in Section 3.34
of the Company Disclosure Schedule, neither the Company nor any director,
officer, agent or employee of the Company, or any other Person associated
with or acting for or on behalf of the Company, has directly or indirectly,
in violation of any Legal Requirement, (i) made any contribution, gift,
bribe, rebate, payoff, influence payment, kick-back or other payment to
any Person, private or public, regardless of any form, whether in money,
property or services (A) to obtain favorable treatment in securing
business, (B) to pay for favorable treatment for business secured, or
(C) to obtain special concessions or for special concessions already
obtained for or in respect of the Company or any affiliate thereof, or
(ii) established or maintained any fund or asset that has not been
recorded in the Books and Records of the Company.
3.35 Brokers. Except as set forth in Section 3.35 of the Company
Disclosure Schedule, neither the Principal Stockholders nor the Company
have retained any broker in connection with the transactions contemplated
hereunder. Parent has, and will have, no obligation to pay any broker's,
finder's, investment banker's, financial advisor's or similar fee in
connection with this Agreement or the transactions contemplated hereby
by reason of any action taken by or on behalf of the Principal
Stockholders or the Company.
3.36 Material Misstatements and Omissions. The statements,
representations and warranties of the Company contained in this Agreement
(including the exhibits and schedules hereto) and in each document,
statement, certificate or exhibit furnished or to be furnished by or
39
on behalf of the Company pursuant hereto, or in connection with the
transactions contemplated hereby, taken together, do not contain and
will not contain any untrue statement of a material fact and do not or
will not omit to state a material fact necessary to make the statements
or facts contained herein or therein, in light of the circumstances made,
not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION CO.
Parent and Acquisition Co., jointly and severally, represent and warrant
to the Company as of the date hereof and as of the Closing Date, as follows:
4.1 Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of the Delaware.
Acquisition Co. is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware. Each of Parent and
Acquisition Co. is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required except for any jurisdiction where failure so to qualify would not
have a Material Adverse Effect upon Parent or Acquisition Co., as the case
may be.
4.2 Authority. Each of Parent and Acquisition Co. has all necessary
corporate power and corporate authority and has taken all corporate actions
necessary to enter into this Agreement, to consummate the transactions
contemplated hereby, to issue the Stock Consideration, and to perform its
respective obligations hereunder and no other proceedings on the part of
Parent or Acquisition Co. are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Parent and Acquisition
Co. and constitutes a legal, valid and binding obligation of Parent and
Acquisition Co., respectively, enforceable against each of Parent and
Acquisition Co. in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
Except as set forth in Schedule 4.2, Parent and Acquired Co. are not and
will not be required to obtain any Consents from any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.3 Litigation. There are no Actions or Proceedings pending or, to the
Knowledge of Parent or Acquisition Co., threatened or anticipated against,
relating to or affecting the transactions contemplated by this Agreement,
and, to the Knowledge of Parent or Acquisition Co., there is no basis for
any such Action or Proceeding.
4.4 Reports and Financial Statements. As of the date hereof, the Parent
has furnished or made available to the Company true and complete copies of
all Parent SEC Documents. As of their respective filing dates, all such
Parent SEC Documents complied in all material respects with the requirements
of the Securities Act, the Exchange Act, as the case may be, and none of
such Parent SEC Documents contained any untrue statement of a material fact
or
40
omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which
they were made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC. The Parent Financial Statements comply as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP consistently applied (except as
may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC) and present fairly the
consolidated financial position of the Parent at the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal audit
adjustments). As of the date hereof, there has been no change in the
Parent accounting policies except as described in the notes to Parent
Financial Statements.
4.5 Absence of Changes. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on or prior to
the Closing Date, since the date of the most recent Parent SEC Documents,
there has not been any material adverse change, or any event or development
relating to Parent (but excluding national economic conditions,
international events, and other events and developments affecting all
participants in the nurse staffing industry) which, individually or together
with other such events, could reasonably be expected to result in a Material
Adverse Effect on Parent.
4.6 Brokers. Neither Parent nor Acquisition Co. has retained any broker
in connection with the transactions contemplated hereunder. Neither the
Company nor the Principal Stockholders has, and will have, any obligation
to pay any broker's, finder's investment banker's, financial advisor's or
similar fee in connection with this Agreement or the transactions
contemplated hereby by reason of any action taken by or on behalf of Parent
or Acquisition Co.
4.7 Tax Matters. Parent has no plan or intention to liquidate the
Surviving Company or to cause the Surviving Company to sell, transfer or
otherwise dispose of any of the Surviving Company's assets except for
dispositions in the made in the ordinary course of business and transfers
described in Section 368(a)(2)(C) of the Code or in Section 1.368-2(k)(1)
or 1.368-1(d)(4) of the Treasury Regulations.
(a) Parent has no plan or intention the sell or otherwise dispose of
any stock of the Surviving Company acquired in the Merger, except for
dispositions in the made in the ordinary course of business and transfers
described in Section 368(a)(2)(C) of the Code or Revenue Ruling 2001-24,
2001-22 I.R.B. 1290.
(b) Following the Merger, Parent will cause the Surviving Company
to continue the Company's historic business or use a significant portion
of the Company's historic business assets in a business within the meaning
of Section 1.368-1(d) of the Treasury Regulations, assuming that the assets
of, and the business conducted by, the Company on the Closing Date
constitute the Company's historic business assets and historic business,
respectively.
41
(c) Following the Merger, Parent has no plan or intention to cause
the Surviving Company to issue additional shares that will result in Parent
losing control of the Surviving Company within the meaning of Section
368(c) of the Code.
4.8 No Investigations. Neither Parent nor Acquisition Co. is currently
the subject of any pending or, to the knowledge of the officers and
directors of Parent or Acquisition Co., Threatened investigation by any
Governmental or Regulatory Authority. To the knowledge of the officers
and directors of Parent and Acquisition Co., no officer or director of
Parent or of Acquisition Co. is currently the subject of any pending or
Threatened investigation by any Governmental or Regulatory Authority
related to Parent.
4.9 Parent Capitalization. The capitalization information set forth
in the Information Statement is accurate as of the date thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL STOCKHOLDERS
Each Principal Stockholder hereby represents and warrants to Parent
and Acquisition Co. as follows (such representations and warranties do
not lessen or obviate the representations and warranties of the Company
and the Stockholders set forth in Article III above):
5.1 Requisite Power and Authority. Such Principal Stockholder has all
necessary power and authority under all applicable provisions of law to
execute and deliver this Agreement and to carry out its provisions. All
action on such Principal Stockholder's part required for the lawful
execution and delivery of this Agreement has been or will be effectively
taken prior to the Closing. Upon execution and delivery, this Agreement
will be the valid and binding obligation of such Principal Stockholder,
enforceable in accordance with its terms.
5.2 Investment Representations. Such Principal Stockholder understands
that the shares of the Parent Common Stock have not been registered under
the Securities Act. Such Principal Stockholder also understands that the
shares of Parent Common Stock are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part
upon such Principal Stockholder's representations and warranties contained
in this Agreement. Such Principal Stockholder hereby represents and
warrants as follows:
(a) Such Principal Stockholder is an "accredited investor" as defined
in Rule 501(a) of the Securities Act.
(b) Such Principal Stockholder is capable of evaluating the merits
and risks of his, her or its investment in Parent and has the capacity
to protect his, her or its own interests. Such Principal Stockholder must
bear the economic risk of this investment indefinitely unless the shares
of Parent Common Stock are registered pursuant to the Securities Act, or
an exemption from registration is available. Such Principal Stockholder
also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow such Principal Stockholder to
transfer all
42
or any portion of the shares of Parent Common Stock under the circumstances,
in the amounts or at the times such Principal Stockholder might propose.
(c) Such Principal Stockholder is acquiring the shares of Parent
Common Stock for such Principal Stockholder's own account for investment
only, and not with a view towards their distribution.
(d) Such Principal Stockholder represents that by reason of his,
her or its business or financial experience, such Principal Stockholder
has the capacity to protect his, her or its own interests in connection
with the transactions contemplated in this Agreement. Further, such
Principal Stockholder is aware of no general solicitation of investors
in connection with the transactions contemplated in the Agreement.
(e) Such Principal Stockholder has received and read the Parent
SEC Filings and has had an opportunity to discuss Parent's business,
management and financial affairs with directors, officers and management
of Parent and has had the opportunity to review Parent's operations.
Such Principal Stockholder has also had the opportunity to ask questions
of and receive answers from Parent and its management regarding the terms
and conditions of this investment.
(f) Such Principal Stockholder acknowledges and agrees that the
shares of Parent Common Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Such Principal Stockholder has been advised or
is aware of the provisions of Rule 144 promulgated under the Securities Act
as in effect from time to time, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the availability of certain
current public information about Parent, the resale occurring not less
than one year after a party has purchased and paid for the security to be
sold, the sale being through an unsolicited "broker's transaction" or in
transactions directly with a market (as said term is defined under the
Exchange Act) and the number of shares being sold during any three month
period not exceeding specified limitations.
(g) Such Principal Stockholder resides in the state or province
identified in the address of such Principal Stockholder set forth on the
signature page to this Agreement.
5.3 Transfer Restrictions. Such Principal Stockholder acknowledges and
agrees that the shares of Parent Common Stock are subject to restrictions
on transfer set forth in this Section 5.3. Such Principal Stockholder
agrees not to make any disposition of all or any portion of the shares of
Parent Common Stock unless and until: (i) there is then in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such
registration statement; or (ii) the transferee (except for transfers in
compliance with Rule 144) has agreed in writing to be bound by the terms
of this Agreement, such Principal Stockholder shall have notified Parent
of the proposed disposition and shall have furnished Parent with a
detailed statement of the circumstances surrounding the proposed
disposition and if reasonably requested by Parent, such Principal
Stockholder shall have furnished Parent with an opinion of counsel,
reasonably satisfactory to Parent, that such disposition will not require
registration of such shares under the Securities Act. Notwithstanding
43
the provisions of clauses (i) and (ii) above, no such registration
statement or opinion of counsel shall be necessary for a transfer by
such Principal Stockholder to a family member of such Stockholder or
trust for the benefit of such Principal Stockholder; provided, however,
that in each case the transferee will be subject to the terms of this
Agreement to the same extent as if he, she or it were an original
Principal Stockholder hereunder.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Operation of Business Prior to Effective Time. Between the date
hereof and the Effective Time, the Company will operate its business in
the Ordinary Course of Business and, to the extent consistent therewith,
with no less diligence and effort than would be applied in the absence of
this Agreement, use all commercially reasonable efforts to seek to
preserve intact its current business organizations, keep available the
service of its current officers and employees and preserve its
relationships with customers, suppliers, distributors, lessors,
creditors, employees, contractors and others having business dealings
with it with the intention that its goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Without limiting the generality of
the foregoing, except as otherwise expressly provided in this Agreement,
prior to the Effective Time:
(a) the Company shall not do any of the following without the prior
written consent of Parent:
(i) amend its Articles of Incorporation or bylaws (or other
similar governing instrument);
(ii) except as set forth in the Company Disclosure Schedule,
authorize for issuance, issue, sell, deliver or agree or commit to issue,
sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other debt or equity securities or equity
equivalents (including any stock options or stock appreciation rights);
(iii) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, make any other actual, constructive or deemed
distribution in respect of its capital stock or otherwise make any
payments to stockholders in their capacity as such, or redeem or
otherwise acquire any of its securities or any securities other than
shares repurchased from employees at their original cost;
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its subsidiaries (other
than the Merger) or otherwise permit the corporate existence of the
Company or the rights or franchises or any license, permit or
authorization under which its business operates to be suspended,
lapsed or revoked;
(v) create or form any subsidiary;
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(vi) (A) incur or assume any long-term or short-term debt or
issue any debt securities except for borrowings under existing lines
of credit or factoring agreements in the ordinary course of business,
or modify or agree to any amendment of the terms of any of the foregoing;
(B) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except for obligations of subsidiaries of the Company and
endorsements of checks for collection for deposit in the Ordinary Course
of Business; (C) make any loans, advances or capital contributions to or
investments in any other person; (D) pledge or otherwise encumber shares
of capital stock of the Company; or (E) mortgage or pledge any of its
assets, tangible or intangible, or create any new Encumbrances thereupon;
(vii) except as may be required by law, enter into, adopt or
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, health, life, or disability
insurance, dependent care, severance or other employee benefit plan
agreement, trust, fund or other arrangement for the benefit or welfare of
any director, officer or employee in any manner or increase in any manner
the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan and arrangement as in effect
as of the date hereof (including the granting of stock appreciation rights
or performance units);
(viii) hire additional employees of the Company, materially
increase the compensation of employees, or enter into employment
agreements or contracts, except in the Ordinary Course of Business;
(ix) (A) acquire, sell, lease, license, transfer or otherwise dispose of
any assets in any single transaction or series of related transactions
having a fair market value in excess of $10,000 in the aggregate or that
are otherwise material to the Company, other than sales of its products
and licenses of software (other than exclusive licenses) in the Ordinary
Course of Business, or (B) enter into any exclusive license, distribution,
marketing, sales or other agreement;
(x) except as may be required as a result of a change in law or
in generally accepted accounting principles or as recommended by the
auditor selected by Parent, materially change any of the accounting
principles, practices or methods used by it;
(xi) revalue any of its assets, including writing down the value
of inventory or writing-off notes or accounts receivable, other than in
the Ordinary Course of Business;
(xii) (A) acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other entity or division
thereof or any equity interest therein; (B) enter into any contract or
agreement that would be material to the Company other than customer
contracts entered into in the Ordinary Course of Business, (C) amend,
modify, waive or terminate any material right under any material contract
in any way or any right under any other contract in any material way; (D)
modify its standard Company warranty terms for its products or amend or
modify any product warranties in effect as of the date hereof in any
manner
45
that is adverse to the Company or any of its subsidiaries; or (E)
authorize any new capital expenditure or expenditures that individually
is in excess of $10,000 or in the aggregate are in excess of $25,000;
(xiii) make any tax election or settle or compromise any income
tax liability or permit any insurance policy naming it as a beneficiary
or loss payee to expire, or to be canceled or terminated, unless a
comparable insurance policy reasonably acceptable to Parent is obtained
and in effect;
(xiv) settle or compromise any pending or threatened suit,
action or claim that (A) relates to the transactions contemplated hereby
or (B) the settlement or compromise of which would be for more than
$10,000 in any single case, or $25,000 in the aggregate, or that would
otherwise be material to the Company;
(xv) make any payment to any stockholder, officer, director or
employee of the Company or any affiliate or relative of any of them
except for senior staff bonuses earned for the year and payment for
services rendered by any such person as an employee or independent
contractor of the Company in the Ordinary Course of Business;
(xvi) commence any software, hardware or other technology
development project or terminate any software, hardware or other
technology development project that is currently ongoing;
(xvii) allow the Company's rights in any material Intellectual
Property to be abandoned or otherwise lost;
(xviii) sell or license to any third party any of the Company's
Intellectual Property other than non-exclusive licenses in the ordinary
course of business; or
(xix) take or agree in writing or otherwise that would make any
of the representations or warranties of the Company and the Principal
Stockholders contained in this Agreement untrue or incorrect at Closing.
(b) The Company shall:
(i) maintain the assets and properties of the Company in the
Ordinary Course of Business in the manner historically maintained by
the Company, reasonable wear and tear, damage by fire and other casualty
excepted;
(ii) promptly repair, restore or replace any assets or properties
of the Company in the Ordinary Course of Business consistent with past
practice;
(iii) upon any damage, destruction or loss to any of the assets
or properties of the Company, apply any and all insurance proceeds
received with respect thereto to the prompt repair, replacement and
restoration thereof;
(iv) comply in all material respects with all applicable laws;
46
(v) file all material foreign, federal, state and local Tax
Returns required to be filed and make timely payment of all applicable
Taxes when due (taking into account all applicable extension periods)
and pay the expenses of preparation therefore (other than where the
Company is disputing any such obligation in good faith);
(vi) take all actions reasonably necessary to be in material
compliance with all material contracts and to maintain the effectiveness
of all of the Company's Government Authorizations;
(vii) notify Parent of any action, event, condition or
circumstance, or group of actions, events, conditions or circumstances,
relating to the Company or any other Person that results in, or would
reasonably be expected to result in, a Material Adverse Effect on the
Company (other than publicly-known events, conditions or circumstances
affecting other similarly-situated Persons in a like manner);
(viii) notify Parent in writing of the commencement of any
Proceeding by or against the Company or any of its subsidiaries; and
(ix) pay accounts payable and pursue collection of its accounts
receivable in the Ordinary Course of Business, consistent with past
practices.
6.2 No Solicitation or Negotiation. Between the date hereof and
September 30, 2003, the Company will not (nor will the Company permit
any of the Company's officers, directors, employees, agents,
representatives or affiliates to) directly or indirectly, take any of
the following actions with any person other than Parent and Acquisition
Co.: (i) solicit, initiate, entertain or encourage any proposals or
offers from, or conduct discussions with or engage in negotiations with
any person relating to any possible acquisition of the Company or any of
its subsidiaries (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any material portion of its or their
capital stock or assets or any equity interest in the Company; (ii)
provide information with respect to it or any of its subsidiaries to
any person, other than Parent and Acquisition Co., relating to, or
otherwise cooperate with, facilitate or encourage any effort or attempt
by any such person with regard to, any possible acquisition of the
Company (whether by way of merger, purchase of capital stock, purchase
of assets or otherwise), any portion of its or their capital stock or
assets or any equity interest in the Company; or (iii) enter into any
agreement with any person providing for the possible acquisition of the
Company or any of its subsidiaries (whether by way of merger, purchase
of capital stock, purchase of assets or otherwise), any portion of its
or their capital stock or assets or any equity interest in the Company.
In addition, the Company also agrees that, unless and until this Agreement
is terminated in accordance with its terms, it will not commence, be
involved in, or take any actions in furtherance of, the process of
becoming a public company through an initial public offering.
6.3 Access to Information. Between the date hereof and the Effective
Time, the Company shall give Parent and its authorized representatives
(including, without limitation, its attorneys and accountants), upon
reasonable notice from Parent, reasonable access to all employees,
customers, plants, offices, warehouses and other facilities, to (and
where necessary, provide copies of) all books and records, contracts
and all personnel files of current employees of
47
the Company and its subsidiaries as Parent may reasonably require, and
will cause its officers and those of its subsidiaries to furnish Parent
with such financial and operating data and other information with respect
to the business and properties of the Company and its subsidiaries as
Parent may from time to time reasonably request.
6.4 Notification of Certain Matters. The Company shall give prompt
notice to Parent of (i) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which has caused or would be likely
to cause any representation or warranty contained in this Agreement by
the Company to be untrue or inaccurate at or prior to the Effective Time
on (ii) any failure by the Company to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 6.4 shall not cure such Breach or
non-compliance by the Company, limit or otherwise affect the remedies
available hereunder to Parent, or constitute an amendment of any
representation, warranty or statement in this Agreement or the Company
Disclosure Schedules.
6.5 Fees and Expenses. Whether or not the Merger is consummated,
all fees, costs and expenses incurred in connection with the Merger,
this Agreement and the other agreements and transactions contemplated
hereby and thereby, including all legal, accounting, financial advisory,
broker's consulting and other fees and expenses of third parties incurred
by a party in connection with the negotiation, documentation and
effectuation of the terms and conditions of the Merger, other than costs
and fees relating to the audit of the Company prior to Closing (which costs
and fees shall be paid by Parent), this Agreement and the other agreements
and transactions contemplated hereby and thereby ("Third Party Expenses"),
shall be the obligation of the respective party incurring such Third Party
Expenses. Notwithstanding the foregoing, the Principal Stockholders shall
pay all legal costs and fees of their counsel and the Company shall not be
responsible for or pay for any such fees. The Company Stockholders shall
be responsible for and shall pay all applicable sales or other transfer
taxes (if any) arising in connection with the transactions contemplated
by this Agreement.
6.6 Confidentiality.
(a) The parties hereto will maintain in confidence, and will its
directors, officers, employees, agents, Affiliates and advisors to maintain
in confidence any written, oral or other information furnished by another
party to this Agreement in connection with the transactions contemplated by
this Agreement, unless (a) such information is already known to such party
or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party , (b) the use of
such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated by this Agreement, or (c) the furnishing or use
of such information is required by law. If the Merger is not consummated,
each party will return or, at the request of the party supplying the
information, destroy as much of such written information as the other party
may reasonably request.
(b) Notwithstanding anything to the contrary in this Agreement or in
any other written or oral understanding or agreement to which the parties
hereto are parties or by which they are bound, each party to this Agreement
has been and is permitted to disclose the
48
federal tax treatment and federal tax structure of the Merger effective
no later than the earlier of the date
of the public announcement of discussions relating to the Merger, the date
of the public announcement of the Merger, or the date of the execution of
this Agreement (with or without conditions) to enter into the Merger. This
permission to disclose includes the ability of each party to this Agreement
to consult, without limitation of any kind, any tax advisor (including a tax
advisor independent from all other entities involved in the Merger) regarding
the federal tax treatment or federal tax structure of the Merger. This
Section 6.6(b) is intended to qualify for the exception from confidential
transaction status as set forth in Section 1.6011-4(b)(3)(ii)(B) of the
Treasury Regulations and shall be interpreted to authorize disclosure only
to the extent necessary to so qualify.
6.7 Right of First Offer. Upon the Effective Time, Parent shall grant,
on the terms set forth in this Section 6.7, to each of the Principal
Stockholders the right to purchase all or any part of such Principal
Stockholder's pro rata share of the Equity Securities (as defined below)
which Parent may, from time to time, propose to sell and issue. The
Principal Stockholders may purchase said Equity Securities on the same
terms and at the same price at which Parent proposes to sell the Equity
Securities to other potential investors. The pro rata share of each
Principal Stockholder, for purposes of this Section 6.7, is the proportion
that the number of shares of Parent Common Stock issued and held by such
Principal Stockholder bears to the total number of shares of then
outstanding Parent Common Stock.
(a) Equity Securities. For purposes of this Agreement, the term
"Equity Securities" shall mean any capital stock of Parent, whether now
authorized or not, and any rights, options or warrants to purchase said
capital stock, and securities of any type whatsoever that are, or may
become, convertible into said capital stock; provided, however, that
"Equity Securities" does not include (i) securities offered pursuant to
a registration statement filed under the Securities Act, (ii) securities
issued pursuant to the acquisition of another corporation by the Company
by merger, purchase of substantially all of the assets or other
reorganization, (iii) securities issued or issuable to officers,
directors, stockholders, employees, scientific advisors or consultants
of the Company pursuant to any employee or consultant incentive stock
plan, agreement or arrangement approved by the Board of Directors of
Parent, (iv) all securities issued in connection with bona fide third
party equipment leasing, equipment financing arrangements, bank loans or
secured debt financings, (v) securities issued in connection with any
stock split, stock dividend or similar recapitalization of Parent and
(vi) securities issued upon the conversion or exercise of outstanding
convertible or exercisable securities or upon any anti-dilution adjustment
applicable to outstanding securities (including the anti-dilution protection
held by James D. Durham in connection with Parent Acquisitions).
(b) Notice. In the event Parent proposes to undertake an issuance
of Equity Securities, it shall give to the Principal Stockholders written
notice (the "Notice") of its intention, describing the type of Equity
Securities, the price, the terms upon which Parent proposes to issue the
same, and a statement as to the number of days from receipt of such Notice
within which the Principal Stockholders must respond to such Notice. The
Principal Stockholders shall have fourteen (14) days from the date of
receipt of the Notice to purchase any or all of the Equity Securities for
the price and upon the terms specified in the Notice by giving written
notice to Parent and stating therein the quantity of Equity Securities to
be purchased and forwarding
49
payment for such Equity Securities to Parent if immediate payment is
required by such terms, or in any event no later than fourteen (14) days
after the date of receipt of the Notice.
(c) Lapse of Right. In the event the Principal Stockholders fail
to exercise in full the right of first offer within said fourteen (14)
day period, Parent shall have one hundred twenty (120) days thereafter
to sell or enter into an agreement to sell the Equity Securities with
respect to which the Principal Stockholders' rights were not exercised,
at a price and upon general terms no more favorable to the purchasers
thereof than specified in the Notice. In the event Parent has not sold
the Equity Securities within said one hundred twenty (120) day period,
Parent shall not thereafter issue or sell any Equity Securities without
first offering such securities to the Principal Stockholders in the
manner provided above.
(d) Termination of Right. The rights granted under this Section
6.7 shall terminate (i) upon the sale, lease or other disposition of all
or substantially all of the assets of Parent or an acquisition of Parent
by another corporation or entity by consolidation, merger or other
reorganization in which the holders of Parent's outstanding voting stock
immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the
voting power of Parent or other entity surviving such transaction or (ii)
the date on which the Principal Stockholders fail to hold in the aggregate
at least 500,000 shares of Parent Common Stock (as adjusted for stock
splits, stock dividends, recapitalizations or the like with respect to
such shares), whichever first occurs.
6.8 Observer Rights. The Board of Directors of Parent will take all
action reasonably necessary such that, upon the Effective Time and
continuing until at least the first anniversary of the Closing Date
(subject to removal for cause), Nick Liuzza, Jr. shall have observer
rights on the Board of Directors of Parent, including the right to
receive all information provided to Members and to request such
additional information as Board members are entitled to request.
6.9 Tax Matters.
(a) Neither Parent, Acquisition Co. or Principal Stockholders
shall take any action prior to or following the Closing that would
reasonably be expected to cause the merger to fail to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code.
Notwithstanding anything in this Agreement to the contrary, none of
the Parent, Acquisition Co., any attorney, accountant or other advisor
of the Parent (including Morrison & Foerster LLP) has made, or makes,
any representations or warranties to the Company, any holder of Company
stock, options, warrants or indebtedness or any other Person regarding
the Tax treatment of the Merger and any other transactions contemplated
by this Agreement, whether the Merger will qualify as reorganization
under Section 368(a) of the Code, or any of the Tax consequences to any
Person of this Agreement, the Merger or any of the transactions
contemplated hereby or thereby, and the Company and Principal
Stockholders acknowledge that they are relying solely on their own tax
advisors in connection with this Agreement and the transactions
contemplated by this Agreement. Each of Company, Principal
Stockholders and other Person (and not the Parent or Acquisition Co.)
shall be responsible for its own Tax liabilities that may arise as a
result of the Merger or the transactions contemplated by this Agreement.
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(b) The Parent shall determine the portion of the Merger
Consideration to be treated as interest for Tax purposes and the parties
shall report the Merger Consideration for Tax purposes consistent with
such determination.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States federal or state court or United States federal or state
Governmental or Regulatory Authority that prohibits, restrains, enjoins or
restricts the consummation of the Merger; and
(b) any governmental or regulatory notices, approvals or other
requirements necessary to consummate the transactions contemplated hereby
shall have been given, obtained or complied with, as applicable.
7.2 Conditions to the Obligations of the Company. The obligation of
the Company to effect the Merger is subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) the representations and warranties of Parent and Acquisition Co.
contained in this Agreement shall be true and correct in all material
respects at and as of the Effective Time with the same effect as if made
at and as of the Effective Time (except to the extent such representations
specifically relate to an earlier date, in which case such representations
shall be true and correct in all material respects as of such earlier date
and, at the Closing, Parent and Acquisition Co. shall have delivered to
the Company a certificate to that effect, executed by an officer of Parent
and Acquisition Co.;
(b) each of the covenants and obligations of Parent and Acquisition
Co. to be performed at or before the Effective Time pursuant to the terms
of this Agreement shall have been duly performed in all material respects
at or before the Effective Time and, at the Closing, Parent and Acquisition
Co. shall have delivered to the Company a certificate to that effect,
executed by an officer of Parent and Acquisition Co.;
(c) Parent shall have delivered all of Closing deliveries set forth
in Section 2.10(c) above;
(d) all proceedings taken by the Parent and Acquisition Co. and all
instruments executed and delivered by Parent and Acquisition Co. on or
prior to the Closing in connection with the Contemplated Transactions shall
be reasonably satisfactory in form and substance to counsel for the Company.
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7.3 Conditions to the Obligations of Parent and Acquisition Co. The
respective obligations of Parent and Acquisition Co. to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and
as of the Effective Time with the same effect as if made at and as of the
Effective Time (except to the extent such representations specifically
relate to an earlier date, in which case such representations shall be
true and correct in all material respects as of such earlier date) and,
at the Closing, the Company shall have delivered to Parent and Acquisition
Co. a certificate to that effect, executed by an executive officer of the
Company;
(b) each of the covenants and obligations of the Company to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or
before the Effective Time and, at the Closing, the Company shall have
delivered to Parent and Acquisition Co. a certificate to that effect,
executed by an executive officer of the Company;
(c) the consents specified on Section 3.32 of the Company Disclosure
Schedule and any other material third party consents necessary to
consummate the transactions contemplated hereby shall have been given,
obtained or complied with as applicable;
(d) there shall have been no events, changes or effects,
individually or in the aggregate, with respect to the Company or its
subsidiaries having, or that would reasonably be expected to have, a
Material Adverse Effect on the Company;
(e) none of the Key Employees shall have terminated their
employment with the Company or given written or oral notice to the
Company or Parent of their intention to do so after the consummation of
the Merger;
(f) the Company and the Stockholders, as the case may be, shall
have delivered all of the Closing deliveries set forth in Section 2.10(b)
above;
(g) all proceedings taken by the Company and the Stockholders and
all instruments executed and delivered by the Company and the Stockholders
on or prior to the Closing in connection with the Contemplated
Transactions shall be reasonably satisfactory in form and substance to
counsel for the Parent and Acquisition Co.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
8.1 Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time whether before or
after approval and adoption of this Agreement:
(a) by written consent of Parent, Acquisition Co., and the Company;
52
(b) by Parent and Acquisition Co. or the Company if (i) any court of
competent jurisdiction in the United States or other United States federal
or state governmental entity shall have issued a final order, decree or
ruling, or taken any other final action, restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action is or shall have become non-appealable, or (ii) the Merger has not
been consummated by October 31, 2003 (the "Final Date"); provided that no
party may terminate this Agreement pursuant to this clause (ii) if such
party's failure to fulfill any of its obligations under this Agreement s
hall have been a principal reason that the Effective Time shall not have
occurred on or before said date.
(c) by the Company if (i) there shall have been a material Breach of
any representations or warranties on the part of Parent or Acquisition Co.
set forth in this Agreement or if any representations or warranties of
Parent or Acquisition Co. shall have become untrue in any material respect,
provided that the Company has not Breached any of its obligations hereunder
in any material respect; or (ii) there shall have been a Breach by Parent
or Acquisition Co. of any of their respective covenants or agreements
hereunder in any material respect or materially adversely affecting (or
materially delaying) the ability of Parent, Acquisition Co. or the Company
to consummate the Merger, and Parent or Acquisition Co., as the case may
be, has not cured such Breach within ten business days after notice by the
Company thereof, provided that the Company has not Breached any of its
obligations hereunder in any material respect; or
(d) by Parent and Acquisition Co. if (i) there shall have been a
material Breach of any representations or warranties on the part of the
Company set forth in this Agreement or if any representations or
warranties of the Company shall have become untrue in any material
respect, provided that neither Parent nor Acquisition Co. has Breached
any of their respective obligations hereunder in any material respect;
or (ii) there shall have been a Breach by the Company of one or more of
its covenants or agreements hereunder in any material respect or
materially adversely affecting (or materially delaying) the ability of
Parent, Acquisition Co. or the Company to consummate the Merger, and
the Company has not cured such Breach within ten business days after
notice by Parent or Acquisition Co. thereof, provided that neither Parent
nor Acquisition has Breached any of their respective obligations
hereunder in any material respect.
8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1 above, this Agreement shall forthwith
become void and have no effect without liability on the part of any
party hereto or its Affiliates, directors, officers or stockholders
other than the provisions of this Section 8.2 and Sections 6.5, 6.6,
8.3, 8.4, 10.9, 10.10, and 10.13.
8.3 Amendment. This Agreement may be amended by action taken by the
Company, Parent Acquisition Co. and the Principal Stockholders at any
time before or after approval of the Merger by the Company Stockholders
but after any such approval no amendment shall be made that requires the
approval of such Company Stockholders under applicable law without such
approval. This Agreement (including the Company Disclosure Schedule)
may be amended only by an instrument in writing signed on behalf of the
parties hereto.
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8.4 Break-Up Fee.
(a) In the event Parent terminates this Agreement pursuant to
Section 8.1(d) above, the Company shall pay Parent a break-up fee of
$50,000, and the Company shall be obligated to reimburse Parent for all
reasonable out-of-pocket expenses incurred by Parent in connection with
the transactions contemplated by this Agreement (including the fees of
investment bankers and counsel).
(b) In the event the Company terminates this Agreement pursuant
to Section 8.1(c) above, Parent shall pay the Company a break-up fee of
$50,000, and Parent shall be obligated to reimburse the Company for all
reasonable out-of-pocket expenses incurred by either the Company in
connection with the transactions contemplated by this Agreement (including
the fees of investment bankers and counsel).
8.5 Extension; Waiver. At any time prior to the Effective Time, each
party hereto may, only by action taken in writing, (i) extend the time for
the performance of any of the obligations or other acts of any other party,
(ii) waive any inaccuracies in the representations and warranties of any
other party contained herein or in any document certificate or writing
delivered pursuant hereto or (iii) waive compliance by any other party
with any of the agreements or conditions contained herein. Any agreement
on the part of any party hereto to any such extension or waiver shall be
valid only if set forth in an instrument, in writing, signed on behalf of
such party. The failure of any party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
ARTICLE IX
ACTIONS BY THE PARTIES AFTER THE CLOSING
9.1 Survival of Representations, Warranties, Etc. The representations,
warranties and covenants contained in or made pursuant to this Agreement
or any certificate, document or instrument delivered pursuant to or in
connection with this Agreement in the transactions contemplated hereby
shall survive the execution and delivery of this Agreement and the Closing
hereunder (notwithstanding any investigation, analysis or evaluation by
any party hereto or their designees of the Assets and Properties, business,
operations or condition (financial or otherwise) of the other party) until
the eighteen (18) month anniversary of the Effective Time; provided,
however, that the representations and warranties of the parties contained
in Sections 3.2, 3.3, 3.20 and 3.25 (collectively, the "Surviving
Representations") shall continue to survive in full force and effect
following the Effective Time.
9.2 Indemnification.
(a) By the Principal Stockholders. The Principal Stockholders shall,
jointly and severally, indemnify, defend and hold harmless Parent,
Acquisition Co., the Surviving Corporation and their respective officers,
directors, employees, affiliates, agents, successors, subsidiaries and
assigns (collectively the "Parent Group") from and against any and all
costs, losses (including, without limitation, diminution in value),
liabilities, damages, lawsuits, deficiencies, claims and expenses,
including without limitation, interest, penalties, costs of
54
mitigation, and other losses resulting from any shutdown or curtailment
of operations, attorneys' fees and all amounts paid in investigation,
defense or settlement of any of the foregoing (collectively, the
"Damages"), incurred in connection with, arising out of, resulting from
or incident to any (i) Breach of any covenant, representation, warranty
or agreement or the inaccuracy of any representation, made by the Company
in or pursuant to this Agreement, or in the other documents delivered
in connection with the transactions contemplated in this Agreement; (ii)
any claim by any third party that such third party has the right to own
or to be issued shares of capital stock in the Company, (iii) any claim
for the payment of any bonuses or other compensation by the Company,
Acquisition Co. or the Parent in connection with the Closing of the
Contemplated Transactions, and (iv) any liability or obligation arising
out of the ownership or operation of the assets of HC Travelers, Inc.
and/or Terri Hill prior to their acquisition by the Company.
(b) By Parent. Parent and Acquisition Co. shall, jointly and
severally, indemnify, defend and hold harmless the Company Stockholders
and their respective officers, employees, agents, successors and assigns
from and against any and all Damages incurred in connection with, arising
out of, resulting from or incident to any Breach of any covenant,
representation, warranty or agreement or the inaccuracy of any
representation, made by Parent in or pursuant to this Agreement, or
in any other documents delivered in connection with the transactions
contemplated in this Agreement.
(c) Notwithstanding the foregoing, neither the Principal
Stockholders or Parent shall have any liability with respect to
indemnification above unless and until the aggregate amount of Damages
equal or exceed $50,000 (the "Threshold Amount"). At such time as the
aggregate Damages equal or exceed the Threshold Amount, the indemnified
party shall be indemnified to the extent, and only to the extent, that
all such Damages exceed the Threshold Amount; provided, however, that
this paragraph shall not apply to any intentional or fraudulent breach
by any Company Stockholder or Parent of any representation, warranty,
covenant or obligation. The limitation on liability of the Principal
Stockholders set forth above shall not apply to claims relating to Taxes.
(d) Right of Set-Off. As additional security for their obligation
to indemnify Parent and Parent Group hereunder, the Company Stockholders
hereby grant each of Parent and the Parent Group a right of set-off
pursuant to the further terms of this Section 9.2(d) and agree that if
either Parent or the Parent Group has made a claim for indemnification
pursuant to the terms of this Article IX which has either (a) been
accepted in writing by the Principal Stockholders or (b) awarded or
confirmed in arbitration pursuant to Section 10.12, Parent and the
Parent Group may set-off, or direct the other party to set-off, amounts
owning by either Parent or the Parent Group to any of the Company
Stockholders.
(e) Limitation of Liability. The liability of the Principal
Stockholders for indemnification under this Article IX shall be limited
to his several portion of $11,000,000. For purposes of this Section
9.2(d), Nick Liuzza, Jr.'s several portion shall be 46.15% and Nick
Liuzza, Sr.'s several portion shall be 53.85%. The liability of Parent
for indemnification under this Article IX shall be capped at $11,000,000.
This limitation of liability shall not apply to (i) any breach by any
party of any of the Surviving Representations or (ii) any intentional or
fraudulent breach by any party of any representation, warranty, covenant
or obligation.
55
(f) Third Party Claims; Defense of Claims. If any Action or
Proceeding is filed or initiated against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be given
to the indemnifying party as promptly as practicable (and in any event
within ten days after the service of the citation or summons); provided,
however, that the failure of any indemnified party to give timely notice
shall not affect rights to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual damage caused by such
failure. After such notice, if the indemnifying party shall acknowledge
in writing to the indemnified party that the indemnifying party shall be
obligated under the terms of its indemnity hereunder in connection with
such Action or Proceeding, then the indemnifying party shall be entitled,
if it so elects, to take control of the defense and investigation of such
Action or Proceeding and to employ and engage attorneys of its own choice
to handle and defend the same, such attorneys to be reasonably
satisfactory to the indemnified party, at the indemnifying party's cost,
risk and expense (unless (i) the indemnifying party has failed to assume
the defense of such Action or Proceeding or (ii) the named parties to such
Action or Proceeding include both of the indemnifying party and the
indemnified party, and the indemnified party and its counsel determine
in good faith that there may be one or more legal defenses available to
such indemnified party that are different from or additional to those
available to the indemnifying party and that joint representation would
be inappropriate), and to compromise or settle such Action or Proceeding,
which compromise or settlement shall be made only with the written
consent of the indemnified party, such consent not to be unreasonably
withheld. The indemnified party may withhold such consent if such
compromise or settlement would adversely affect the conduct of business
or requires less than an unconditional release to be obtained. If (i)
the indemnifying party fails to assume the defense of such Action or
Proceeding within 15 days after receipt of notice thereof pursuant to
this Section 9.2, or (ii) the named parties to such Action or Proceeding
include both the indemnifying party and the indemnified party and the
indemnified party and its counsel determine in good faith that there
may be one or more legal defenses available to such indemnified party
that are different from or additional to those available to the
indemnifying party and that joint representation would be inappropriate,
the indemnified party against which such Action or Proceeding has been
filed or initiated will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying
party's cost and expense, the defense, compromise or settlement of such
Action or Proceeding on behalf of and for the account and risk of the
indemnifying party; provided, however, that such Action or Proceeding
shall not be compromised or settled without the written consent of the
indemnifying party, which consent shall not be unreasonably withheld.
In the event the indemnified party assumes defense of the Action or
Proceeding, the indemnified party will keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement and will consult with, when appropriate, and consider any
reasonable advice from, the indemnifying party of any such defense,
compromise or settlement. The indemnifying party shall be liable for
any settlement of any action effected pursuant to and in accordance with
this Section 9.2 and for any final judgment (subject to any right of
appeal), and the indemnifying party agrees to indemnify and hold harmless
the indemnified party from and against any Damages by reason of such
settlement or judgment.
Regardless of whether the indemnifying party or the indemnified party
takes up the defense, the indemnifying party will pay reasonable costs and
expenses in connection with the defense, compromise or settlement for any
Action or Proceeding under this Section 9.2.
56
The indemnified party shall cooperate in all reasonable respects with
the indemnifying party and such attorneys in the investigation, trial and
defense of such Action or Proceeding and any appeal arising therefrom;
provided, however, that the indemnified party may, at its own cost,
participate in the investigation, trial and defense of such Action or
Proceeding and any appeal arising therefrom. The indemnifying party
shall pay all expenses due under this Section 9.2 as such expenses
become due. In the event such expenses are not so paid, the indemnified
party shall be entitled to settle any Action or Proceeding under this
Section 9.2 without the consent of the indemnifying party and without
waiving any rights the indemnified party may have against the indemnifying
party.
(g) Indemnity Claims. A claim for indemnification for any matter
not involving a third-party claim may be asserted by notice to the party
from whom indemnification is sought.
9.3 Certificate of Incorporation and Bylaws. Notwithstanding anything
to the contrary contained in the Company's Certificate of Incorporation
or Bylaws, the indemnification provisions of this Article IX shall take
precedence over such Certificate of Incorporation or Bylaws. No Company
Stockholder nor any other director or officer incumbent at any time prior
to the Closing shall be entitled to indemnification directly or indirectly
under the Company's Certificate of Incorporation or Bylaws or otherwise
for any matter upon which the Company or any Company Stockholder has or
might have an indemnification obligation hereunder and the Certificate of
Incorporation and Bylaws shall be deemed amended accordingly. However,
the provisions of this Section 9.3 are intended only for the regulation
of relations between the Company and the Company Stockholders and any
indemnified party. This Section 9.3 is not intended for the benefit of
creditors or other third parties and does not grant any rights to
creditors or other third parties.
9.4 Exclusivity. The parties hereto acknowledge and agree that the
indemnity obligations set forth above shall, following Closing, be the
exclusive remedy of the indemnified parties with respect to the
Contemplated Transactions.
ARTICLE X
MISCELLANEOUS
10.1 Restriction on Transferability of the Parent Common Shares. The
certificates representing the Parent Common Stock (if and when issued
pursuant to this Agreement) shall bear the following legend restricting
transfer, and such other legends as may be required by any applicable
state securities law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
57
THE SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA OR ANY OTHER STATE AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SUCH SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100,
25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE AND SUCH PROVISIONS
OF THE CORPORATIONS CODE OF ANY SUCH OTHER STATE. THE RIGHTS OF THE
HOLDER OF THIS CERTIFICATE ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
The Parent Common Stock issued pursuant to this Agreement shall not
be transferable in the absence of an effective registration statement
under the Securities Act and applicable state securities laws or an
exemption therefrom or in the absence of compliance with any term of
this Agreement. In the absence of an effective registration statement
under the Securities Act and applicable state securities laws, Parent
may require the delivery of an opinion of counsel knowledgeable in federal
and state securities law, in form and substance reasonably satisfactory
to Parent and accompanied by such supporting documents as Parent may
reasonably request, prior any transfer of Parent Common Stock or any
interest therein. Parent shall be entitled to impose stop transfer
instructions with respect to the Parent Common Stock in order to enforce
the foregoing restrictions.
10.2 Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including
the execution and delivery of such further instruments and documents) as
the other party reasonably may request, all the sole cost and expense of
the requesting party (unless the requesting party is entitled to
indemnification therefore under Article IX).
10.3 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission
with answer back confirmation or mailed (postage prepaid by certified or
registered mail, return receipt requested) or by overnight courier to the
parties at the following addresses or facsimile numbers:
If to Parent or Surviving Corporation:
Crdentia Corp.
455 Market Street, Suite 1220
San Francisco, CA 92105
Facsimile No.: (415) 543-1415
Attention: Chief Executive Officer
58
with copies to:
Morrison & Foerster LLP
3811 Valley Centre Drive, Suite 500
San Diego, CA 92130
Facsimile No.: (858) 720-5125
Attention: Steven G. Rowles, Esq.
If to Principal Stockholders:
Nick Liuzza, Sr.
Nick Liuzza, Jr.
2416 21st Avenue, Suite 302
Nashville, TN 37212
Facsimile No.: (401) 847-6012
with copies to:
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, LLP
201 St. Charles Avenue
New Orleans, LA 70170
Facsimile No.: (504) 582-8583
Attention: F. Rivers Lelong, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 10.3, be deemed
given upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided in this Section 10.3, be deemed given upon
receipt, and (iii) if delivered by mail or overnight courier in the manner
described above to the address as provided in this Section 10.3, be deemed
given upon receipt (in each case regardless of whether such notice, request
or other communication is received by any other Person to whom a copy of
such notice, request or other communication is to be delivered pursuant to
this Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that
party by giving notice specifying such change to the other parties hereto.
10.4 Entire Agreement. This Agreement (and all exhibits and schedules
attached hereto, all other documents delivered in connection herewith)
supersede all prior discussions and agreements among the parties with
respect to the subject matter hereof and contains the sole and entire
agreement among the parties hereto with respect thereto, including,
without limitation, the binding provision of the letter of intent executed
by the parties on March 13, 2003 as amended on May 6, 2003.
10.5 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No
waiver by any party hereto of any term or condition of this Agreement, in
any one or more instances, shall be deemed to be or construed as a waiver
of the same or any other term
59
or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by law or otherwise afforded, will be
cumulative and not alternative.
10.6 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of
each party hereto.
10.7 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon
any other Person other than any Person entitled to indemnity under Article
IX.
10.8 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto and
any attempt to do so will be void, except that any party's rights to
indemnification under Article IX may be freely assigned. This Agreement
is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
10.9 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the
provisions hereof.
10.10 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will
be fully severable, (ii) this Agreement will be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a
part hereof, (iii) the remaining provisions of this Agreement will remain
in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu
of such illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and mutually acceptable to the parties herein.
10.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to
contracts executed and performed in such State, without giving effect to
conflicts of laws principles.
10.12 Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration
in front of a sole arbitrator administered by the American Arbitration
Association in accordance with its commercial rules and judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitrator appointed under this Section shall
be qualified by education or experience in the subject matter of the
submitted dispute. The place of the arbitration shall be Denver, Colorado.
The non-prevailing party in the arbitration shall pay the fees and expenses
of the arbitrator and the costs of arbitration and the enforcement of any
award rendered therein, including attorney's fees and expenses of the
prevailing party.
10.13 Construction. No provision of this Agreement shall be construed
in favor of or against any party on the ground that such party or its
counsel drafted the provision.
60
Any remedies provided for herein are not exclusive of any other lawful
remedies which may be available to either party. This Agreement shall at
all times be construed so as to carry out the purposes stated herein.
10.14 Counterparts. This Agreement may be executed in any number of
counterparts and by facsimile, each of which will be deemed an original,
but all of which together will constitute one and the same instrument.
[Remainder of page intentionally left blank.]
61
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto, or their duly authorized officer, as of the date
first above written.
CRDENTIA CORP.,
a Delaware corporation
By: /s/ James D. Durham
Name: James D. Durham
Title: Chief Executive Officer
NAS ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ James D. Durham
Name: James D. Durham
Title: Chief Executive Officer
NEW AGE STAFFING, INC.,
a Texas Corporation
By: /s/ Nick Liuzza
Name: Nick Liuzza
Title: President and Chief
Executive Officer
/s/ Nick Liuzza, Jr.
Nick Liuzza, Jr.
/s/ Nick Liuzza, Sr.
Nick Liuzza, Sr.
/s/ M. Kolene Goubeaux
M. Kolene Goubeaux
/s/ Steve Katz
Steve Katz
62
/s/ Dave Falgoust
Dave Falgoust
/s/ Kim Falgoust
Kim Falgoust
/s/ Terri Hill
Terri Hill
/s/ Chris Liuzza
Chris Liuzza
/s/ Robert Jay McCoskey
Robert Jay McCoskey
/s/ Suzanne Liuzza McCoskey
Suzanne Liuzza McCoskey
/s/ Fred Butler
Fred Butler
/s/ Laurie Rielley
Laurie Rielley
62
SCHEDULE 1.1(A)
ACCREDITED STOCKHOLDERS
This schedule has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this schedule will be furnished supplementally
to the Securities and Exchange Commission upon request.
63
SCHEDULE 1.1(B)
NON-ACCREDITED STOCKHOLDERS
This schedule has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this schedule will be furnished supplementally
to the Securities and Exchange Commission upon request.
64
SCHEDULE 1.1(C)
KEY EMPLOYEES
This schedule has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this schedule will be furnished supplementally
to the Securities and Exchange Commission upon request.
65
SCHEDULE 2.11(B)(IV)
PARTIES TO NON-COMPETITION AGREEMENTS
This schedule has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this schedule will be furnished supplementally
to the Securities and Exchange Commission upon request.
66
SCHEDULE 2.11(B)(XIII)
EXCLUDED PARTIES FROM LOCK-UP AGREEMENTS
This schedule has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this schedule will be furnished supplementally
to the Securities and Exchange Commission upon request.
67
SCHEDULE 2.11(C)(I)
ALLOCATION OF STOCK CONSIDERATION AND CASH CONSIDERATION
COMPANY DISCLOSURE SCHEDULE
This schedule has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this schedule will be furnished supplementally
to the Securities and Exchange Commission upon request.
68
EXHIBIT A
ARTICLES OF MERGER
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
69
EXHIBIT B
CERTIFICATE OF MERGER
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
70
EXHIBIT C
FORM OF SUBORDINATED PROMISSORY NOTE
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
71
EXHIBIT D
EMPLOYMENT AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
72
EXHIBIT E
NON-COMPETITION AND NON-SOLICITATION AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
73
EXHIBIT F
COMPANY OFFICER'S CERTIFICATE
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
74
EXHIBIT G
COMPANY SECRETARY CERTIFICATE
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
75
EXHIBIT H
RELEASE
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
76
EXHIBIT I
LETTER OF TRANSMITTAL
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
77
EXHIBIT J
OPINION OF COMPANY COUNSEL
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
78
EXHIBIT K
REGISTRATION RIGHTS AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
79
EXHIBIT L
LOCK-UP AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
80
EXHIBIT M
PARENT OFFICER'S CERTIFICATE
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
81
EXHIBIT N
PARENT SECRETARY CERTIFICATE
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
82
EXHIBIT O
OPINION OF COUNSEL TO PARENT AND ACQUISITION CO.
This exhibit has been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A copy of this exhibit will be furnished supplementally
to the Securities and Exchange Commission upon request.
83