AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of the 12th day of July, 1999
(the "Agreement"), is by and among CARECENTRIC SOLUTIONS, INC., a Delaware
corporation (the "Company"), XXXXXXX CENTRAL HOLDINGS, INC., a Delaware
corporation ("Purchaser") and XXXXXXX ACQUISITION CORPORATION, a Delaware
corporation ("Newco").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Company, Newco and Purchaser deem
it advisable and in the best interests of their respective stockholders for the
Company to be merged with and into Newco ("Merger") upon the terms and subject
to the conditions set forth herein;
WHEREAS, in furtherance of the Merger, the Board of Directors of Purchaser
and the Company, and the Board of Directors and stockholder of Newco have each
approved the Merger in accordance with the General Corporation Law of the State
of Delaware (the "Delaware Act"); and
WHEREAS, certain stockholders of the Company, identified as such on
Schedule 1 hereto (the "Major Shareholders"), have agreed to be bound by Section
4.1, Article 7 and Section 11.8 hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Defined Terms. As used in this Agreement:
"1934 Act Registration" shall have the meaning ascribed to it in Section
4.1(a) hereof.
"Accounts Payable Certificate" shall have the meaning ascribed to it in
Section 4.7(c) hereof.
"Acquisition Proposal" shall have the meaning ascribed to it in Section
4.15(a) hereof.
"Additional Shares" shall have the meaning ascribed to it in Section 3.1(b)
hereof.
"Adjusted Accounts Payable" shall have the meaning ascribed to it in
Section 4.7(c) hereof.
"Adjusted Merger Shares" means the Closing Merger Shares (or any shares of
Purchaser Common Stock into which such shares are convertible) less any Closing
Merger Shares (or any shares of Purchaser Common Stock into which such shares
are convertible) paid to Purchaser pursuant to (i) the terms of the Indemnity
Escrow Agreement or (ii) pursuant to an underestimation at Closing of Expenses
as provided in Section 4.7(f) hereof.
"Adjustment Market Price" shall have the meaning ascribed to it in Section
3.1(b) hereof.
"Affiliate" shall have the meaning ascribed to it in Paragraphs (c) and (d)
of Rule 145 under the Securities Act.
"Affiliated Group" means any affiliated group within the meaning of Section
1504(a) of the Code or any similar group defined under a similar provision of
state, local or foreign law.
"Agreement" means the Agreement and Plan of Merger, and all Schedules and
Exhibits hereto.
"Assets" means all of the assets of the Company or of Purchaser (as the
context shall require), of every kind and nature.
"Bank" shall have the meaning ascribed to it in Section 8.12 hereof.
"Certificate" and "Certificates" shall have the meanings set forth in
Section 3.4 hereof.
"Certificate of Designations" shall have the meaning ascribed to it in
Section 9.3(e).
"Change of Control Transaction" as to any entity means (i) the acquisition
of the entity by an unaffiliated third party pursuant to a merger, consolidation
or business combination; (ii) the sale of all or a substantial part of the
assets of such entity to an unaffiliated third party; (iii) the occurrence of a
transaction pursuant to which any Person, alone or in combination with any
affiliate (as defined under the Exchange Act), shall become the beneficial owner
(as defined in Rules 13(d) and 13(d)-5 under the Exchange Act) of 50% or more of
any outstanding class of capital stock of such entity having ordinary voting
power in the election of its directors; or (iv) such entity fails to own 100% of
the voting stock of each of its subsidiaries (unless such failure is due to the
merger of any subsidiary with and into the entity).
"Closing" and "Closing Date" shall have the meaning ascribed to such terms
in Section 3.5 hereof.
"Closing Consideration" shall have the meaning ascribed to it in Section
3.1 hereof.
"Closing Consideration Certificate" shall have the meaning ascribed to it
in Section 4.7(d) hereof.
"Closing Merger Shares" shall have the meaning ascribed to it in Section
3.1 hereof.
"Closing Price" shall have the meaning ascribed to it in Section 3.1(a)
hereof.
"COBRA" shall have the meaning ascribed to it in Section 5.18(e) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Exchange Ratio" shall have the meaning ascribed to it in Section
3.1(a) hereof.
"Company Capital Stock" means the Company Common Stock and the Company
Preferred Stock.
"Company Common Shareholders" means the holders of Company Common Stock.
"Company Common Stock" means the Company's Common Stock, $.01 par value per
share.
"Company Designees" shall have the meaning ascribed to it in Section 2.5(d)
hereof.
"Company Employees" shall have the meaning ascribed to it in Section
5.18(a) hereof.
"Company Financial Statements" shall have the meaning ascribed to it in
Section 5.8(a) hereof.
"Company Material Adverse Consequence" means a material adverse effect
upon, or in, or circumstances likely to result in, a material adverse change in
the business, assets, liabilities, operations, results of operations, properties
(including intangible properties), regulatory status or condition (financial or
otherwise) of the Company taken as a whole, the effect of which is equal to or
greater than $500,000.
"Company Material Adverse Effect" means a material adverse effect upon, or
in, or circumstances likely to result in, a material adverse change in (i) the
business, assets, liabilities, operations, results of operations, properties
(including intangible properties), regulatory status or condition (financial or
otherwise) of the Company, taken as a whole, the effect of which is equal to or
greater than $50,000, (ii) the legality, validity, binding effect or
enforceability of this Agreement, or (iii) the ability of the Company to perform
its respective obligations under this Agreement.
"Company Officer/Director Releases" shall have the meaning ascribed to it
in Section 4.17 hereof.
"Company Preferred Shareholders" shall mean the holders of Company
Preferred Stock.
"Company Preferred Stock" means the Company's Series A, B and C Convertible
Redeemable Participating Preferred Stock, each $.01 par value per share.
"Company Protected Parties" shall have the meaning ascribed to it in
Section 7.2 hereof.
"Company Shareholder Approval" means with respect to the Company the
requisite approval by holders of the Company's capital
stock of this Agreement, the Merger and the Certificate of Merger.
"Company Shareholders" shall mean all stockholders of the Company as of the
Effective Time, except as otherwise provided in Section 4.1(k) hereof.
"Company Shareholder Notes" shall have the meaning ascribed to it in
Section 3.1(a) hereof'.
"Company Software" shall have the meaning ascribed to it in Section 5.12(d)
hereof.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement and Nondisclosure Agreement dated as of February 9, 1999, by and
between Purchaser and the Company.
"Customer Contract" shall have the meaning ascribed to it in Section 5.11
hereof.
"Delaware Act" shall have the meaning ascribed to it in the Recitals
hereof.
"Disqualification" shall have the meaning ascribed to it in Section 2.5(d)
hereof.
"DOL" shall have the meaning ascribed to it in Section 5.18(b) hereof.
"Effective Time" shall have the meaning ascribed to it in Section 2.2
hereof.
"Employee Benefit Plan" shall have the meaning ascribed to it in Section
5.18(a) hereof.
"Environmental Laws" shall have the meaning ascribed to it in Section
5.6(c) hereof.
"ERISA" shall have the meaning ascribed to it in Section 5.18(a) hereof.
"ERISA Affiliate" shall have the meaning ascribed to it in Section 5.18(a)
hereof.
"Escrow Shares" shall have the meaning ascribed to it in Section 3.1
hereof.
"Excess Expenses" shall have the meaning ascribed to it in Section 4.7(a)
hereof.
"Excess Payables" shall have the meaning ascribed to it in Section 4.7(c)
hereof.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and all regulations promulgated pursuant thereto.
"Expenses" shall have the meaning ascribed to it in Section 4.7(a) hereof.
"Expenses Certificate" shall have the meaning ascribed to it in Section
4.7(a) hereof.
"Expenses Overage" shall have the meaning ascribed to it in Section 4.7(e)
hereof.
"FAMLA" shall have the meaning ascribed to it in Section 5.18(e) hereof.
"Filing" shall have the meaning ascribed to it in Section 4.1(e) hereof.
"401(k) Plan" shall have the meaning ascribed to it in Section 4.4 hereof.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Going Private Event" shall have the meaning ascribed to it in Section
3.1(d) hereof.
"Good Cause" shall have the meaning ascribed to it in Section 4.1(e)
hereof.
"Governmental Authority" shall include any and all governmental or
quasi-governmental bodies, agencies, bureaus, departments, boards, commissions,
instrumentalities or other entities having or asserting jurisdiction over
Purchaser or the Company, as applicable.
"Hired Employee" shall have the meaning ascribed to it in Section 4.4(b)
hereof.
"Immigration Laws" shall have the meaning ascribed to it in Section 5.13
hereof.
"Indemnity Escrow Agreement" shall have the meaning ascribed to it in
Section 7.5 hereof.
"Investment Letter" shall have the meaning ascribed to it in Section 3.1(e)
hereof.
"IRS" shall have the meaning ascribed to it in Section 5.18(b) hereof.
"knowledge" or "known" means or refers to the actual knowledge of (i) as to
the Purchaser, the president, chief financial officer or general counsel of the
Purchaser and (ii) as to the Company, any officer or director of the Company.
"Licensed Software" shall have the meaning ascribed to such term in Section
5.12(c) hereof.
"Major Shareholders" shall have the meaning ascribed to it in the Recitals
hereof.
"Market Price" shall have the meaning ascribed to it in Section 3.1(b)
hereof.
"Material Contracts" shall have the meaning ascribed to it in Section 5.10
hereof.
"MCS" means MCS, Inc., a Pennsylvania corporation.
"Merger" shall have the meaning ascribed to it in the preamble.
"Mestek Agreement" means that certain Agreement and Plan of Merger dated as
of May 26, 1999, by and among Purchaser, Mestek, Inc. and MCS.
"Mestek Merger" means the merger of MCS with and into Purchaser, pursuant
to the Mestek Agreement.
"Note Consideration" shall have the meaning ascribed to it in Section
3.1(a) hereof.
"Options" shall have the meaning ascribed to it in Section 3.3 hereof.
"Overlap Tax Periods" shall have the meaning ascribed to it in Section
4.8(b) hereof.
"Owned Software" shall have the meaning ascribed to it in Section 5.11
hereof.
"PBGC" shall have the meaning ascribed to it in Section 5.18(b) hereof.
"Person" means an individual, corporation, limited liability company,
limited liability partnership, limited partnership, trust, joint venture,
association or unincorporated organization or a Governmental Authority.
"Pre-Closing Tax Periods" shall have the meaning ascribed to it in Section
4.8(a) hereof.
"Preferred Exchange Ratio" shall have the meaning ascribed to it in Section
3.1(a) hereof.
"Proxy Statement" shall have the meaning ascribed to it in Section 5.24
hereof.
"Purchaser Common Stock" shall mean Purchaser's common stock, $.01 par
value.
"Purchaser Conversion Rights" shall have the meaning ascribed to it in
Section 6.5 hereof.
"Purchaser Material Adverse Consequence" means a material adverse effect
upon, or in, or circumstances likely to result in, a material adverse change in
the business, assets, liabilities, operations, results of operations, properties
(including intangible properties), regulatory status or condition (financial or
otherwise) of the Purchaser taken as a whole, the effect of which is equal to or
greater than $2,500,000 (except, as to Section 4.15(b) only, $1,000,000).
"Purchaser Material Adverse Effect" means a material adverse effect upon,
or in, or circumstances likely to result in, a material adverse change in (i)
the business, assets, liabilities, operations, results of operations, properties
(including intangible properties), regulatory status or condition (financial or
otherwise) of the Purchaser, taken as a whole, the effect of which is equal to
or greater than $250,000, (ii) the legality, validity, binding effect or
enforceability of this Agreement, or (iii) the ability of the Purchaser, to
perform its obligations under this Agreement.
"Purchaser Protected Parties" shall have the meaning ascribed to it in
Section 7.1 hereof.
"Purchaser Series A Preferred Stock" shall mean Purchaser's non-voting
Series A Preferred Stock convertible into Purchaser Common Stock, which stock
shall be subject to the rights and preferences in the Certificate of
Designations attached hereto as Exhibit A.
"Qualified Plans" shall have the meaning ascribed to it in Section 4.4(b)
hereof.
"Registrable Shares" means the Adjusted Merger Shares, the Additional
Shares and shares of Purchaser Common Stock into which the Adjusted Merger
Shares and the Additional Shares (or such greater or smaller number adjusted for
share splits, share dividends, and share recombinations) shall be convertible
once Purchaser's stockholders approve the conversion of the Purchaser Series A
Preferred Stock into Purchaser Common Stock.
"Registration Rights Agreements" shall have the meaning ascribed to it in
Section 4.1(g) hereof.
"Regulation D Exemption" shall have the meaning ascribed to it in Section
3.1(e) hereof.
"Representative" shall have the meaning ascribed to in Section 7.5 hereof.
"Revised Schedules" shall have the meaning ascribed to it in Section 8.7
hereof.
"Rights Holder" shall have the meaning ascribed to it in Section 4.1(k)
hereof.
"Rights to Securities" shall have the meaning ascribed to in Section 5.5
hereof.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Section 4.7 Expenses" shall have the meaning ascribed to it in Section
4.7(d) hereof.
"Section 7.1 Indemnified Claims" shall have the meaning ascribed to it in
Section 7.1 hereof.
"Section 7.2 Indemnified Claims" shall have the meaning ascribed to it in
Section 7.2 hereof.
"Section 7.8 Indemnified Claims" shall have the meaning ascribed to it in
Section 7.8 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and all
regulations promulgated thereunder.
"Securities Filings" shall mean all filings made by Purchaser with the SEC
from and after December 31, 1998 pursuant to the Securities Act and the Exchange
Act.
"Security Holders" shall have the meaning ascribed to it in Section
4.1(e)(ii) hereof.
"Severance Payment Obligations" shall have the meaning ascribed to it in
Section 4.7(b) hereof.
"Surviving Corporation" shall have the meaning ascribed to it in Section
2.1 hereof.
"Tax" or "Taxes" means all taxes, charges, fees, interest, fines,
penalties, additions to tax or other assessments imposed by any Tax Authority,
including without limitation, income, excise, environmental, property, sales,
gross receipts, gains, transfer, occupation, privilege, employment (including
social security and unemployment), use, value added, capital stock or surplus,
franchise, advance corporate, withholding, unemployment, estimated and customs
duties taxes.
"Tax Authority" means any United States federal, foreign, national, state,
county or municipal or other local government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental body exercising any
taxing authority or any other authority exercising tax regulatory authority.
"Tax Return" means any return, declaration, report, claim for refund or
information return filed or to be filed with any Tax Authority in connection
with the determination, assessment, collection or administration of any Tax,
including any schedule or attachment thereto and any amendment thereof.
"Termination Date" means the date on which this Agreement may be terminated
pursuant to Section 10.1 hereof.
"Transaction Documents" shall have the meaning ascribed to such term in
Section 7.1 hereof.
"Transactions" means the transactions contemplated by this Agreement.
"VEBA" shall have the meaning ascribed to it in Section 5.18(g) hereof.
"Warrants" shall have the meaning ascribed to it in Section 3.3 hereof.
ARTICLE 2.
THE MERGER
2.1. The Merger. At the Effective Time (as defined in Section 2.2) and
subject to and upon the terms and conditions of this Agreement and the Delaware
Act, the Company shall be merged into Newco, the separate corporate existence of
the Company shall cease, and Newco shall continue as the surviving corporation.
Newco as the surviving corporation after the Merger shall be governed by the
Delaware Act, and is hereinafter sometimes referred to as the "Surviving
Corporation."
2.2. Effective Time. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Article 8 and Article 9, the parties
hereto shall cause the Merger to be consummated by filing a Certificate of
Merger with the Secretary of State of Delaware in such form as required by, and
executed in accordance with, the relevant provisions of the Delaware Act (the
effective time of the last such filing being the "Effective Time"). At the
Effective Time, Purchaser will deliver to the Company Shareholders in the manner
provided in Article 3 the certificates evidencing the Merger Shares issued in
the Merger.
2.3. Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the Delaware Act. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all property, rights, privileges, powers and franchises of the Company
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company immediately prior to the Effective Time shall become the debts,
liabilities and duties of the Surviving Corporation.
2.4. Subsequent Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurance or any other actions or things are necessary or
desirable to (i) vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or (ii)
otherwise to carry out this Agreement, then the officers and directors of the
Surviving Corporation shall be authorized to (x) execute and deliver, in the
name and on behalf of the Company, all such deeds, bills of sale, assignments
and assurances and (y) to take and do, in the name of and on behalf of each such
corporation or otherwise, all such other actions and things as may be necessary
or desirable, to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out this Agreement.
2.5. Certificate of Incorporation; Bylaws; Directors and Officers.
(a) Unless otherwise determined by Newco and the Company before the
Effective Time, at the Effective Time the Certificate of Incorporation of Newco,
as in effect immediately before the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation.
(b) The Bylaws of Newco, as in effect immediately before the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter amended
as provided by law, the Certificate of Incorporation of the Surviving
Corporation and such Bylaws.
(c) The directors of Newco in office immediately before the Effective Time
shall, by virtue of the approval of this Agreement by the stockholders and
directors of Newco and the Company, be the directors of the Surviving
Corporation, all of whom shall hold their directorships until the election and
qualification of their respective successors or until their tenure is otherwise
terminated by law, or in accordance with the Bylaws of the Surviving
Corporation.
(d) The parties hereto acknowledge and agree that upon consummation of the
Merger, the directors of Purchaser shall appoint two designees of the Company,
as set forth on Schedule 2.5 (the "Company Designees," which term shall include
any successor or replacement designee requested by the Company), to the Board of
Directors of Purchaser, to serve until the next annual or special meeting of
Purchaser's stockholders. For a period of eighteen months after the Effective
Time, (a) Purchaser will use its best efforts to cause the Company Designees to
be named as nominees for election to the Board of Directors in each proxy
statement of Purchaser relating to an annual or a special meeting of
stockholders at which Directors will be elected. Notwithstanding the foregoing,
Purchaser may decline to name a Company Designee as a nominee for any of the
following reasons (each a "Disqualification"):
(i) the Company Designee has been convicted of a felony;
(ii) the Company Designee has been named as a target in an SEC
investigation due to alleged misconduct in connection with the Company
Designee's service as a director of any publicly held company (including
but not limited to Purchaser);
(iii) the SEC has barred the Company Designee from service on the
Board;
(iv) the presence of the Company Designee will cause Purchaser's
Directors and Officers' insurance carrier to decline to provide coverage at
standard rates, unless such coverage may be obtained from the same carrier
and the Company agrees to pay for the additional premiums related to such
Company Designee's service on the Board; or
(v) based on a written opinion from legal counsel, it cannot nominate
the Company Designee without breaching its duties to its stockholders.
2.6. Tax Consequences. It is intended that the Merger shall constitute
a reorganization within the meaning of Section 368(a)(2)(D) of the Code,
and that this Agreement shall constitute a "plan of reorganization" for the
purposes of Section 368 of the Code. The business purpose of the Merger is
to combine the business operations of Purchaser (through its wholly-owned
subsidiary, Newco) and the Company and to provide skilled employees to
Purchaser so as to give Purchaser the xxxxxxxx xxxx and certain software
products necessary to compete in an ever-changing marketplace and to
deliver software and service solutions that meet customers' requirements.
ARTICLE 3.
MERGER CONSIDERATION
3.1. Conversion of Company Capital Stock. At the Effective Time, Purchaser
shall provide the Company Shareholders and holders of Company Shareholder Notes
(as hereafter defined) with an aggregate consideration ("Closing Consideration")
equal in value to $10,000,000 less the amount of Section 4.7 Expenses, payable
in shares of Purchaser Series A Preferred Stock to the Company Preferred
Shareholders and holders of Company Shareholder Notes (collectively, the
"Closing Merger Shares") and payable in cash to the Company Common Shareholders.
Twenty-five percent (25%) of the Closing Merger Shares shall be held in escrow
(the "Escrow Shares") pursuant to the Indemnity Escrow Agreement, and
seventy-five percent (75%) of the Closing Merger Shares shall be issued to the
Company Preferred Shareholders and holders of Company Shareholder Notes at the
Closing. The manner and basis of converting shares of the Company Preferred
Stock and Company Shareholder Notes into Closing Merger Shares and shares of
Company Common Stock into cash shall be as follows:
(a) Except as provided in Section 3.2, (i) all promissory notes between the
Company and the noteholders set forth by name of holder and amount on Schedule
3.1(a) (collectively, the "Company Shareholder Notes") shall be satisfied in
full by delivery to the noteholders of a number of shares of Purchaser Series A
Preferred Stock equal to (x) the outstanding principal and all accrued but
unpaid interest on the Company Shareholder Notes as of the Closing Date (the
"Note Consideration") divided by (y) $3.00 (as adjusted for share splits, share
dividends and share recombinations with respect to Purchaser Common Stock
between the date hereof and the Closing) (the "Closing Price"); (ii) each share
of Company Preferred Stock which shall be outstanding immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into only the right
to receive shares of Purchaser Series A Preferred Stock equal to the preferred
share exchange ratio set forth on Schedule 3.1(a) (the "Preferred Exchange
Ratio"); and (iii) each share of Company Common Stock which shall be outstanding
immediately prior to the Effective Time shall, at the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into only the right to receive cash in an amount equal to the common
share exchange ratio set forth on Schedule 3.1(a) (the "Common Exchange Ratio").
No Company Capital Stock shall be deemed to be outstanding or to have any rights
other than those set forth above in this Section 3.1 after the Effective Time.
(b) (i) Additional merger consideration shall be provided to the
Company Preferred Shareholders and to the holders of Company Shareholder
Notes as follows: If the average per share closing price (as published in
The Wall Street Journal) of Purchaser Common Stock for all trading days
during the period from October 1, 2000 to and including December 31, 2000
(the "Market Price") is not equal to or greater than $3.00 (as adjusted for
share splits, share dividends and share recombinations with respect to
Purchaser Common Stock between the date hereof and December 31, 2000),
then, subject to subparagraphs (ii) and (iii) of this Section 3.1(b) and
Section 3.1(d), Purchaser will issue to the Company Preferred Shareholders
and to the holders of Company Shareholder Notes an aggregate number of
shares of Purchaser Common Stock (the "Additional Shares") determined by
dividing (a) the product obtained by multiplying (i) the number of Adjusted
Merger Shares, by (ii) the excess of (A) $3.00, over (B) the greater of the
Market Price or $1.50 (the amount referred to in this clause (B) being the
"Adjustment Market Price"), by (b) the Adjustment Market Price (all as
adjusted for share splits, share dividends and share recombinations between
the date hereof and December 31, 2000). Any such Additional Shares shall be
subject to all of the same benefits and restrictions described herein in
respect of the Adjusted Merger Shares, including, without limitation, those
described in Section 4.1 hereof; provided however that no adjustment shall
be made in the number of Additional Shares nor shall any additional
payments be required with respect to any dividends or other distributions
made with respect to Purchaser Common Stock prior to the issuance of the
Additional Shares. The Additional Shares shall be allocated in the
following manner: a number of Additional Shares shall be issued to the
holders of Company Shareholder Notes (pro rata in accordance with their
receipt of Closing Merger Shares at the Closing) equal to the product of
(x) a fraction, the numerator of which is the aggregate number of Closing
Merger Shares issued at Closing to the holders of Company Shareholder Notes
(in their capacities as such and including any shares to which such holders
are otherwise entitled which were issued to Representative pursuant to
Section 7.5 of this Agreement), and the denominator of which is the
aggregate number of Closing Merger Shares, multiplied by (y) the number of
Additional Shares. The Additional Shares that are not issued to the holders
of Company Shareholder Notes as provided in the preceding sentence shall be
issued to the holders of Company Preferred Stock pro rata according to the
ratio of the number of Closing Merger Shares issued to a holder of Company
Preferred Shares compared to the aggregate number of Closing Merger Shares
received by all holders of Company Preferred Stock (all in their capacities
as such, and including any shares to which such holders are otherwise
entitled which were issued to Representative pursuant to Section 7.5 of
this Agreement). Each Company Preferred Shareholder's or holder of Company
Shareholder Notes' right to Additional Shares in accordance with the terms
hereof is not voluntarily assignable by any Company Preferred Shareholder
or holder of Company Shareholder Notes. If Additional Shares are required
to be issued pursuant to the terms hereof, Purchaser shall notify its
transfer agent on January 5, 2001 to issue and deliver the Additional
Shares to the Company Preferred Shareholders and the holders of Company
Shareholder Notes.
(ii) Notwithstanding the foregoing, in the sole and absolute
discretion of Purchaser, Purchaser may elect to reduce the number of
Additional Shares required to be issued pursuant to the immediately
preceding paragraph as follows. In lieu of issuing Additional Shares,
Purchaser may make a cash payment in an amount equal to the Market Price of
such Additional Shares not being issued. In no event, however, shall the
amount of cash payments made by Purchaser pursuant to this paragraph exceed
55% of the sum of (a) the product obtained by multiplying (i) the Closing
Merger Shares, by (ii) the Closing Price and (b) the product obtained by
multiplying (x) the number of Additional Shares determined without regard
to any reduction pursuant to this paragraph, by (y) the Market Price. Any
cash payment option elected by Purchaser pursuant to this paragraph shall
be shared among, and reduce the number of Additional Shares to be issued
to, the holders of Company Shareholder Notes and the Company Preferred
Shareholders, pro rata in accordance with their relative rights to receive
Additional Shares.
(iii) Notwithstanding any provision in this Section 3.1(b) to the
contrary, in the event that Purchaser consummates a Change of Control
Transaction (other than pursuant to the Mestek Agreement) between the date
hereof and December 31, 2000, the Company Preferred Shareholders and
holders of Company Shareholder Notes shall have no right to receive
Additional Shares or additional cash as provided in subparagraphs (i) and
(ii) above provided that (x) the per share consideration (in cash or
securities) for Purchaser Common Stock (or Purchaser Series A Preferred
Stock, if the Purchaser Series A Preferred Stock has not been converted
into Purchaser Common Stock) received in such Change of Control
Consideration is equal to at least $3.00 (as adjusted for share splits,
share dividends and share recombinations with respect to Purchaser Common
Stock between the date hereof and the closing date of the Change of Control
Transaction), or (y) Purchaser (or its successor-in-interest pursuant to a
Change of Control Transaction), shall have redeemed the Purchaser Common
Stock (or Purchaser Series A Preferred Stock, if the Purchaser Series A
Preferred Stock has not been converted into Purchaser Common Stock) from
the Company Preferred Shareholders and holders of Company Shareholder Notes
for cash in an amount equal to at least $3.00 per share (as adjusted for
share splits, share dividends and share recombinations with respect to
Purchaser Common Stock between the date hereof and the closing date of the
Change of Control Transaction).
(c) Each share of Company Capital Stock, if any, held in the treasury of
the Company shall automatically be canceled and extinguished without any
conversion thereof and no payment will be made with respect thereto.
(d) In the event that Purchaser consummates a going private transaction
("Going Private Event") at any time between the Closing Date and December 31,
2000, each holder of Adjusted Merger Shares shall have a thirty (30) day period
from the closing of the Going Private Event to notify Purchaser of its election
to require Purchaser to redeem for cash the Adjusted Merger Shares held by such
holder based on a valuation of the Purchaser Common Stock or Purchaser Series A
Preferred Stock in an appraisal conducted in accordance with the 1934 Act
requirements with respect to self-tenders, including Rule 13e-4. Purchaser shall
pay the redemption proceeds to the Company Preferred Shareholders and holders of
Company Shareholder Notes within thirty (30) days of such notification. The cash
proceeds from the redemption of Adjusted Merger Shares that constitute Escrow
Shares shall remain in escrow pursuant to the terms of the Indemnity Escrow
Agreement. All interest earned on such escrowed cash shall accrue for the
benefit of the Company Preferred Shareholders and holders of Company Shareholder
Notes.
(e) Notwithstanding the foregoing, Purchaser may at its option pay cash in
lieu of Closing Merger Shares to any Company Preferred Shareholder and any
holder of Company Shareholder Notes that fails to complete, sign and deliver an
Investment Letter and Investor Questionnaire in the Form of Exhibit 3.1(e)
("Investment Letter"), in a manner reasonably acceptable to Purchaser, by the
second business day prior to the Closing Date. The amount of cash paid to any
such Company Preferred Shareholder and any holder of Company Shareholder Notes
shall be equal to the Closing Price multiplied by the number of shares of
Purchaser Series A Preferred Stock that such Company Shareholder would have
otherwise received pursuant to the Preferred Exchange Ratio as provided above.
The parties hereto acknowledge that the offering of the Closing Merger Shares is
intended to qualify for an exemption from registration under Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated thereunder ("Regulation
D Exemption"). Purchaser may at its option reject any Investment Letter that
Purchaser reasonably believes may cause the offering of the Closing Merger
Shares to fail to qualify for the Regulation D Exemption.
3.2. Fractional Shares. No scrip or fractional shares of Purchaser Common
Stock shall be issued in the Merger, nor will any outstanding fractional share
interest entitle the owner thereof to vote, to receive dividends or to exercise
any other right of a stockholder of Purchaser. The Company Preferred
Shareholders and the holders of Company Shareholder Notes shall be entitled, at
the Effective Time, to recover cash in lieu of such fractional shares, with the
cash amount due to be computed based on the Closing Market Price with respect to
Adjusted Merger Shares and based on the Market Price with respect to Additional
Shares.
3.3. Stock Options and Warrants. All stock options of the Company (the
"Options") outstanding at the Effective Time, as identified on Schedule 3.3,
shall remain outstanding following the Effective Time other than those
terminated pursuant to Section 4.16 hereof. All warrants of the Company
("Warrants") outstanding at the Effective Time, as identified on Schedule 3.3,
shall be cancelled prior to the Effective Time.
3.4. Delivery of Closing Merger Shares. At the Closing (as defined herein),
the Company Shareholders' certificates that immediately prior to the Effective
Time represented all of the outstanding shares of Company Capital Stock
("Certificate" or "Certificates") and the Company Shareholder Notes shall be
cancelled, and the Purchaser shall notify its transfer agent to promptly issue
the appropriate number of Closing Merger Shares as calculated pursuant to
Section 3.1 hereof.
3.5. Closing. The closing of the Transactions (the "Closing") shall take
place on or before the fifth (5th) business day after compliance or waiver of
the terms, conditions and contingencies contained herein at the offices of
Purchaser's counsel in Atlanta, Georgia, or another mutually agreed upon
location, or such other date as is mutually agreed upon by the parties hereto
(such date to be herein referred to as the "Closing Date"). Except as otherwise
provided in this Agreement, all computations, adjustments, and transfers for the
purposes hereof shall be effective as of the close of business on the Closing
Date. Each of the parties will take all lawful actions as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible subject to
the satisfaction of the closing conditions set forth in Articles 8 and 9.
ARTICLE 4.
ADDITIONAL COVENANTS
4.1. Registration Rights.
(a) At any time between January 1, 2001 until December 31, 2002, upon
request by Rights Holders (as defined in Section 4.1(k)) holding an aggregate of
at least 40% of the Registrable Shares, Purchaser will use its best efforts to
file, within 45 days of such request, a registration statement with the SEC
(utilizing Form S-3 or a successor form thereto and Rule 415 to the extent
available or Form S-1 if the foregoing are not available) to register the
Registrable Shares owned by the Rights Holders. The Rights Holders that did not
initiate the request for registration shall receive notice and the right to
participate in the registration under the procedures provided in Section 4.1(b)
hereof. Notwithstanding the foregoing, Purchaser shall not be required to file
more than one such registration statement (excluding any registration statement
which is delayed pursuant to clause (e) below and through which the Rights
Holders are unable to register eighty percent (80%) or more of the amount of
Registrable Shares that were originally requested to be registered in such
registration statement), and no such filing shall be made after de-registration
of the Purchaser Common Stock registration under the Securities Exchange Act of
1934 ("1934 Act Registration") as a result of a Going Private Event.
(b) If Purchaser at any time from the Closing Date until December 31, 2002
proposes to register an offering of its securities under the Securities Act,
either for its own account or for the account of or at the request of one or
more Persons holding securities of Purchaser, Purchaser will:
(i) give written notice thereof to the Rights Holders (which shall
include a list of the jurisdictions in which Purchaser intends to attempt
to qualify such securities under the applicable blue sky or other state
securities laws) within 10 days of its receipt of a request from one or
more Persons holding securities of Purchaser to register securities, or
from its decision to effect a registration of securities for its own
account, whichever first occurs; and
(ii) include in such registration and in any underwriting involved
therein, all the Registrable Shares specified in a written request by the
Rights Holders made within 30 days after receipt of such written notice
from Purchaser in accordance with and in the manner described in Section
4.1(g).
(c) Without regard to whether the registration statement relating to the
proposed sale of the Registrable Shares is made effective or the proposed sale
of such shares is carried out, Purchaser shall pay the fees and expenses in
connection with any such registration including, without limitation, legal,
accounting and printing fees and expenses in connection with such registration
statements, the registration filing and examination fees paid under the
Securities Act and state securities laws and the filing fees paid to the
National Association of Securities Dealers, Inc. Notwithstanding the foregoing,
the Rights Holders shall be responsible for the payment of underwriting
discounts and commission, if any, applicable transfer taxes and fees and charges
of any attorneys or other advisers retained by the Rights Holders.
(d) If and whenever pursuant to the provisions of this Section 4.1
Purchaser effects registration of Registrable Shares under the Securities Act of
1933 and state securities laws, Purchaser shall:
(i) Prepare and file with the SEC a registration statement with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for a period not to
exceed two years after the filing (but which period shall be extended by
the duration of any delay periods under clause (e) below);
(ii) Use its best efforts to register or qualify the securities
covered by such registration statement under the securities or blue sky
laws of such jurisdictions as the Rights Holders shall reasonably request,
and do any and all other acts and things which may be necessary or
advisable (in the reasonable opinion of a majority of the Rights Holders)
to enable the Rights Holders to consummate the disposition thereof;
provided, however, that in no event shall Purchaser be obligated to qualify
to do business in any jurisdiction where it is not now so qualified or to
take any action which would subject it to the service of process in suits
other than those arising out of the offer or sale of the securities covered
by such registration statement in any jurisdictions where it is not now so
subject.
(e) Anything in this Section 4.1 to the contrary notwithstanding:
(i) Purchaser shall not be obligated pursuant to Section 4.1(a) or
Section 4.1(b) to effect any registration with respect to any Registrable
Shares that have been sold by the Rights Holders pursuant to Rule 144.
(ii) Purchaser may defer the filing ("Filing") of any registration
statement or suspend the use of a prospectus under a currently effective
registration statement under Section 4.1(a) at its discretion for "Good
Cause." "Good Cause" means either if (1) Purchaser is engaged in active
negotiations with respect to the acquisition of a "significant subsidiary"
as defined in Regulation S-X promulgated by the SEC under the Exchange Act
and the Securities Act which would in the opinion of counsel for Purchaser
be required to be disclosed in the Filing; or (2) in the opinion of counsel
for Purchaser, the Filing would require the inclusion therein of certified
financial statements other than those in respect of Purchaser's most
recently ended full fiscal year and any preceding full fiscal year, and
Purchaser may then, at its option, delay the imposition of its obligations
pursuant to Section 4.1(a) hereof or suspend the use of the prospectus
until the earlier of (A) the conclusion or termination of such
negotiations, or the date of availability of such certified financial
statements, whichever is applicable; (B) 60 days from the date of the
registration request; or (C) or in the case of a suspension of the
prospectus, 60 days from the date of notice of the suspension.
In the event Purchaser has deferred a requested Filing, pursuant to the
preceding paragraph, such deferral period shall end if Purchaser registers
shares for resale by another stockholder of Purchaser. In the event Purchaser
undertakes an underwritten public offering to issue Purchaser securities for
cash during any period in which a requested Filing has been deferred or if the
registration of which Purchaser gives notice under Section 4.1(b)(i) is for an
underwritten public offering to issue Purchaser securities for cash, Purchaser
shall include the Registrable Securities in such underwritten offering subject
to (A) the right of the managing underwriters to object to including such
shares, (B) the provisions in Section 4.1(g) describing the relative priorities
of any currently existing piggyback rights, and (C) the condition that the
Rights Holders shall cooperate in the registration process in all material
respects, including execution by the Rights Holders of the underwriting
agreement agreed to by Purchaser and the underwriters.
If the managing underwriter elects to limit the number or amount of
securities to be included in any registration referenced in the preceding
paragraph or in Section 4.1(b)(ii), all Persons holding securities of the
Purchaser (including the Rights Holders) who hold registration rights and who
have requested registration (collectively, the "Security Holders") shall
participate in the underwritten public offering pro rata based upon the ratio of
the total number or amount of securities to be offered by the total number or
amount of securities held by each Security Holder (including the number or
amount of securities which each such Security Holder may then be entitled to
receive upon the exercise of any option or warrant, or the exchange or
conversion of any security, held by such Security Holder, subject to the
provisions of Section 4.1(g)). If any such Security Holder would thus be
entitled to include more securities than such Security Holder requested to be
registered, the excess shall be allocated among the other Security Holders pro
rata in a manner similar to that described in the previous sentence, subject to
the provisions of Section 4.1(g).
(iii) Purchaser may amend any registration statement to withdraw
registration of the Rights Holders' Registrable Shares if the Rights
Holders shall fail or refuse to cooperate in full and in a timely manner
with all reasonable requests relating to such registration and the public
offering generally made by Purchaser, the underwriters (if any), their
respective counsel and Purchaser's auditors.
(f) (i) Notwithstanding anything contained to the contrary in, and in
addition to any indemnification provisions contained herein or in the
Transaction Documents, with respect to any registration statement relating
to any Registrable Shares sold by the Rights Holders, the Rights Holders
will indemnify Purchaser and each person, if any, who controls Purchaser
within the meaning of the Securities Act, in writing, in form and substance
acceptable to counsel for Purchaser, against any and all expenses, claims,
damages or liabilities to which Purchaser may become subject under the
Securities Act, Exchange Act, any applicable state securities laws, or
otherwise, insofar as such expenses, claims, damages or liabilities arise
out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any preliminary prospectus, registration
statement, final prospectus or any amendment or supplement thereto, or any
filing made pursuant to the Exchange Act, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make statements contained therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made therein in reliance upon and in conformity with written
information furnished to Purchaser by the Rights Holders expressly for use
in the preparation thereof.
(ii) With respect to any registration statement relating to any
Registrable Shares held by the Rights Holders, Purchaser will indemnify the
Rights Holders, each underwriter of the Registrable Shares, and each
person, if any, who controls the Rights Holders or any such underwriter
within the meaning of the Securities Act, against all expenses, claims,
damages or liabilities to which the Rights Holders, any such underwriter,
or any such controlling person may become subject, under the Securities
Act, the Exchange Act, any applicable state securities law, or otherwise,
insofar as such expenses, claims, damages or liabilities arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in any preliminary prospectus, registration
statement, final prospectus or any amendment or supplement thereto, or any
filing under the Exchange Act, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements contained therein not
misleading; provided, however, that (x) Purchaser shall not be liable to
the Rights Holders or to any controlling person of the Rights Holders in
any such case to the extent that such expenses, claims, damages or
liabilities arise out of or are based upon any untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance
upon and in conformity with written information furnished to Purchaser by
the Rights Holders expressly for use in the preparation thereof; and (y)
Purchaser shall not be liable to any underwriter or any controlling person
of such underwriter in any such case to the extent that such expenses,
claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information
furnished to Purchaser by such underwriter expressly for use in the
preparation thereof.
(g) The parties hereto acknowledge that, subject to the last sentence of
this paragraph, the rights to registration of the Rights Holders contained
herein shall be equal in priority on a pro rata basis (in accordance with
relative share ownership) with the rights of (i) holders under those certain
Registration Rights Agreements ("Registration Rights Agreements") dated October
6, 1996 by and among InfoMed Holdings, Inc. (as predecessor in interest to the
Purchaser) and certain shareholders of Purchaser named therein, copies of which
have been provided to the Rights Holders (subject to the remaining provisions of
this paragraph (g)), and (ii) the rights of Mestek, Inc. pursuant to Section 4.1
of the Mestek Agreement (a copy of which has been provided to the Rights
Holders). Purchaser shall cause Xxxxxxx X. X'Xxxxxxx, O'Xxxxxxx Xxxxx, Inc. and
Rowan Nominees Limited to waive their rights to priority under Section 2(k) of
their respective Registration Rights Agreements. Purchaser shall use reasonable
efforts (not including the payment of funds) to cause certain other holders
under the Registration Rights Agreements to waive their right to priority under
Section 2(k) thereof. Notwithstanding the foregoing, to the extent any such
holders do not execute such a waiver, their piggyback registration rights shall
be prior to those of Mestek and the Rights Holders.
(h) Purchaser shall as promptly as practicable prepare and file with the
SEC such amendments and supplements to any registration statement and prospectus
used pursuant to or in connection with this Section 4.1 as may be necessary to
keep such registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement or for such shorter
period as may be required herein.
(i) Purchaser shall furnish to the Rights Holders such number of conformed
copies of its registration statement and of each such amendment and supplement
thereto (in each case including all exhibits, such number of copies of the
prospectus comprised in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the requirements of
the Securities Act, and such other related documents) as the Rights Holders may
reasonably request in order to facilitate the disposition of the Registrable
Shares to be registered.
(j) For purposes of this Section 4.1,.all notices to the Rights Holders
shall be delivered in accordance with the provisions of Section 11.5 hereof to
the addresses indicated on Schedule 4.1(j).
(k) For purposes of this Section 4.1, "Rights Holder" shall mean any
Company Shareholder receiving shares of Purchaser Series A Preferred Stock
pursuant to the Merger.
4.2. Stockholders' Meeting. The Company, acting through its Board of
Directors, shall duly call, give notice of, convene and hold a meeting of its
stockholders and submit this Agreement and the Merger and any related matters,
as appropriate, to a vote of the Company's stockholders as soon as practicable
for the purpose of considering and taking action upon this Agreement and any
such related matters, or shall obtain a written consent of the stockholders in
accordance with the Delaware Act, and shall use its reasonable best efforts to
obtain the necessary approval of the Merger by its stockholders.
4.3. Best Efforts to List Shares and Maintain S-3 and NASDAQ NMS Status
Purchaser shall use best efforts to ensure that, upon the conversion of the
Purchaser Series A Preferred Stock into Registrable Shares, the Registrable
Shares will be approved for trading on the NASDAQ National Market System subject
to official notice of issuance. Unless Purchaser's Board of Directors determines
it is in the best interest of the Purchaser to terminate the registration of
Purchaser Common Stock under the 1934 Act Registration, upon the conversion of
the Purchaser Series A Preferred Stock into Registrable Shares, Purchaser shall
use its best efforts to ensure that it shall remain eligible to (i) register the
Registrable Shares on Form S-3 under the Securities Act or any successor form
thereof, and (ii) maintain approval for trading of the Registrable Shares on the
NASDAQ National Market System.
4.4. Termination of 401(k) Plan; Employee Matters.
(a) Prior to the Closing, the Company shall be solely responsible for
funding any and all contributions, both matching and discretionary, for any
fiscal year including fiscal year 1999 under the Company 401(k) Plan (the
"401(k) Plan") and as soon as practical thereafter, and in no event later than
the time prescribed by law, the Company will be responsible for allocating the
contributions among participants of the 401(k) Plan. Prior to the Closing Date,
the Board of Directors of the Company shall have authorized by appropriate
action (i) a change in the eligibility date for all 1999 contributions under the
401(k) Plan to a date immediately prior to the Closing Date, (ii) the amendment
of the 401(k) Plan in order to comply with applicable law and to provide for its
subsequent termination no later than the date immediately prior to the Closing
Date, and (iii) appropriate officers of the Company to execute any documents or
filings related to the 401(k) Plan, and shall have completed and adopted the
amendment of the 401(k) Plan no later than the date immediately prior to the
Closing Date. The Company shall deliver to Purchaser or its counsel drafts of
the aforementioned Board resolutions and amendment terminating the 401(k) Plan
at least two days prior to their adoption and shall make any changes reasonably
requested by Purchaser. The Company (or, if after the Effective Time, Purchaser)
shall timely notify all participants of the termination of the 401(k) Plan. As
soon as practical thereafter, and in any event no later than the time prescribed
by law, the Company (or, if after the Effective Time, Purchaser) shall submit
the termination of the 401(k) Plan to the IRS for a determination as to the
continued qualification of the 401(k) Plan under Sections 401(a) and 401(k) of
the Code upon the termination of the 401(k) Plan. All legal, accounting and tax
costs and other expenses incurred in terminating the 401(k) Plan shall be deemed
Expenses for purposes of Section 4.7 hereof.
(b) Each employee of the Company hired by Purchaser (a "Hired Employee")
shall be entitled, to the extent permitted by applicable law, to participate in
all employee benefits plans that are intended to be qualified under Section
401(a) of the Code (for purposes of this section, "Qualified Plans") of
Purchaser to the same extent as Purchaser's employees. To the extent permitted
by applicable law, each Hired Employee's service with the Company shall be
recognized for purposes of vesting and eligibility to participate under
Purchaser's Qualified Plans.
(c) Purchaser shall adopt, as of the Closing Date, each "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA and as listed on Schedule
5.18) sponsored by the Company, and shall provide that each such plan(s) shall
remain in effect at least until all obligations under any employment or
severance agreement regarding continuation of benefits under each such plan(s)
have been satisfied.
4.5. Company Financial Statements. By no later than July 26, 1999, the
Company will deliver to Purchaser an unaudited balance sheet for the Company as
of June 30, 1999 and the Company's related statements of income, stockholder's
equity and cash flows for the period from January 1, 1999 through June 30, 1999.
4.6. Conduct of Business by the Company, Purchaser and Newco Pending
Merger.
(a) Except as set forth on Schedule 4.6, the Company covenants and agrees
that, unless Purchaser shall otherwise consent in writing or except as otherwise
set forth herein, between the date hereof and the Closing, the business of the
Company shall be conducted only in, and the Company shall not take any action
except in, the ordinary course of business and in a manner consistent with past
practice; and the Company will use its best efforts to preserve intact its
business organization, to keep available the services of its present officers,
employees and consultants and to preserve its present relationships with
customers, suppliers and other persons with which they have significant business
relations; provided, however, that nothing herein shall obligate the Company to
pay any additional compensation to any such persons. The Company covenants that,
between the date hereof and the Closing, it will not, directly or indirectly, do
any of the following without the prior written consent of the Purchaser:
(i) except as set forth on Schedule 4.6, (1) issue, sell, pledge,
dispose of, encumber, authorize, or propose the issuance, sale, pledge,
disposition, encumbrance or authorization of any shares of its capital
stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of its capital stock; (2)
amend or propose to amend its Certificate of Incorporation or Bylaws; (3)
split, combine or reclassify any outstanding share of its capital stock, or
declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise with respect to its capital stock; (4) redeem,
purchase or otherwise acquire or offer to redeem, purchase or otherwise
acquire any shares of its capital stock; or (5) authorize or propose or
enter into any contract, agreement, commitment or arrangement with respect
to any of the matters set forth in this Section 4.6(a)(i);
(ii) (1) acquire (by merger, consolidation, or acquisition of stock or
assets) directly or indirectly, any Person or any business owned by such
Person; (2) except in the ordinary course of business and in a manner
consistent with past practices, sell, pledge, dispose of, or encumber or
authorize or propose the sale, pledge, disposition or encumbrance of any of
its assets; (3) enter into any material contract or agreement, except in
the ordinary course of business; (4) authorize any capital expenditure in
excess of $10,000 or outside the ordinary course of business; or (5) enter
into or amend any contract, agreement, commitment or arrangement with
respect to any of the matters prohibited by this Section 4.6(a)(ii);
(iii) except as otherwise provided in this Agreement, take any action
other than in the ordinary course of business and in a manner consistent
with past practice (none of which actions shall be unreasonable) with
respect to increasing compensation of any officer, director, stockholder or
employee or with respect to the grant of any severance or termination pay
or benefits (otherwise than pursuant to policies or agreements in effect on
the date hereof or policies or agreements intended on the date hereof to be
in effect on or prior to the Closing Date, which are disclosed to the other
parties hereto prior to the date hereof) or with respect to any increase of
benefits payable under its severance or termination pay policies in effect
on the date hereof (other than any increase disclosed to the other parties
hereto prior to the date hereof);
(iv) make any payments except in the ordinary course of business and
in amounts and in a manner consistent with past practice (none of which
payments shall be unreasonable or unusual), under any employee benefit plan
(other than any employee benefit plan disclosed to the parties hereto prior
to the date hereof) or otherwise to any of its employees, independent
contractors or consultants, enter into any employee benefit plan, any
employment or consulting agreement, grant or establish any new awards under
any such existing employee benefit plan or agreement, or adopt or otherwise
amend any of the foregoing, except as otherwise required by applicable law;
(v) except in the ordinary course of business or as permitted herein,
take any action to incur or increase prior to Closing any indebtedness for
borrowed money from banks or other financial institutions or cancel,
without payment in full, any notes, loans or receivables except in the
ordinary course of business;
(vi) directly or indirectly loan or advance monies to any Person under
any circumstance whatsoever except for credit transactions with customers
on terms consistent with past practices;
(vii) fail to pay, perform or discharge as they become due any of its
liabilities or obligations, the failure of which to pay, perform or
discharge would have a Company Material Adverse Effect; or
(viii) do any act or omit to do any act which might reasonably be
expected to cause a breach of any contract, commitment or obligation.
(b) Purchaser covenants and agrees that, unless the Company shall
otherwise consent in writing or except as otherwise set forth herein,
between the date hereof and the Closing it will not, directly or
indirectly: (i) issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or
authorization of any shares of its capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of its capital stock (except for shares to be issued
upon the exercise of options or warrants outstanding on the date hereof or
for the issuance of options to purchase up to an additional 200,000 shares
of Purchaser Common Stock, and except for the issuance of securities
pursuant to Purchaser's obligations under the Mestek Agreement); (ii) amend
or propose to amend its Certificate of Incorporation or Bylaws (except as
may be necessary to comply with Purchaser's obligations under this
Agreement and the Mestek Agreement); (iii) split, combine or reclassify any
outstanding share of its capital stock, or declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise with
respect to its capital stock; or (iv) redeem, purchase or otherwise acquire
or offer to redeem, purchase or otherwise acquire any shares of its capital
stock. Notwithstanding any provision in this Section 4.6(b) to the
contrary, Purchaser may consummate a Change of Control Transaction in
accordance with the terms set forth in Section 3.1(b)(iii) without the
Company's consent.
4.7. Expenses; Other Reductions to Closing Consideration.
(a) All of the expenses incurred by Purchaser in connection with the
authorization, preparation, execution and performance of this Agreement and
other agreements referred to herein, including, without limitation, all fees and
expenses of agents, representatives, brokers, counsel and accountants for
Purchaser, shall be paid by Purchaser. All expenses incurred by the Company
(including expenses incurred after the Closing on behalf of the Company,
including without limitation, with respect to terminating the Company's 401(k)
Plan) in connection with the authorization, preparation, execution and
performance of this Agreement on behalf of the Company and the other agreements
referred to herein, including without limitation, all fees and expenses of
advisors, agents, representatives, brokers, counsel and accountants
(collectively, the "Expenses"), shall be paid by the Company if the Merger is
not consummated. Reasonable costs incurred by the Company or Purchaser in
connection with any Company Shareholder that exercises appraisal rights under
the Delaware Act with respect to the Merger shall also constitute Expenses. If
the Merger is consummated, any Expenses incurred by the Company and paid or
payable by the Company or Purchaser in connection with the Merger in excess of
$87,500 (such amount in excess of $87,500 shall be referred to herein as the
"Excess Expenses") shall reduce the Closing Consideration on a dollar-for-dollar
basis. In no event shall the Company or Purchaser pay any expenses of the
Company Shareholders or the Major Shareholders in connection with the
authorization, preparation, execution and performance of this Agreement and the
other agreements referred to herein, including without limitation, all fees and
expenses of advisors, agents, representatives, brokers, counsel and accountants
of the Company Shareholders or Major Shareholders. At Closing, the Company shall
deliver a certificate setting forth in reasonable detail an estimate of the
aggregate amount of Expenses incurred by the Company through the Closing Date
(the "Expenses Certificate").
(b) Purchaser or the Company shall satisfy certain contractual change of
control or severance obligations to J. Xxxx Xxxxx, Xxxxxx Xxxxxx, Xxxx Xxxxxx,
Xxxxxxx X. Xxxx, Xxxxx Xxxxxxx and Xxxxxx Xxxxxxxx owed in connection with the
Merger. The estimated cash value of those obligations (the "Severance Payment
Obligations") is set forth on Schedule 4.7(b). If the Merger is consummated, the
Closing Consideration shall be reduced by an amount equal to the Severance
Payment Obligations. Notwithstanding the foregoing, if any Severance Payment
Obligations are not paid or provided by Purchaser by December 31, 2000, the cash
value of such Severance Payment Obligations shall constitute Section 7.2
Indemnified Claims that are not subject to the limitations in Section 7.6(b)
hereof.
(c) Purchaser and Company shall execute and deliver at Closing a
certificate ("Accounts Payable Certificate") setting forth the Company's
accounts payable as of the Closing Date, net of any cash on hand and accounts
payable incurred as a result of Company sales contracts or orders executed after
June 30, 1999 (the "Adjusted Accounts Payable"). In the event that the Merger is
consummated and the Adjusted Accounts Payable exceeds $350,000 (such amount in
excess of $350,000 shall be referred to herein as the "Excess Payables"), the
Closing Consideration shall be reduced by an amount equal to the Excess
Payables.
(d) Purchaser and the Company shall execute and deliver at Closing a
certificate setting forth in reasonable detail the Closing Consideration
calculated pursuant to Section 3.1 and this Section 4.7 ("Closing Consideration
Certificate"). The reductions to the Closing Consideration as described in
Section 4.7(a) through 4.7(c) are collectively referred to as the "Section 4.7
Expenses".
(e) In the event that, as of the business day ending six (6) months after
the Closing Date (and assuming that the Merger is consummated) (or such earlier
date if a Change of Control Transaction with respect to Purchaser other than
pursuant to the Mestek Agreement is consummated prior thereto), the aggregate
amount of Expenses set forth on the Expenses Certificate is determined (based on
agreement between Representative and Purchaser after Purchaser's delivery of a
certificate to Representative and the Major Shareholders) to be less than the
actual amount of Expenses (the difference being defined as an "Expenses
Overage"), the Expenses Overage shall be paid to Purchaser as a claim against
the Escrow Shares. Purchaser's claim in Escrow Shares shall equal the Expenses
Overage divided by the Closing Price, rounded to the nearest whole Escrow Share.
Any dispute between Purchaser and the Representative relating to the Expenses
Certificate shall be resolved pursuant to the provisions of Section 11.8 hereof.
4.8. Tax Matters.
(a) Purchaser shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns for the Company for all periods ending on or prior to the
Closing Date which are required to be filed after the Closing Date ("Pre-Closing
Tax Periods").
(b) The parties anticipate that the Merger will terminate all Tax periods
for the Company. With respect, however, to any Tax periods of the Company which
are determined to begin before the Closing Date and end after the Closing Date
("Overlap Tax Periods"), Purchaser shall prepare or cause to be prepared and
file or cause to be filed any Tax Returns of the Company. The portion of Tax for
any Overlap Tax Period which relates to the portion of such Tax period ending on
the Closing Date shall (i) in the case of any Taxes other than Taxes based upon
or related to income or receipts, be deemed to be in the amount of such Tax for
the entire Tax period multiplied by a fraction the numerator of which is the
number of days in the Tax period ending on the Closing Date and the denominator
of which is the number of days in the entire Tax period, and (ii) in the case of
any Tax based upon or related to income or receipts, shall be deemed equal to
the amount which would be payable if the relevant Tax period ended on the
Closing Date.
(c) For federal income Tax purposes, the parties intend that the Merger
shall be treated as a reorganization within the meaning of Section 368(a)(2)(D)
of the Code.
4.9. Notification of Certain Matters.
(a) Purchaser shall give prompt notice to the Company of the following:
(i) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (A) any representation,
warranty or agreement of Purchaser contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the date hereof to
the Closing, or (B) directly or indirectly, any Purchaser Material Adverse
Effect; or
(ii) any material failure of Purchaser, any officer, director,
employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
(b) The Company shall give prompt notice to Purchaser of the following:
(i) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (A) any representation or
warranty of the Company contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing, or (B) directly or indirectly, any Company Material Adverse
Effect; or
(ii) Any material failure of the Company, or any officer, director,
employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
(c) Notwithstanding the foregoing, the delivery of any notice pursuant to
this Section shall not waive or release the Company or Purchaser from its
covenants, representations or warranties under this Agreement.
4.10. Public Announcements.
(a) Except for and to the extent of any public announcement or disclosures
relating to the Transactions previously made by any of the parties hereto, as
may be required by law or stock exchange requirements, or as provided in this
Section, the Company and the Purchaser agree that until the consummation of the
Transactions, each of such parties will not, and will direct its directors,
officers, employees, representatives and agents who have knowledge of the
Transactions not to, disclose to any Person who is not a participant in
discussions concerning the Transactions (other than Persons whose consent is
required to be obtained hereunder), any of the terms, conditions or other facts
with respect to the Transactions.
(b) Prior to the Effective Time, the Company shall obtain the prior oral or
written consent of Purchaser, and Purchaser shall obtain the prior oral or
written consent of the Company, before issuing any press release or otherwise
making any public statements with respect to the Transactions and shall not
issue any such press release or make any such public statement prior to
receiving such consent, except as may be, in the good faith belief of the party
issuing such press release, required by law or stock exchange requirements. The
parties acknowledge and agree that Purchaser and Company expect to issue press
releases with respect to the Transactions immediately after execution of this
Agreement, as well as after the Closing
. 4.11. Reorganization. After the Closing, Purchaser shall use its
commercially reasonable best efforts to protect the parties' intended tax
treatment of the Merger as a reorganization, as provided in Section 2.6 hereof.
Purchaser will continue after the Closing the historical business operation of
the Company pursuant to Regulation 1.368-1(d) of the Code.
4.12. Access and Inspection. On reasonable notice, each party hereto shall
provide the other party (or parties) full access during normal business hours
from and after the date hereof until the Closing to all of the books and records
of such party as they relate to the business and affairs of Purchaser or the
Company as may be requested, in each case for the purpose of making such
continuing investigation of such party and its respective predecessors as it may
desire. Each party shall cause appropriate personnel to assist the other party
(or parties) in such continuing investigation and shall cause personnel,
counsel, accountants and other non-employee representatives to be reasonably
available to such party (or parties) in connection with its continuing
investigation.
4.13. Ongoing Business. Prior to Closing, the Company will not engage in
any activities outside the ordinary course of business, except as contemplated
in this Agreement.
4.14. Certain Filings, Consents and Arrangements. Subject to compliance
with applicable law, Purchaser and the Company will (a) cooperate with one
another (i) in promptly determining whether in connection with this Agreement
any filings, including qualifications to conduct business as a foreign
corporation, are required to be made with, or consents, approvals, permits or
authorizations are required to be obtained from, any Governmental Authority
under any federal, state or foreign law or regulation or from any other third
party under any Material Contract (as defined herein) and (ii) in promptly
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such consents, approvals, permits or
authorizations and (b) provide one another with copies of all filings made by
such party with any Governmental Authority in connection with this Agreement.
4.15. No Solicitation.
(a) In consideration of the expenses to be incurred by Purchaser in
negotiating toward this Agreement and in conducting its due diligence
investigation, the Company shall not, directly or indirectly, through any
officer, director, employee, financial advisor, representative or agent of such
party, (i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer for
a merger, consolidation, business combination, sale or transfer of substantial
assets, sale of any shares of capital stock (including without limitation by way
of a tender offer), or similar transaction involving it or any of its
subsidiaries, other than the Transactions (any of the foregoing inquiries or
proposals being referred to in this Agreement as an "Acquisition Proposal"), or
(ii) engage in negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Acquisition Proposal, or
agree to or recommend any Acquisition Proposal; PROVIDED, HOWEVER, that nothing
contained in this Section 4.15(a) shall prevent the Company or its Board of
Directors, from (A) furnishing non-public information, or entering into
discussions or negotiations, with, any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or entity or
agreeing to or recommending an unsolicited bona fide written Acquisition
Proposal to its stockholders, if and only to the extent that (1) the Board of
Directors of the Company believes in good faith (after consultation with its
advisors) that such Acquisition Proposal is reasonably capable of being
completed on the terms proposed and, after taking into account the strategic
benefits anticipated to be derived from the Acquisition Proposal, would, if
consummated, result in a transaction more favorable to such party over the long
term than the transaction contemplated by this Agreement, and such Board of
Directors determines in good faith after receipt of an opinion from outside
legal counsel to the effect that such action is likely necessary for such Board
of Directors to comply with its fiduciary duties to stockholders under
applicable law and (2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality agreement with terms no more favorable to such party than those
contained in the Confidentiality Agreement; or (B) complying with rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal.
(b) If the Company enters into a definitive agreement pursuant to an
Acquisition Proposal, it shall be deemed to have terminated this Agreement and
shall pay Purchaser a termination fee within the earlier of three business days
of such termination or three business days of its entering into such a
definitive agreement. If Purchaser elects not to close under this Agreement
because: (i) any of the conditions to Closing in Sections 8.9, 8.10, 8.13 or
8.14 is not satisfied; (ii) holders of ten percent (10%) or more of the
aggregate number of shares of issued and outstanding Company Capital Stock shall
have exercised appraisal rights under the Delaware Act; or (iii) there shall be
pending or threatened any action, proceeding or investigation before any court
or administrative agency or any pending action by any other Person, challenging
or seeking damages based upon any actions of the Company or its shareholders,
officers, directors, employees or creditors in connection with the Merger and
having a Purchaser Material Adverse Consequence, the Company shall be deemed to
have terminated this Agreement and shall pay Purchaser a termination fee within
three business days of such termination. The termination fee in either
circumstance described in the preceding two sentences shall be the sum of (i)
Purchaser's out-of-pocket costs incurred in connection with the Transactions
through the date of termination, not to exceed $500,000 in the aggregate, and
(ii) $300,000. The payment of a termination fee pursuant to this subsection,
which is agreed to be a fair estimate of the expenses and damages which would be
suffered by Purchaser in such event, shall be the sole and exclusive remedy of
Purchaser against the Company and its respective directors, officers, employees,
attorneys, agents, advisors or other representatives (including its
stockholders), with respect to the occurrences giving rise to such payment.
Should any court of competent jurisdiction determine that, consistent with
applicable law, the termination fee set forth above is unenforceable or
otherwise contrary to public policy, the parties hereto agree to any reformation
of this Agreement by a court that would result in such termination fee being
upheld and given effect.
4.16. Company Options. Prior to the Closing, the Company shall (i)
terminate the CareCentric Solutions, Inc. 1995 Incentive Stock Plan, (ii) cause
outstanding options held by J. Xxxx Xxxxx and Xxxxxx Xxxxxx representing rights
to purchase 1,981,387 shares of Company Common Stock under such plan to be
terminated, and (iii) use its best efforts to terminate all outstanding options
under such plan. Purchaser shall convert the remaining Company options (not to
exceed options to purchase 717,000 shares of Company Common Stock) into options
to purchase Purchaser Common Stock under the Purchaser's Omnibus Equity-based
Incentive Plan, with the number of shares subject to such options and the per
share exercise price for such options to be determined in accordance with the
conversion formula set forth on Schedule 4.16.
4.17. Officer and Director Releases. The Company will obtain a release from
each of its directors and officers in a form reasonably acceptable to the
Purchaser (collectively, the "Company Officer/Director Releases").
4.18. Regulation D Exemption. The Company will cooperate with Purchaser in
its efforts to qualify the offering of the Closing Merger Shares for the
Regulation D Exemption. The Company will promptly disseminate to the Company
Preferred Shareholders copies of SEC filings and other disclosure documents
provided by the Purchaser, which shall be reasonably acceptable to the Company.
The Company, at its sole expense, will make available to each Company Preferred
Shareholder with a purchaser representative that is qualified under Regulation
D, to the extent that a purchaser representative is required under the
Regulation D Exemption. The Company will provide Purchaser with drafts of any
proxy statements and similar disclosure documents prior to dissemination to the
Company Preferred Shareholders, and will make all revisions to such documents
requested by Purchaser as are necessary to comply with the Regulation D
Exemption.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Purchaser and Newco to enter into this Agreement and
consummate the Transactions, the Company represents and warrants to Purchaser
and Newco as follows, each of which warranties and representations is material
to and relied upon by Purchaser and Newco:
5.1. Organization and Authority. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware. The
states in which the Company is qualified to do business are set forth on
Schedule 5.1. The Company has all necessary corporate power and authority to
own, lease and operate its properties and conduct its business as it is
currently being conducted. The Company does not own, directly or indirectly, any
equity interest in any corporation, partnership, joint venture, or other entity
and does not have any subsidiaries, which for purposes of this Agreement means
any corporation or other legal entity of which the Company (either alone or
through or together with any other Affiliate of the Company) owns, directly or
indirectly, more than 20% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
5.2. Corporate Power and Authority; Due Authorization. The Company has full
corporate power and authority to execute and deliver this Agreement and each of
the Transaction Documents to which the Company is or will be a party and to
consummate the Transactions. The names of the Company Shareholders, and the
number and percentage of shares in the Company owned by the Company
Shareholders, are set forth on Schedule 5.2 attached hereto. The Company
Shareholders own all of the issued and outstanding shares of Company Capital
Stock. The Board of Directors of the Company at a meeting duly called and held
has determined that the Merger is advisable and in the best interest of the
Company and has approved it. The directors have also duly approved and
authorized the execution and delivery of this Agreement and each of the
Transaction Documents to which the Company is or will be a party and the
consummation of the Transactions, and no other corporate proceeding on the part
of the Company except for Company Shareholder Approval is necessary to approve
the Transactions. Assuming that this Agreement and each of the Transaction
Documents to which Purchaser or Newco is a party constitutes a valid and binding
agreement of Purchaser or Newco, this Agreement and each of the Transaction
Documents to which the Company or the Company Shareholders are or will be
parties constitutes, or will constitute when executed and delivered, a valid and
binding agreement of the Company or the Company Shareholders, in each case
enforceable against the Company and the Company Shareholders in accordance with
its terms, except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency or other similar laws relating to the enforcement of
creditors' rights generally and by the application of general principles of
equity. The duly elected officers and directors of the Company are set forth on
Schedule 5.2 attached hereto. Copies of the Certificate of Incorporation, the
Bylaws and all minutes of the Company are contained in the minute books of the
Company. True, correct and complete copies of the minute books of the Company
have been delivered to Purchaser.
5.3. Ownership of Assets. The Company has title to all of its properties
and assets, other than leased or licensed property, in each case free and clear
of any liens, security interests, claims, charges, options rights of tenants or
other encumbrances, except as disclosed or reserved against in Schedule 5.3 or
reserved against in the Company Financial Statements (as defined in Section
5.8(a) (to the extent and in the amounts so disclosed or reserved against)) and
except for liens arising from current Taxes not yet due and payable and other
liens not having a Company Material Adverse Effect. All buildings, machinery and
equipment owned or leased by the Company are in good operating condition and
reasonable state of repair, subject only to ordinary wear and tear. The Company
has not received any notice of violation of any applicable zoning regulation,
ordinance or other law, regulation or requirement relating to its operations and
properties, whether owned or leased. All of the accounts receivable of the
Company as of the Effective Time will reflect actual transactions and will have
arisen in the ordinary course of business.
5.4. No Conflict; Required Consents. Schedule 5.4 lists all third party
consents or approvals required with respect to the Company for consummation of
the Transactions, which consents the Company agrees to use its best reasonable
efforts to obtain. Assuming all such consents, approvals, authorizations and
other actions have been obtained or taken and assuming the appropriate filings
are made by Purchaser and the Company to effectuate the Merger under the
Delaware Act, and under the Securities Act and the Exchange Act, the execution
and delivery by the Company of this Agreement and the Transaction Documents and
the consummation by the Company of the Transactions do not and will not (a)
require the consent, approval or action of, or any filing or notice to, any
corporation, firm, Person or other entity or any public, governmental or
judicial authority (except for such consents, approvals, actions, filings or
notices the failure of which to make or obtain will not in the aggregate have a
Company Material Adverse Effect); (b) violate the terms of any instrument,
document or agreement to which the Company is a party, or by which the Company
or the property of the Company is bound, or be in conflict with, result in a
breach of or constitute (upon the giving of notice or lapse of time or both) a
default under any such instrument, document or agreement, or result in the
creation of any lien upon any of the property or assets of the Company except
for such violations, conflicts, breaches and defaults which, individually or in
the aggregate, would not have a Company Material Adverse Effect; (c) violate the
Company's Certificate of Incorporation or Bylaws; or (d) violate any order,
writ, injunction, decree, judgment, ruling, law, rule or regulation of any
federal, state, county, municipal, or foreign court or Governmental Authority
applicable to the Company, or the business or assets of the Company, except for
such violations which would not, individually or in the aggregate, have a
Company Material Adverse Effect. The Company is not subject to, or a party to,
any mortgage, lien, lease, agreement, contract, instrument, order, judgment or
decree or any other material restriction of any kind or character which would
prevent or hinder the continued operation of the business of the Company after
the Closing on substantially the same basis as theretofore operated.
5.5. Capitalization. The authorized and outstanding capital stock of the
Company, and the number of shares of Company Capital Stock owned by each Company
Shareholder, is set forth on Schedule 5.5(a) and 33,333 shares of the Company's
Common Stock are held in the treasury of the Company. All outstanding Company
Capital Stock has been duly authorized, and is validly issued, fully paid and
nonassessable. No party has any preemptive (whether statutory or contractual)
rights in any capital stock of the Company. The Company's convertible
securities, options, warrants, or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which it is bound to issue any
additional shares of its capital stock or other securities are as set forth on
Schedule 5.5(b) (the "Rights to Securities"). Each share of Company Preferred
Stock is convertible into one share of Company Common Stock and has voting
rights equal to those of each share of Company Common Stock. All securities of
the Company were offered and sold in compliance with applicable Federal and
state securities laws. Each and every dividend of the Company, if any, whether
paid in cash or other property, has been declared and paid in compliance with
applicable law, and the Company has no further obligation with respect to such
payment.
5.6. Compliance with Laws
(a) The Company is in compliance with, and the Company operated any
businesses previously owned by it in compliance with, all applicable laws,
orders, rules and regulations of all Governmental Authorities, including
applicable Environmental Laws, except for such noncompliance as would not,
individually or in the aggregate, have a Company Material Adverse Effect. The
Company has not received notice of any noncompliance with the foregoing.
(b) Neither the Company nor any other Persons providing services for the
Company have, to the knowledge of the Company, engaged in any activities which
would be a basis for exclusion from any otherwise available Medicare, Medicaid
or other federally funded programs under Section 0000x - 0x xx Xxxxx 00 xx xxx
Xxxxxx Xxxxxx Code, or prohibited under any applicable portions of Section 1320a
- 7b of such Title 42, or regulations promulgated thereunder, or related state
or local statutes or regulations, including any "fraud and abuse" provisions,
except where such noncompliance has and will have, individually and in the
aggregate, no Company Material Adverse Effect.
(c) Without limiting the foregoing, the Company and any other person or
entity for whose conduct the Company is legally held responsible are in
compliance with all applicable federal, state, regional, local or provincial
laws, statutes, ordinances, judgments, rulings and regulations relating to any
matters of pollution, protection of the environment, health or safety, or
environmental regulation or control (collectively, "Environmental Laws"), except
where such noncompliance has and will have, individually or in the aggregate, no
Company Material Adverse Effect. Neither the Company, nor any other person or
entity for whose conduct the Company is legally responsible has received any
notice, demand, request for information, or administrative inquiry relating to
any violation of an Environmental Law or the institution of any suit, action,
claim, or proceedings alleging such violation or investigation by any
Governmental Authority or any third party of any such violation.
5.7. Licenses and Permits. The Company holds and is in compliance with all
licenses, permits, concessions, grants, franchises, approvals and authorizations
necessary or required for the use or ownership of its assets and the operation
of its business, except where the failure to hold such license, permit,
concession, grant, franchise, approval or authorization has and will have,
individually or in the aggregate, no Company Material Adverse Effect. The
Company has not received notice of any violations in respect of any such
licenses, permits, concessions, grants, franchises, approvals or authorizations,
which violations, individually or in the aggregate, would have a Company
Material Adverse Effect. No proceeding is pending or, to the knowledge of the
Company, threatened, which seeks revocation or limitation of any such licenses,
permits, concessions, grants, franchises, approvals or authorizations, nor is
there any basis therefor, the revocation or limitation of which, individually or
in the aggregate, would have a Company Material Adverse Effect.
5.8. Liabilities and Obligations of the Company.
(a) Attached hereto as Schedule 5.8 are true, correct and complete copies
of (i) the Company's audited balance sheets as of December 31, 1997 and December
31, 1998, audited statements of income, stockholders' equity and cash flows for
the years then ended, with the reports of Ernst & Young LLP thereon and (ii) an
unaudited balance sheet as of May 31, 1999, and the related unaudited statements
of income, stockholders' equity and cash flows for the five months then ended,
(collectively, the "Company Financial Statements"). The Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, fairly present in all material respects the
financial condition of the Company as of the respective dates thereof, and
disclose all liabilities of the Company, whether absolute, contingent, accrued
or otherwise, existing as of the date thereof that are of a nature required to
be reflected in financial statements prepared in accordance with generally
accepted accounting principles, except for liabilities that, individually or in
the aggregate, would not have a Company Material Adverse Effect; provided,
however, that the interim financial statements do not include footnotes and are
subject to normal year-end adjustments.
(b) The Company has no liability or obligation (whether accrued, absolute,
contingent or otherwise) including, without limitation, any liability that might
result from an audit of its Tax Returns by any Tax Authority, except for (i)
liabilities that, individually or in the aggregate, would not have a Company
Material Adverse Effect, (ii) the liabilities and obligations of the Company
that are disclosed or reserved against in the Company Financial Statements or
Schedule 5.8 hereto, to the extent and in the amounts so disclosed or reserved
against, and (iii) liabilities incurred or accrued in the ordinary course of
business since December 31, 1998 and liabilities incurred in connection with the
Transactions.
(c) Except as disclosed in the Company Financial Statements or Schedule
5.8, the Company is not in default with respect to any liabilities or
obligations, except for defaults that, individually or in the aggregate, would
not have a Company Material Adverse Effect and all such liabilities or
obligations shown or reflected in the Company Financial Statements or Schedule
5.8 and such liabilities incurred or accrued subsequent to December 31, 1998
were incurred in the ordinary course of business except as indicated in Schedule
5.8, except for liabilities and obligations that, individually or in the
aggregate, would not have a Company Material Adverse Effect.
(d) The Company Shareholder Notes constitute all of the debts for borrowed
money owed by the Company to any holder of Company Capital Stock.
5.9. Taxes.
Except as to any noncompliance with any of the following provisions that
would not, individually or in the aggregate, have a Company Material Adverse
Effect:
(a) The Company has timely filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. Except as
set forth in Schedule 5.9, the Company currently is not the beneficiary of any
extension of time within which to file any Tax Return. There are no liens or
other security interests on any of the assets of any of the Company that arose
in connection with any failure (or alleged failure) to pay any Tax, other than
liens, if any, for Taxes not yet due and payable.
(b) The Company has timely paid, withheld and/or remitted to the
appropriate Tax Authority all Taxes required to be paid, withheld and/or
remitted on or before the Closing Date. The reserves for Taxes to be reflected
on the Closing Balance Sheet (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) will be
adequate to cover all Tax liabilities, contingent or otherwise, as of the
Closing Date.
(c) No employee of the Company or any of its subsidiaries responsible for
Tax matters has received notice that any Tax Authority proposes to assess any
additional Taxes against the Company for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax liability of the
Company either (i) claimed or raised by any Tax Authority in writing, or (ii) as
to which any employee of the Company responsible for Tax matters has knowledge
based upon personal contact with any agent of such Tax Authority.
(d) Except as set forth in Schedule 5.9, the Company has not waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) The Company has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. The Company has not made any payments which
have not yet been reported on any Tax Return, is not obligated to make any
payments, and is not a party to any agreement that under certain circumstances
could obligate the Company to make any payments that will not be deductible
under Section 280G of the Code. The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code.
(f) The Company is not a party to any Tax allocation or sharing agreement.
The Company has not been a member of an Affiliated Group or filed or been
included in a combined, consolidated or unitary Tax Return. The Company has no
contractual obligation to indemnify any other person with respect to the payment
of any Taxes of the other person which could have a Company Material Adverse
Effect.
5.10. Contracts, Agreements and Instruments Generally. Schedule 5.10 hereto
consists of a true and complete list of all contracts, agreements, commitments
and other instruments (identified by title, date and parties) (whether oral or
written) to which the Company is a party that involve a receipt or an
expenditure by the Company or require the performance of services or delivery of
goods to, by, through, on behalf of or for the benefit of the Company, which in
each case relates to a contract, agreement, commitment or instrument that
requires (or is reasonably expected to require) payments or provides (or is
reasonably expected to provide) for receipts in excess of $10,000 from the
Closing Date until the first (1st) anniversary thereof.
The contracts, agreements, commitments and other instruments listed or
required to be listed on Schedule 5.10 or listed on a Schedule referred to in
Section 5.12 hereof are herein referred to as the "Material Contracts". All of
the Material Contracts are in full force and effect.
None of the Company, and, to the knowledge of the Company, any other party
to any such contract, commitment or arrangement has breached any provision of,
or is in default under, the terms thereof, the breach of or default under which
would, individually or in the aggregate, have a Company Material Adverse Effect;
and there are no existing facts or circumstances known to the Company that would
prevent the work in process of the Company or its contracts and agreements from
maturing upon performance by the Company into collectible accounts receivable in
the aggregate in amounts consistent with historical experience. Except as set
forth on Schedule 5.10 or as reserved against in the Company Financial
Statements, there are no contracts or commitments that require the performance
of services or provision of goods by the Company at a direct cost for each such
contract or commitment known by the Company to be in excess of the revenue to be
derived pursuant to the terms of such contract or commitment, which,
individually, or in the aggregate, would have a Company Material Adverse Effect.
Except for terms specifically described in Schedule 5.10, the Company has not
received any payment from any contracting party in connection with or as an
inducement for entering into any contract, agreement, policy or instrument
except for payment for actual services rendered or to be rendered by the Company
consistent with amounts historically charged for such services.
5.11. Customer Contracts. With respect to each contract, agreement,
commitment or other instrument in effect to which the Company is a party with
any customer of the Company (each, a "Customer Contract") all performance
warranties with respect to computer software represented in writing as owned by
or proprietary to the Company ("Owned Software") made by the Company in any
Customer Contract, including warranties with respect to capacity, availability,
downtime and response time, and Year 2000 compliance have been satisfied in all
material respects upon the terms and conditions and to the extent provided for
in such Customer Contract, except for failures to satisfy which, individually or
in the aggregate, would not have a Company Material Adverse Effect. 5.12.
Intellectual Property; Computer Software.
(a) Schedule 5.12(a) hereto sets forth (i) a complete and correct list of
all trademarks, trade names, service marks, service names, and brand names
(whether or not any of the same are registered), and all patents and registered
copyrights and all applications for the foregoing, if any, (setting forth the
registration, issue or serial number of the patents and registered copyrights
and a description of the same) applicable to or used in the business of the
Company; (ii) the owner of such intellectual property and any registration
thereof or application thereof; and (iii) a complete list of all licenses
granted by or to the Company with respect to any of the above (identified by
title, date and parties) (not inclusive of Customer Contracts). All such
trademarks, trade names, service marks, service names, brand names, copyrights
and patents are owned by the Company free and clear of all liens, claims,
security interests and encumbrances, except for such liens, claims, security
interests and encumbrances as would, individually or in the aggregate, not have
a Company Material Adverse Effect. Except as set forth on Schedule 5.12(a), the
Company is not currently in receipt of any notice of any violation of, and, to
the Company's knowledge, the Company is not violating the rights of others in
any trademark, trade name, service xxxx, copyright, patent, trade secret,
know-how or other intangible asset, except such violations as, individually or
in the aggregate, would not have a Company Material Adverse Effect.
(b) Schedule 5.12(b) contains a complete and accurate list of all Owned
Software. Except as set forth on Schedule 5.12(b), the Company has title to the
Owned Software, free and clear of all claims, including claims or rights of
employees, agents, consultants, inventors, customers, licensees or other parties
involved in the development, creation, marketing, maintenance, enhancement or
licensing of such computer software. Except as set forth on Schedule 5.12(b) and
except for commercially available, over-the-counter "shrink-wrap" software, the
Owned Software is not dependent on any Licensed Software (as defined in
subsection (c) below) in order to operate fully in the manner in which it is
intended. The source code to the Owned Software has not been published or
disclosed to any other parties, except as set forth in the Customer Contracts or
as set forth on Schedule 5.12(b), and except pursuant to contracts requiring
such other parties to keep the Owned Software confidential. To the knowledge of
the Company, no such other party has breached any such obligation of
confidentiality.
(c) Schedule 5.12(c) contains a complete and accurate list of all software
(other than commercially available over-the-counter "shrink-wrap" software)
under which the Company is a licensee, lessee or otherwise has obtained the
right to use (the "Licensed Software"). The Company has the right and license to
use, sublicense, modify and copy Licensed Software to the extent set forth in
the respective license, lease or similar agreement pursuant to which the
Licensed Software is licensed to the Company, free of any other limitations or
encumbrances, and the Company is in compliance with all applicable provisions of
such agreements, except for failures to comply which, individually or in the
aggregate, would not have a Company Material Adverse Effect. Except as disclosed
on Schedule 5.12(c), none of the Licensed Software has been incorporated into or
made a part of any Owned Software or any other Licensed Software. Except for
such publications and disclosures that, individually or in the aggregate, would
not have a Company Material Adverse Effect, the Company has not published or
disclosed any Licensed Software to any other party except in accordance with and
as permitted by any license, lease or similar agreement relating to the Licensed
Software and except pursuant to contracts requiring such other parties to keep
the Licensed Software confidential. Except for such publications and disclosures
that, individually or in the aggregate, would not have a Company Material
Adverse Effect, no party to whom the Company has disclosed Licensed Software
has, to the knowledge of the Company, breached such obligation of
confidentiality.
(d) The Owned Software and Licensed Software and commercially available
over-the-counter "shrink-wrap" software constitute all software used in the
businesses of the Company (collectively, the "Company Software"). The
Transactions will not cause a breach or default under any licenses, leases or
similar agreements relating to the Company Software or impair Purchaser's
ability to use the Company Software in the same manner as such computer software
is currently used by the Company. To the knowledge of the Company, (i) the
Company is not infringing any intellectual property rights of any other person
or entity with respect to the Company Software, and (ii) no other person or
entity is infringing any intellectual property rights of the Company with
respect to the Company Software, except for infringements that, individually or
in the aggregate, would not have a Company Material Adverse Effect. 5.13. Labor
Matters. Except as set forth on Schedule 5.13, within the last three (3) years
the Company has not been the subject of any known union activity or labor
dispute, nor has there been any strike of any kind called or, to the knowledge
of the Company, threatened to be called against the Company. The Company has not
violated any applicable federal or state law or regulation relating to labor or
labor practices, except where such violation has and will have, individually or
in the aggregate, no Company Material Adverse Effect. Schedule 5.13 sets forth a
true, correct and complete list of employer loans or advances from the Company
to their respective employees. The Company is in compliance with all applicable
requirements of the Immigration and Nationality Act of 1952, as amended by the
Immigration Reform and Control Act of 1986 and the regulations promulgated
thereunder (hereinafter collectively referred to as the "Immigration Laws"),
except where such noncompliance has and will have, individually or in the
aggregate, no Company Material Adverse Effect. The Company has had no
immigration violations, except for violations that, individually or in the
aggregate, would have no Company Material Adverse Effect, and, to the Company's
knowledge, the Company has employed only individuals authorized to work in the
United States. The Company has never been the subject of any inspection or
received notice of investigation relating to its compliance with or violation of
the Immigration Laws, nor has it been warned, fined or otherwise penalized by
reason of any failure to comply with the Immigration Laws nor is such proceeding
pending or, to the Company's knowledge, threatened.
5.14. Work-in-Process, Orders and Returns.
(a) Except as set forth on Schedule 5.14(a), as of the date hereof, except
for any claims specifically disclosed on other Schedules hereto, to the
Company's knowledge, there are no claims nor does the Company reasonably expect
to make or receive any claims to terminate Customer Agreements, or material
licenses, services, or other orders, or for refunds relating to Customer
Agreements, licenses, maintenance agreements, or other fees by reason of alleged
dissatisfaction with the Company's capabilities or performance (including those
related to Company Software), or defective or unsatisfactory services or
products, except as would not result in, individually or in the aggregate, a
Company Material Adverse Effect.
(b) Except as set forth on Schedule 5.14(b), the Company has not been
notified that the consummation of the Transactions will result in any
cancellations or withdrawals of accepted and unfilled orders for services or
Company Software, or maintenance or other services and the Company will inform
Purchaser promptly upon receipt of any notification to that effect received
after the date hereof, except for cancellations or withdrawals that,
individually or in the aggregate, would not have a Company Material Adverse
Effect. To the knowledge of the Company, neither the execution of this Agreement
nor the consummation of the Transactions will result in any material
cancellations or withdrawals of accepted and unfilled orders for the license or
sales of Company Software, services or merchandise, except for cancellations or
withdrawals that, individually or in the aggregate, would not have a Company
Material Adverse Effect.
5.15. Absence of Certain Changes. Except as reflected on Schedule 5.15, or
elsewhere in this Agreement or specifically identified on any Schedules hereto,
and since December 31, 1998, the Company has not and at the Closing Date will
not have:
(a) Suffered a Company Material Adverse Effect, or become aware of any
circumstances which might reasonably be expected to result in such a Company
Material Adverse Effect; or suffered any material casualty loss to the Assets
(whether or not insured), except for losses that, individually or in the
aggregate, would not have a Company Material Adverse Effect;
(b) Incurred any obligations specifically related to the Assets (including
Customer Agreements), except in the ordinary course of business consistent with
past practices, except for obligations that, individually or in the aggregate,
would not have a Material Adverse Effect;
(c) Permitted or allowed any of the Assets to be mortgaged, pledged, or
subjected to any lien or encumbrance, except for liens for Taxes not yet due and
payable and liens and encumbrances that, individually or in the aggregate, would
not have a Company Material Adverse Effect;
(d) Written down the value of any inventory, contract or other intangible
asset, or written off as uncollectible any notes or accounts receivable or any
portion thereof, except for write-downs and write-offs in the ordinary course of
business, consistent with past practice and at a rate no greater than during the
latest complete fiscal year; cancelled any other debts or claims, or waived any
rights of substantial value, or sold or transferred any of its material
properties or assets, real, personal, or mixed, tangible or intangible, except
in the ordinary course of business and consistent with past practice, and except
for those that, individually or in the aggregate, would not have a Company
Material Adverse Effect;
(e) Sold, licensed or transferred or agreed to sell, license or transfer,
any of the Assets, except in the ordinary course of business and consistent with
past practice; or which, in the aggregate, do not exceed $25,000;
(f) To the Company's knowledge, received notice of any pending or
threatened adverse claim or an alleged infringement of proprietary material,
whether such claim or infringement is based on trademark, copyright, patent,
license, trade secret, contract or other restrictions on the use or disclosure
of proprietary materials;
(g) Incurred obligations to refund money to customers, except in the
ordinary course of business, or which, in the aggregate, will have no Company
Material Adverse Effect;
(h) Become aware of any event, condition or other circumstance relating
solely to the Assets (as opposed to any such event, condition, or circumstance
which is, for example, national or industry-wide in nature) which is expected to
result in a Company Material Adverse Effect;
(i) Made any capital expenditures or commitments, any one of which is more
than $50,000, for additions to property, plant, or equipment;
(j) Made any material change in any method of accounting or accounting
practice;
(k) Except as permitted under Section 4.7(b) with respect to the Severance
Payment Obligations, paid, loaned, guaranteed, or advanced any material amount
to, or sold, transferred, or leased any material properties or assets (real,
personal, or mixed, tangible or intangible) to, or entered into any agreement,
arrangement, or transaction with any of the Company's officers or directors, or
any business or entity in which any officer or director of the Company, or any
affiliate or associate of any of such Persons has any direct or indirect
interest; or
(l) Agreed to take any action described in this Section 5.15.
5.16. Leases. Schedule 5.16 contains a list of all leases pursuant to which
the Company leases real or personal property, and copies of all such leases have
been delivered to Purchaser. All such leases are in full force and effect, and
except as set forth on Schedule 5.16, no event has occurred which is a default
or which with the passage of time will constitute a default by the Company
thereunder, nor has any such event occurred to the knowledge of the Company
which is a default by any other party to such lease. All property leased by the
Company as lessee is in the possession of the Company. Except as indicated in
Schedule 5.16, no consent of any lessor is required in connection with the
Transactions.
5.17. Litigation. Except as set forth in Schedule 5.17, (i) there are no
actions, proceedings or regulatory agency investigations against the Company or,
to the Company's knowledge, involving the Assets pending (served) or threatened
against the Company, (ii) the Company does not know of any such action,
proceeding or investigation against the Company, and (iii) no such action,
proceeding, or regulatory agency investigation has been pending (served) during
the three-year period preceding the date of this Agreement.
5.18. Employee Benefit Plans: Employees.
Except as to noncompliance with any of the following provisions that would
not, individually or in the aggregate, have a Company Material Adverse Effect:
(a) Without regard to materiality, Schedule 5.18 sets forth a list of each
"employee benefit plan" (as defined by Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and any other bonus, profit
sharing, pension, compensation, deferred compensation, stock option, stock
purchase, fringe benefit, severance, post-retirement, scholarship, disability,
sick leave, vacation, individual employment, commission, bonus, payroll
practice, retention, or other plan, agreement, policy or arrangement (each such
plan, agreement, policy or arrangement is referred to herein as an "Employee
Benefit Plan", and collectively, the "Employee Benefit Plans") that is currently
in effect, was maintained since December 31, 1991 or which has been approved
before the date hereof but is not yet effective, for the benefit of (i)
directors or employees of the Company or any other persons performing services
for the Company, (ii) former directors or employees of the Company or any other
persons formerly performing services for the Company, or (iii) beneficiaries of
anyone described in (i) or (ii) (collectively, "Company Employees") or with
respect to which the Company or any "ERISA Affiliate" (hereby defined to include
any trade or business, whether or not incorporated, other than the Company,
which has employees who are or have been at any date of determination occurring
within the preceding six (6) years, treated pursuant to Section 4001(a)(14) of
ERISA and/or Section 414 of the Code as employees of a single employer which
includes the Company) has or has had any obligation on behalf of any Company
Employee. Except as disclosed on Schedule 5.18 attached hereto, without regard
to materiality, there are no other benefits to which any Company Employee is
entitled or for which the Company has any obligation.
(b) Without regard to materiality, the Company has delivered to Purchaser,
with respect to each Employee Benefit Plan, true and complete copies of (i) the
documents embodying and relating to the plan, including, without limitation, the
current plan documents and documents creating any trust maintained pursuant
thereto, all amendments, investment management agreements, administrative
service contracts, group annuity contracts, insurance contracts, the most recent
summary plan description with each summary of material modification, if any, and
employee handbooks, (ii) annual reports including but not limited to Forms 5500,
990 and 1041 for the last three (3) years for the plan and any related trust,
(iii) actuarial valuation reports and financial statements for the last three
years, and (iv) each material communication involving the plan or any related
trust to or from the Internal Revenue Service ("IRS"), Department of Labor
("DOL"), Pension Benefit Guaranty Corporation ("PBGC") or any other governmental
authority since January 1, 1995 (but excluding any IRS determination letter
application), including, without limitation, the most recent determination
letter received from the IRS pertaining to any Employee Benefit Plan intended to
qualify under Sections 401(a) or 501(c)(9) of the Code.
(c) The Company has no obligation to contribute to or provide benefits
pursuant to, and has no other liability of any kind with respect to, (i) a
"multiple employer welfare arrangement" (within the meaning of Section 3(40) of
ERISA), or (ii) a "plan maintained by more than one employer" (within the
meaning of Section 413(c) of the Code).
(d) Except as otherwise set forth on Schedule 5.18 attached hereto, the
Company is not liable for and neither the Company nor Purchaser will be liable
for, any contribution, tax, lien, penalty, cost, interest, claim, loss, action,
suit, damage, cost assessment or other similar type of liability or expense of
any ERISA Affiliate (including predecessors thereof) with regard to any Employee
Benefit Plan maintained, sponsored or contributed to by an ERISA Affiliate (if a
like definition of Employee Benefit Plan were applicable to the ERISA Affiliate
in the same manner as it applies to the Company), including, without limitation,
withdrawal liability arising under Title IV, Subtitle E, Part 1 of ERISA,
liabilities to the PBGC, or liabilities under Section 412 of the Code or Section
302(a)(2) of ERISA.
(e) The Company, each ERISA Affiliate, each Employee Benefit Plan and each
Employee Benefit Plan "sponsor" or "administrator" (within the meaning of
Section 3(16) of ERISA) has complied in all respects with the applicable
requirements of Section 4980B of the Code and Section 601 et seq. of ERISA (such
statutory provisions and predecessors thereof are referred to herein
collectively as "COBRA"). Schedule 5.18 attached hereto lists the name of each
Company Employee who has experienced a "Qualifying Event" (as defined in COBRA)
with respect to an Employee Benefit Plan who is eligible for "Continuation
Coverage" (as defined in COBRA) and whose maximum period for Continuation
Coverage required by COBRA, or maximum period for electing such coverage, has
not expired. Included in such list are the current address for each such
individual, the date and type of each Qualifying Event, whether the individual
has already elected Continuation Coverage and, for any individual who has not
yet elected Continuation Coverage, the date on which such individual was
notified of his or her rights to elect Continuation Coverage. Schedule 5.18
attached hereto also lists the name of each Company Employee who is on a leave
of absence (whether or not pursuant to the Family and Medical Leave Act of 1993,
as amended ("FAMLA")) and is receiving or entitled to receive health coverage
under an Employee Benefit Plan, whether pursuant to FAMLA, COBRA or otherwise.
(f) With respect to each Employee Benefit Plan and except as otherwise set
forth on Schedule 5.18 attached hereto:
(i) each Employee Benefit Plan, other than a standardized prototype
plan, that is intended to be qualified under Section 401(a) of the Code has
received a determination letter from the IRS to the effect that the
Employee Benefit Plan is qualified under Section 401 of the Code and that
any trust maintained pursuant thereto is exempt from federal income
taxation under Section 501 of the Code, and nothing has occurred or is
expected to occur that caused or could reasonably be expected to cause the
loss of such qualification or exemption or the imposition of any penalty or
tax liability;
(ii) all payments required by the Employee Benefit Plan or by law
(including all contributions, insurance premiums, premiums due the PBGC or
intercompany charges) with respect to all periods through the date hereof
have been made;
(iii) there are no violations of or failures to comply with ERISA and
the Code with respect to the filing of applicable reports, documents, and
notices regarding the Employee Benefit Plan with the DOL, the IRS, the PBGC
or any other governmental authority, or any of the assets of the Employee
Benefit Plan or any related trust;
(iv) no claim, lawsuit, arbitration or other action has been asserted
or instituted or to the knowledge of the Company threatened against the
Employee Benefit Plan, any trustee or fiduciaries thereof, the Company or
any ERISA Affiliate, any director, officer or employee thereof, or any of
the assets of the Employee Benefit Plan or any related trust other than
routine claims for benefits;
(v) all amendments required to bring the Employee Benefit Plan into
conformity with applicable law, including, without limitation, ERISA and
the Code, have been timely adopted;
(vi) any bonding required with respect to the Employee Benefit Plan in
accordance with the applicable provisions of ERISA has been obtained and is
in full force and effect;
(vii) the Employee Benefit Plan complies with and has been maintained
and operated in accordance with its respective terms and the terms and the
provisions of applicable law, including, without limitation, ERISA and the
Code (including rules and regulations thereunder);
(viii) no "prohibited transaction" (within the meaning of Section 4975
of the Code and Section 406 of ERISA) has occurred or is reasonably
expected to occur with respect to the Employee Benefit Plan (and the
transactions contemplated by this Agreement will not constitute or directly
or indirectly result in such a "prohibited transaction") which has
subjected or could reasonably be expected to subject the Company, any ERISA
Affiliate or Purchaser or any officer, director or employee of the Company,
any ERISA Affiliate, Purchaser or the Employee Benefit Plan trustee,
administrator or other fiduciary, to a tax or penalty on prohibited
transactions imposed by either Section 502 of ERISA or Section 4975 of the
Code or any other liability with respect thereto;
(ix) the Employee Benefit Plan is not under audit or investigation by
the IRS or the DOL or any other governmental authority and no such
completed audit, if any, has resulted in the imposition of any tax,
interest or penalty;
(x) if the Employee Benefit Plan purports to provide benefits which
qualify for tax-favored treatment under Sections 79, 105, 106, 117, 120,
125, 127, 129 or 132 of the Code, the Employee Benefit Plan satisfies the
requirements of said Section(s);
(xi) the Employee Benefit Plan may be amended or terminated on no more
than 90 days' notice.
(g) No Employee Benefit Plan purports to be a voluntary employee
beneficiary association ("VEBA"), and no Employee Benefit Plan is subject to
Title IV of ERISA.
(h) The Company is not subject to any liens, or excise or other taxes under
ERISA, the Code or other applicable law relating to any Employee Benefit Plan.
(i) Except as set forth on Schedule 5.18 hereto, the consummation of the
Transactions will not give rise to any liability for any employee benefits,
including, without limitation, liability for severance pay, unemployment
compensation, termination pay or withdrawal liability, or accelerate the time of
payment or vesting or increase the amount of compensation or benefits due to any
Company Employee.
(j) No amounts payable under any Employee Benefit Plan will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the Code
as such section of the Code is currently in effect
(k) Except as set forth on Schedule 5.18 attached hereto, no Employee
Benefit Plan in any way provides for health benefits (other than under COBRA,
the Federal Social Security Act or any Employee Benefit Plan qualified under
Section 401(a) of the Code) to any Company Employee who, at the time the health
benefit is to be provided, is or will be a former director or employee of the
Company or an ERISA Affiliate (or a beneficiary of any such person), nor have
any representations, agreements, covenants or commitments been made to provide
such health benefits.
(l) Since December 31, 1998 and through the date hereof, except as set
forth on Schedule 5.18 attached hereto or as required by applicable law or
consistent with past practice, neither the Company nor any ERISA Affiliate has
(i) instituted or agreed to institute any new employee benefit plan or practice,
(ii) made or agreed to make any change in any Employee Benefit Plan, (iii) made
or agreed to make any increase in the compensation payable or to become payable
by the Company or any ERISA Affiliate to any Company Employee (other than
regularly scheduled increases), or (iv) except pursuant to this Agreement and
except for contributions required to provide benefits pursuant to the provisions
of the Employee Benefit Plans, paid or accrued or agreed to pay or accrue any
bonus, percentage of compensation, or other like benefit to, or for the credit
of, any Company Employee.
(m) Without regard to materiality, any contribution, insurance premium,
excise tax, interest charge or other liability or charge imposed or required
with respect to any Employee Benefit Plan which is attributable to any period or
any portion of any period prior to the Closing is set forth on Schedule 5.18
hereof.
5.19. Accuracy of Representations. No representation or warranty by the
Company contained in this Agreement and no statement contained in any
certificate or schedule furnished to Purchaser pursuant to the provisions hereof
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein not misleading. To the
knowledge of the Company, there is no current event or condition of any kind or
character pertaining to the Company that may reasonably be expected to have a
Company Material Adverse Effect, except as disclosed herein
5.20. Brokers Fees and Expenses. Neither the Company nor the Major
Shareholders nor any affiliate thereof has retained or utilized the services of
any advisor, broker, finder or intermediary, or paid or agreed to pay any fee or
commission to any other Person or entity for or on account of the Transactions,
or had any communications with any Person or entity which would obligate
Purchaser to pay any such fees or commissions.
5.21. Bank Accounts. Schedule 5.21 contains a true, complete and correct
list showing the name and location of each bank or other institution in which
the Company has any deposit account or safe deposit box, together with a listing
of account numbers and names of all Persons authorized to draw thereon or have
access thereto.
5.22. Business Practices. Neither the Company nor anyone acting on its
behalf has made any payment of funds of the Company prohibited by law, and no
funds of the Company have been set aside to be used for any payment prohibited
by law.
5.23. Insurance. Schedule 5.23 lists all of the insurance policies
maintained by the Company, which Schedule includes the name of the insurance
company, the policy number, a description of the type of insurance covered by
such policy, the dollar limit of the policy, and the annual premiums for such
policy. The Company shall maintain such insurance policies in full force and
effect at least through the Closing Date.
5.24. Proxy Statement. None of the information supplied or to be supplied
by or on behalf of the Company or the Major Shareholders for inclusion or
incorporation by reference in Purchaser's proxy statement or information
statement to be delivered to its stockholders ("Proxy Statement") will, at the
date delivered to Purchaser, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading assuming that the information contained therein is
consistent with information provided by the Company or the Major Shareholders.
5.25. Reorganization. To the knowledge of the Company, there is no fact
pertaining to it or the Major Shareholders that would prevent the Merger from
qualifying as a reorganization under the Code. The Company operates at least one
significant historic business line, or owns at least a significant portion of
its historic business assets, in each case within the meaning of U.S. Treasury
Regulation Section 1.368-1(d).
5.26. No Existing Discussion. As of the date hereof, the Company is not
engaged, directly or indirectly, in any discussion or negotiations with any
other party with respect to an Acquisition Proposal.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND NEWCO
In order to induce the Company to enter into this Agreement and consummate
the Transactions, each of Purchaser and Newco represents and warrants to the
Company as follows, each of which representations and warranties is material to
and relied upon by the Company, provided however, that the representations and
warranties in this Article 6 do not give effect to the consummation of the
Mestek Merger:
6.1. Organization. Each of Purchaser and Newco is a corporation duly
organized and validly existing under the laws of the State of Delaware. The
states in which Purchaser is qualified to do business are set forth on Schedule
6.1. Each of Purchaser and Newco has all necessary corporate power and authority
to own, lease and operate its properties and conduct its business as it is
currently being conducted. Except as set forth on Schedule 6.1, neither
Purchaser nor Newco owns, directly or indirectly, any equity interest in any
corporation, partnership, joint venture, or other entity and does not have any
subsidiaries.
6.2. Corporate Power and Authority; Due Authorization. Each of Purchaser
and Newco has full corporate power and authority to execute and deliver this
Agreement and each of the Transaction Documents to which Purchaser or Newco is
or will be a party and to consummate the Transactions. Each of the Board of
Directors of Purchaser and the Board of Directors and stockholder of Newco has
duly approved and authorized the execution and delivery of this Agreement and
each of the Transaction Documents to which it is or will be a party and the
consummation of the Transactions, and no other corporate proceedings on the part
of Purchaser or Newco are necessary to approve and authorize the execution and
delivery of this Agreement and such Transaction Documents and the consummation
of the Transactions. Assuming that this Agreement and each of the Transaction
Documents to which either Purchaser or Newco is a party constitutes a valid and
binding agreement of the Company and the Major Shareholders, this Agreement and
each of the Transaction Documents to which Purchaser or Newco is a party
constitutes, or will constitute when executed and delivered, a valid and binding
agreement of Purchaser or Newco in each case enforceable against Purchaser or
Newco in accordance with its terms, except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency or other similar laws relating to
the enforcement of creditors' rights generally and by the application of general
principles of equity.
6.3. No Conflict; Consents. Except as set forth on Schedule 6.3 hereto, and
except for the applicable requirements of the Securities Act, the Exchange Act,
state blue sky laws and the rules of the NASDAQ Stock Market, Inc., the
execution and delivery by Purchaser and Newco of this Agreement, the Transaction
Documents to which either of them is or will be a party and the consummation by
Purchaser and Newco of the Transactions do not and will not (a) require the
consent, approval or action of, or any filing or notice to, any corporation,
firm, Person or other entity or any public, governmental or judicial authority;
(b) violate the terms of any instrument, document or agreement to which
Purchaser or Newco is a party, or by which Purchaser or Newco or the property of
Purchaser or Newco is bound, or be in conflict with, result in a breach of or
constitute (upon the giving of notice or lapse of time, or both) a default under
any such instrument, document or agreement or result in the creation of any lien
upon any of the property or assets of Purchaser or Newco, except for such
violations, conflicts, breaches and defaults which, individually or in the
aggregate, would not have a Purchaser Material Adverse Effect; (c) violate
Purchaser's or Newco's Certificate of Incorporation or Bylaws; or (d) violate
any order, writ, injunction, decree, judgment, ruling, law, rule or regulation
of any federal, state, county, municipal, or foreign court or Governmental
Authority applicable to Purchaser or Newco, the business or assets of Purchaser
or Newco, or the Merger, except for such violations which would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect.
Neither Purchaser nor Newco is subject to, or a party to, any mortgage, lien,
lease, agreement, contract, instrument, order, judgment or decree or any other
material restriction of any kind or character which would prevent or hinder the
continued operation of the business of Purchaser or Newco after the Closing on
substantially the same basis as theretofore operated.
6.4. Ownership of Assets. Purchaser has title to all of its properties and
assets, other than leased or licensed property, in each case free and clear of
any liens, security interests, claims, charges, options rights of tenants or
other encumbrances, except as disclosed or reserved against in Schedule 6.4 or
reserved against in Purchaser's financial statements (as described in Section
6.8(a) (to the extent and in the amounts so disclosed or reserved against)) and
except for liens arising from current Taxes not yet due and payable and other
liens not having a Purchaser Material Adverse Effect. All buildings, machinery
and equipment owned or leased by Purchaser are in good operating condition and
reasonable state of repair, subject only to ordinary wear and tear. Purchaser
has not received any notice of violation of any applicable zoning regulation,
ordinance or other law, regulation or requirement relating to its operations and
properties, whether owned or leased. All of the accounts receivable of Purchaser
as of the Effective Time will reflect actual transactions and will have arisen
in the ordinary course of business.
6.5. Capitalization. The authorized capital stock of Purchaser consists of
10,000,000 shares of preferred stock, $.001 par value per share) of which no
shares are outstanding, and 20,000,000 shares of common stock, $.001 par value
per share, of which 8,741,713 shares are outstanding as of the date hereof. In
addition, rights to receive 32,392 shares of Purchaser Common Stock, relating to
unconverted shares from Purchaser's 1997 reverse stock split ("Purchaser
Conversion Rights"), are outstanding as of the date hereof. All outstanding
shares of Purchaser Common Stock have been duly authorized, and are validly
issued, fully paid and nonassessable. Except as set forth in Schedule 6.5, no
party has any preemptive (whether statutory or contractual) rights in any
capital stock of Purchaser. Except for the Purchaser Conversion Rights, and
options and warrants identified on Schedule 6.5, Purchaser has no convertible
securities, options, warrants, or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which it is bound to issue any
additional shares of its capital stock or other securities. All securities of
Purchaser were offered and sold in compliance with applicable Federal and state
securities laws. Each and every dividend of the Purchaser, if any, whether paid
in cash or other property, has been declared and paid in compliance with
applicable law, and the Purchaser has no further obligation with respect to such
payment. Purchaser owns one hundred percent (100%) of the issued and outstanding
capital stock of Newco.
6.6. Reorganization. Purchaser has no present intention to redeem or
reacquire any of its stock to be issued pursuant to the Merger. Purchaser has no
present intention to dispose of any of the assets of the Company acquired in the
Merger, except for dispositions made in the ordinary course of business or
transfers described in Code Section 368(a)(2)(D).
6.7. Shares to be Delivered. The Closing Merger Shares to be issued with
respect to previously outstanding Company Capital Stock and Company Shareholder
Notes when issued and delivered to the Company Shareholders and holders of
Company Shareholder Notes pursuant to this Agreement will be duly authorized,
validly issued, fully paid and non-assessable shares of Purchaser Series A
Preferred Stock. Upon delivery of the Closing Merger Shares, the Company
Shareholders and holders of Company Shareholder Notes will receive good and
unencumbered title to the Closing Merger Shares, free and clear of all liens,
restrictions, charges, encumbrances and other security interests of any kind or
nature whatsoever, except for restrictions existing under applicable securities
laws regarding transferability of the Closing Merger Shares or under this
Agreement or the Transaction Documents.
6.8. Accuracy of Securities Filings; Financial Statements.
(a) Except as set forth in Schedule 6.8, Purchaser has made all filings
with the SEC that it has been required to make under the Securities and Exchange
Act, and has done so in a timely manner. Purchaser has furnished, or otherwise
made available, the Securities Filings to the Company. Each of the Securities
Filings has complied with the Securities Act and the Exchange Act in all
material respects. None of the Securities Filings, as of their respective dates,
to Purchaser's knowledge, contain any untrue statement of any material fact or
omit to state a material fact required therein to be stated or omit to state a
material fact in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of Purchaser for
inclusion in the Proxy Statement will, at the date of the filing of the Proxy
Statement with the SEC, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
(b) The financial statements of Purchaser included and/or incorporated by
reference into the Securities Filings (including the related notes and
schedules) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, present fairly the financial
condition of Purchaser as of the indicated dates and the results of operations
of Purchaser for the indicated periods, are consistent with the books and
records of Purchaser and, except as disclosed on Schedule 6.8, do not contain
any material item of special or non-recurring or other income not earned in the
ordinary course of business; provided, however, that the interim financial
statements are subject to normal year-end adjustments which are not expected to
be material in amount.
(c) Except as and to the extent specifically disclosed in this Agreement,
on the date hereof, there are, and prior to Closing will be, no liabilities or
obligations of Purchaser of any nature, whether liquidated, accrued, absolute,
continued or otherwise except for those (i) that are specifically reflected or
reserved against as to amount in the latest balance sheet contained in the
Securities Filings as of the date hereof, or (ii) that arose thereafter in the
ordinary course of business, or (iii) that it specifically set forth on Schedule
6.8 attached hereto; and at the Closing, there will be no liabilities or
obligations of Purchaser of any nature, whether liquidated or unliquidated,
accrued, absolute, contingent or otherwise which are material individually or in
the aggregate, except for those (A) that are specifically reflected or reserved
against as to amount in the latest balance sheet contained in the Securities
Filings, or (B) that arise after the date of such balance sheet in the ordinary
course of business (and are immaterial) or (C) that are specifically set forth
on Schedule 6.8.
6.9. Approvals. The execution and delivery of this Agreement and the
consummation of the Transactions by Purchaser and Newco will not require the
consent, approval, order or authorization of any governmental entity or
regulatory authority or any other Person under any statute, law, rule,
regulation (other than applicable federal and state securities laws), permit,
license, agreement, indenture or other instrument to which Purchaser is a party
or to which any of its properties are subject, except for such consents,
approvals, actions, filings or notices the failure of which to make or obtain
will not have a Purchaser Material Adverse Effect, and except for any federal or
state filings required by applicable securities laws (such as the Proxy
Statement), and the filing of the listing application for the Registrable Shares
with NASDAQ National Market, no declaration, filing or registration with any
governmental entity or regulatory authority is required by Purchaser in
connection with the execution and delivery of this Agreement, the consummation
of the Transactions, or the performance by Purchaser or Newco of their
respective obligations hereunder.
6.10. Accuracy of Representations. No representation or warranty by
Purchaser or Newco contained in this Agreement and no statement contained in any
certificate or schedule furnished to the Company pursuant to the provisions
hereof contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein not misleading.
To the knowledge of Purchaser and Newco, there is no current event or condition
of any kind or character pertaining to Purchaser that may reasonably be expected
to have a Purchaser Material Adverse Effect, except as disclosed herein.
6.11. Compliance with Laws. Each of Purchaser and Newco is in compliance
with, and each of Purchaser and Newco operated any business previously owned by
it in compliance with all applicable laws, orders, rules and regulations of all
Governmental Authorities, including applicable Environmental Laws, except for
such noncompliance as would not, individually or in the aggregate, have a
Purchaser Material Adverse Effect. Purchaser has not received notice of any
noncompliance with the foregoing.
ARTICLE 7.
INDEMNIFICATION
7.1. Indemnification by the Major Shareholders. Subject to the other
applicable provisions of this Article 7, from and after the Closing each of the
Major Shareholders hereby indemnifies and holds harmless Purchaser and Newco and
each of their respective affiliates, directors, officers, employees, advisors
and agents ("Purchaser Protected Parties") from and against all claims,
liabilities, lawsuits, costs, damages or expenses (including, without
limitation, reasonable attorneys' fees and expenses incurred in litigation or
otherwise) arising out of and sustained by any of them due to (a) any
misrepresentation or breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement or any document executed
and delivered by the Company in connection with the Transactions ("Transaction
Documents"); (b) claims relating to the ownership or use of the Assets,
including, without limitation, any and all claims, liabilities, Taxes, debts,
contracts, agreements, obligations, damages, costs and expenses, known or
unknown, fixed or contingent, which are claimed or demanded by third parties
against Purchaser or Newco arising out of the operation of the Company's
business prior to the Closing Date or as a result of the Transactions, which
were not specifically disclosed herein or in the Schedules attached hereto; or
(c) any Taxes for Overlap Tax Periods that are allocated to the period ending on
the Closing Date in accordance with Section 4.8(b) hereof (collectively all
claims described in this Section 7.1, being "Section 7.1 Indemnified Claims").
7.2. Indemnification by Purchaser and Newco. Subject to the other
applicable provisions of this Article 7, from and after the Closing each of
Purchaser and Newco hereby indemnifies and holds harmless the Company
Shareholders and, as applicable, each of its affiliates, directors, officers,
employees, advisors and agents ("Company Protected Parties") from and against
all claims, liabilities, lawsuits, costs, damages or expenses (including,
without limitation, reasonable attorneys' fees and expenses incurred in
litigation or otherwise) arising out of and sustained by any of them due to (a)
any misrepresentation or breach of any representation, warranty, covenant or
agreement of Purchaser or Newco contained in this Agreement or any of the
Transaction Documents; or (b) claims relating to the ownership or use of the
Assets, including, without limitation, any and all claims, liabilities, Taxes,
debts, contracts, agreements, obligations, damages, costs and expenses, known or
unknown, fixed or contingent, which are claimed or demanded by third parties
against the Company Shareholders arising out of the operation of Purchaser's
business prior to or after the Closing Date (except as to Purchaser's business
previously owned and operated by the Company, only after the Closing Date) or as
a result of the Transactions, which were not specifically disclosed herein, in
the Schedules attached hereto or in the Securities Filings filed prior to the
date hereof (collectively all claims described in this Section 7.2, being
"Section 7.2 Indemnified Claims").
7.3. Provisions Regarding Indemnification. The indemnified party (or
parties) shall promptly notify the indemnifying party (or parties) of any claim,
demand, action or proceeding for which indemnification will or may be sought
under Section 7.1 or 7.2 of this Agreement and, if such claim, demand, action or
proceeding is a third party claim, demand, action or proceeding, the
indemnifying party will have the right, at its expense, to assume the defense
thereof using counsel reasonably acceptable to the indemnified party. The
indemnified party shall have the right to participate in at its own expense, but
not control, the defense of any such third party claim, demand, action or
proceeding. In connection with any such third party claim, demand, action or
proceeding, the Major Shareholders, Purchaser and Newco shall cooperate with
each other. No such third party claim, demand, action or proceeding shall be
settled without the prior written consent of the indemnified party provided,
however, that if a firm, written offer is made to settle any such third party
claim, demand, action or proceeding (which offer does not involve the admission
of guilt or wrongdoing by any indemnified party) and the indemnifying party
proposes to accept such settlement and the indemnified party refuses to consent
to such settlement, then: (i) the indemnifying party shall be excused from, and
the indemnified party shall be solely responsible for, all further defense of
such third party claim, demand, action or proceeding; and (ii) the maximum
liability of the indemnifying party relating to such third party claim, demand,
action or proceeding shall be the amount of the proposed settlement if the
amount thereafter recovered from the indemnified party on such third party
claim, demand, action or proceeding is greater than the amount of the proposed
settlement. Additional provisions relating to notification of Section 7.1
Indemnification Claims are set forth in the Indemnity Escrow Agreement.
7.4. Survival. The representations, warranties and covenants (other than
the covenants contained in Section 4.1, which shall survive in accordance with
its terms, and Section 7.9, which shall survive indefinitely) contained in this
Agreement and in the Transaction Documents delivered at the Closing shall
survive the Closing for a period ending eighteen (18) months after the Closing
Date (except that the covenants in Section 4.1 shall survive as provided
therein) and shall thereafter cease to be of any force and effect, except for
claims as to which notice has been given in accordance with Section 7.3 hereof
prior to such date and claims which are pending on such date.
7.5. Indemnity Escrow Agreement. To secure the satisfaction of the Section
7.1 Indemnified Claims, the Escrow Shares shall be issued on behalf of the
Company Preferred Shareholders and the holders of Company Shareholder Notes in
the name of Xxxxxx X. Xxxxxxxx (a representative of one of the Company Preferred
Shareholders) or his successor as provided in Section 7(g) of the Indemnity
Escrow Agreement (the "Representative"), as nominee and attorney-in-fact for the
Company Preferred Shareholders and holders of Company Shareholder Notes, to be
held in escrow pursuant to an Indemnity Escrow Agreement to be entered into at
Closing, by and among Purchaser, the Company, the Representative and the Major
Shareholders in the form attached hereto as Exhibit 7.5 (the "Indemnity Escrow
Agreement"). The Escrow Shares shall be held and disposed of in accordance with
the Indemnity Escrow Agreement and shall be the sole source of recourse of the
Purchaser Protected Parties for Section 7.1 Indemnified Claims. Schedule 7.5,
which shall be attached to this Agreement at Closing, is a percentage allocation
of the Escrow Shares which each Company Preferred Shareholder and each holder of
Company Shareholder Notes will be entitled to receive upon the termination of
the Indemnity Escrow Agreement if no Section 7.1 Indemnification Claims are paid
therefrom. Any Section 7.1 Indemnification Claim shall reduce each Company
Preferred Shareholder's and each holder of Company Shareholder Notes'
entitlement to Escrow Shares (or proceeds therefrom) on a pro rata basis in
accordance with the allocation ratios of the Company Preferred Shareholders and
holders of Company Shareholder Notes to be set forth on Schedule 7.5.
7.6. Limitations.
(a) Notwithstanding anything to the contrary contained herein, neither
Purchaser nor Newco will assert a claim against the Escrow Shares under this
Article 7 until the total of all Section 7.1 Indemnified Claims exceeds in the
aggregate $500,000, at which time all Section 7.1 Indemnified Claims in excess
of $100,000 may be claimed in full.
(b) Notwithstanding anything to the contrary contained herein, the Major
Shareholders will not assert a claim against Purchaser or Newco under this
Article 7 until the total of all Section 7.2 Indemnified Claims exceeds
$2,500,000, at which time all Section 7.2 Indemnified Claims in excess of
$500,000 may be claimed in full.
(c) All Section 7.1 Indemnified Claims shall be satisfied solely from the
Escrow Shares. Section 7.2 Indemnified Claims may be satisfied by delivery of
Purchaser Series A Preferred Stock (or, if such stock has by its terms
converted, Purchaser Common Stock) or, at the election of Representative, if the
average per share closing market price of Purchaser Common Stock for the ten
(10) day period ending on the business day prior to the payment of the Section
7.2 Indemnified Claim is $3.00 or less per share (as adjusted for share splits,
share dividends, and share recombinations with respect to Purchaser Common Stock
from the date hereof to the date of payment of the claim), cash in an amount
equal to the value of the Section 7.2 Indemnified Claim. The number of Escrow
Shares to be issued in satisfaction of a Section 7.1 Indemnified Claim shall be
as determined in the Indemnity Escrow Agreement. The number of shares of
Purchaser Common Stock or Purchaser Series A Preferred Stock to be issued in
satisfaction of a Section 7.2 Indemnified Claim shall be based upon a market
price of Purchaser Common Stock equal to the average per share closing market
price of Purchaser Common Stock for the ten (10) day period ending on the
business day prior to the payment of the Section 7.2 Indemnified Claim.
(d) Any indemnification claims of Purchaser or the Company Shareholders
pursuant to Section 4.1 hereof shall not be subject to any of the terms or
limitations described in this Article 7.
(e) The satisfaction of all Section 7.1 Indemnified Claims and Section 7.2
Indemnified Claims shall be deemed to constitute adjustments to the aggregate
consideration paid by Purchaser pursuant to the Merger.
7.7. Effect of Insurance. With respect to any indemnifiable claim
hereunder, the amount recoverable by the party seeking indemnification shall
take into account any reimbursements realized by such party from insurance
policies or other indemnification sources, arising from the same incident or set
of facts or circumstances giving rise to the claim for indemnification. Upon the
payment of the indemnified claim from the indemnifying party to the indemnified
party, the indemnifying party shall have a right of subrogation with respect to
any insurance proceeds or other rights to third party reimbursement for such
claims held by the indemnified party.
7.8. Indemnification for Shareholder Action. In addition to its
indemnification obligations under Section 7.1, each of the Major Shareholders
hereby indemnifies and holds harmless Purchaser and each of its affiliates,
directors, officers, employees, advisors and agents from and against all claims,
liabilities, lawsuits, costs, damages or expenses (including, without
limitation, reasonable attorneys' fees and expenses incurred in litigation or
otherwise) arising out of and sustained by any of them due to a claim from any
Company Shareholder or any person claiming any Rights to Securities that the
Merger, including, without limitation, the allocation of cash and the Closing
Merger Shares among the Company Shareholders and the holders of Company
Shareholder Notes, constitute a breach by the Company's board of directors of
its duty of care or duty of loyalty to the Company Shareholders or otherwise
violates the Company's Certificate of Incorporation or Bylaws, Delaware law or
any federal or state securities laws (collectively, "Section 7.8 Indemnified
Claims"). The indemnification obligations under this Section 7.8 shall survive
for a period of three (3) years and one month after the Closing Date.
Notwithstanding anything in this Section 7.8 to the contrary, the Major
Shareholders' indemnification obligations under this Section 7.8 shall be
several, and the aggregate liability of any Major Shareholder for Section 7.8
Indemnified Claims shall be limited to the number of Closing Merger Shares and
number of Additional Shares issued to such Major Shareholder (or, if any such
shares are sold, assigned, transferred or pledged, an amount in cash
attributable to such shares equal to $3.00 per share (as adjusted for share
splits, share dividends and share recombinations with respect to Purchaser
Common Stock between the date hereof and the Closing Date)), which shall be the
sole source of recourse to Purchaser for Section 7.8 Indemnified Claims. Any
Section 7.8 Indemnified Claim shall, at the option of the Major Shareholder, be
satisfied first from Closing Merger Shares or Additional Shares before cash
proceeds are used to satisfy such claim. The number of Closing Merger Shares or
Additional Shares to be paid to Purchaser in satisfaction of a Section 7.8
Indemnified Claim shall be based upon a market price of Purchaser Common Stock
equal to the per share closing market price of Purchaser Common Stock for the
ten (10) day period ending on the business day prior to the payment of the
Section 7.8 Indemnified Claim (provided, however, to the extent that Closing
Merger Shares or Additional Shares are comprised of shares of Purchaser Series A
Preferred Stock, adjustment shall be made for any share splits, share dividends
or share recombinations with respect to Purchaser Common Stock from the date
hereof through the date of payment of the claim).
7.9. Exclusive Remedy. With the exception of the indemnification
obligations under Article 4 and any claims for fraud, the indemnification
obligations of the Major Shareholders under this Article 7 are the sole and
exclusive remedy of the Purchaser Protected Parties regarding any matter related
to this Agreement and the Transactions. With the exception of the
indemnification obligations under Article 4 and any claims for fraud, the
indemnification obligations of Purchaser and Newco under this Article 7 are the
sole and exclusive remedy of the Company Shareholders regarding any matter
related to this Agreement and the Transactions.
ARTICLE 8.
CONDITIONS TO OBLIGATIONS
OF PURCHASER AND NEWCO TO CLOSE
Each and every obligation of Purchaser and Newco under this Agreement to be
performed on or prior to the Closing shall be subject to the fulfillment, on or
prior to the Closing, of each of the following conditions, which conditions the
Company agrees to use its best efforts to satisfy:
8.1. Representations and Warranties True at Closing. The representations
and warranties made by the Company in or pursuant to the Agreement or given on
their behalf hereunder shall be true and correct in all respects on and as of
the Closing Date, in each case with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date (except to the extent expressly made as of an earlier date, in which case
such representations and warranties shall be true and correct as of such date),
except where the failure of such representations and warranties to be so true
and correct does not have, and is not likely to have, individually or in the
aggregate, a Company Material Adverse Consequence.
8.2. Obligations Performed. The Company shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing, except where the failure to
perform or comply does not have, and is not likely to have, individually or in
the aggregate, a Company Material Adverse Consequence.
8.3. Consents. Except for the filing of a Certificate of Merger as required
under the Delaware Act, any consents required to be obtained by the Company from
a Governmental Authority to consummate the Transactions shall have been obtained
and any consents required to be obtained from third parties under Material
Contracts in order to consummate the Transactions shall have been obtained.
8.4. Closing Deliveries. The Company shall have delivered to Purchaser each
of the following:
(a) a certificate of the President of the Company certifying as to the
matters set forth in Sections 8.1, 8.2 and 8.3 hereof and as to the satisfaction
of all other conditions set forth in this Article 8 as to which the President of
the Company has actual knowledge;
(b) a Certificate of Merger duly executed by an officer of the Company for
filing in accordance with the provisions of Section 2.2 hereof;
(c) the corporate minute books, seals and stock transfer books of the
Company certified by the corporate secretary of the Company as true, correct and
complete, including minutes authorizing the Merger and the Transactions;
(d) the audited Company financial statements, as more fully described in
Section 4.5 hereof;
(e) an opinion of counsel to the Company addressing only the opinions set
forth in the 1992 State Bar of Georgia Report in Legal Opinions to Third Parties
in Corporate Transactions;
(f) the Indemnity Escrow Agreement duly executed by the Representative and
the Major Shareholders;
(g) Investment Letters executed by all of the Company Preferred
Shareholders and holders of Company Shareholder Notes;
(h) the Closing Consideration Certificate, the Accounts Payable Certificate
and the Expenses Certificate each duly executed by the chief financial officer
of the Company; and
(i) a voting agreement executed by the Major Shareholders in the form
attached hereto as Exhibit 8.4(i).
8.5. No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency or any
pending action by any other Person, challenging or seeking damages in connection
with the Merger and having a Purchaser Material Adverse Effect.
8.6. No Company Material Adverse Consequence. Since the date of execution
of this Agreement, there shall have been no Company Material Adverse
Consequence.
8.7. Revised Schedules. The Company shall have provided Purchaser with
revised Schedules dated as of the Closing Date (the "Revised Schedules"), with
all material changes through such date duly noted thereon, and the Revised
Schedules will not contain any disclosures which (i) should have been but were
not disclosed on the Schedules attached hereto and which would have a Company
Material Adverse Effect, or (ii) set forth material changes, which in the
opinion of Purchaser, individually or in the aggregate, could reasonably be
expected to have a Company Material Adverse Consequence unless such disclosures
are approved in writing by Purchaser.
8.8. Repayment of Debts. At the Closing, all officers, directors,
stockholders and employees of the Company shall repay to the Company or
Purchaser in full any outstanding indebtedness, if any, owed to the Company by
them or their families.
8.9. Company Officer/Director Releases. Each of the officers and directors
of the Company shall have executed the Company Officer/Director Releases.
8.10. Company Shareholder Notes. Each of the Company Shareholder Notes
shall be delivered to Purchaser at Closing with the holder's notation "satisfied
in full" on the face thereof. Holders of Company Shareholder Notes shall also
have executed and delivered to Purchaser Uniform Commercial Code UCC-3
termination statements as requested by Purchaser.
8.11. Company Shareholder Approval. Company Shareholder Approval shall have
been obtained.
8.12. Bank Loan. That certain loan agreement dated October 2, 1998 between
the Company and Silicon Valley Bank (the "Bank") shall have been amended so as
to provide for: (i) payments of interest only through December 31, 2000; (ii)
the conversion of the existing revolving loan thereunder into a term loan
commencing on January 1, 2001, and (iii) termination of all current and
contingent Warrants issued or issuable to the Bank, all on terms reasonably
acceptable to Purchaser.
8.13. Termination of Options and Warrants. The Company shall have
terminated the CareCentric Solutions, Inc. 1995 Incentive Stock Plan and shall
have caused outstanding options representing rights to purchase an aggregate of
at least 1,981,387 shares of Company Common Stock to have been terminated. The
Warrants shall have been terminated.
8.14. Termination of Stockholders Agreements. The Company shall have
terminated the Third Amended and Restated Stockholders' Agreement dated as of
December 12, 1997 to which it is a party and all related management or
registration rights agreements contemplated thereby, as well as any other
shareholder agreement to which any of the Company Shareholders is a party.
8.15. Appointment of Representative. Each holder of Company Preferred Stock
or Company Shareholder Notes (except for those who have perfected appraisal
rights under the Delaware Act) shall have executed and delivered to Purchaser a
power of attorney in form reasonably acceptable to Purchaser appointing the
Representative to act on its behalf in connection with the Indemnity Escrow
Agreement and the Escrow Shares.
8.16. Appraisal Rights. In obtaining Company Shareholder Approval, holders
of no more than five percent (5%) of the aggregate number of shares of issued
and outstanding Company Capital Stock shall have exercised appraisal rights
under the Delaware Act.
8.17. Regulation D Exemption. Purchaser shall have a reasonable basis for
reliance on the Regulation D Exemption and for reliance on applicable Blue Sky
law exemptions in every state where a Company Preferred Shareholder or a holder
of Company Shareholder Notes is resident, except where the Regulation D
Exemption or Blue Sky exemption is unavailable due to the failure of Purchaser
to take necessary actions to qualify for the Regulation D Exemption or any
applicable Blue Sky exemption.
ARTICLE 9.
CONDITIONS TO OBLIGATIONS
OF THE COMPANY TO CLOSE
Each and every obligation of the Company under this Agreement to be
performed on or prior to the Closing, shall be subject to the fulfillment, on or
prior to the Closing, of each of the following conditions, which conditions each
of Purchaser and Newco agrees to use best efforts to satisfy:
9.1. Representations and Warranties True at Closing. The representations
and warranties made by Purchaser and Newco in or pursuant to the Agreement or
given on its behalf hereunder shall be true and correct in all respects on and
as of the Closing Date, in each case with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date (except to the extent expressly made as of an earlier date, in which case
such representations and warranties shall be true and correct as of such date),
except where the failure of such representations and warranties to be so true
and correct does not have, and is not likely to have, individually or in the
aggregate, a Purchaser Material Adverse Consequence.
9.2. Obligations Performed. Purchaser shall have performed and complied
with all of its obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing, except where the failure to
perform or comply does not have, and is not likely to have, individually, or in
the aggregate, a Purchaser Material Adverse Consequence.
9.3. Closing Deliveries. Purchaser shall have delivered to the Major
Shareholders and the Company each of the following:
(a) certified copies of the corporate resolutions of Purchaser and Newco
authorizing the execution, delivery and performance of this Agreement by
Purchaser, together with an incumbency certificate with respect to the
respective officers of Purchaser and Newco executing documents or instruments on
behalf of Purchaser or Newco, as the case may be;
(b) a certificate of the President or any Senior Vice President of
Purchaser certifying as to the matters set forth in Sections 9.1, 9.2 and 9.3
hereof and as to the satisfaction of all other conditions set forth in this
Article 9 as to which such officer of Purchaser has actual knowledge;
(c) an opinion of counsel to Purchaser and Newco reasonably satisfactory to
the Company and addressing only the opinions set forth in the 1992 State Bar of
Georgia Report on Legal Opinions to Third Parties in Corporate Transactions;
(d) a Certificate of Merger duly executed by an officer of Purchaser for
filing in accordance with Section 2.2, or evidence of such filing;
(e) an amendment to Purchaser's Certificate of Incorporation, certified by
the Secretary of State of Delaware, setting forth the Certificate of
Designations for the Purchaser Series A Preferred Stock ("Certificate of
Designations") in the form of Exhibit 9.3(e); and
(f) the Closing Consideration Certificate, duly executed by an officer of
Purchaser.
9.4. No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by any
government agency or any pending action by any other Person, challenging or
seeking damages from the Company in connection with the Merger and having a
Company Material Adverse Consequence or a Purchaser Material Adverse
Consequence.
9.5. Revised Schedules. Purchaser shall have provided the Company with
Revised Schedules dated as of the Closing Date, with all material changes
through such date duly noted thereon, and the Revised Schedules will not contain
any disclosures which (i) should have been but were not disclosed on the
Schedules attached hereto and which would have a Purchaser Material Adverse
Effect, or (ii) set forth material changes, which in the opinion of the Company,
individually or in the aggregate, could reasonably be expected to have a
Purchaser Material Adverse Consequence, unless such disclosures are approved in
writing by the Company.
9.6. No Material Adverse Consequence. Since the date of execution of this
Agreement, there shall have been no Purchaser Material Adverse Consequence.
9.7. Voting Agreements. Voting agreements shall have been executed by
Mestek, Inc., Xxxxxxx X. X'Xxxxxxx, O'Xxxxxxx Xxxxx, Inc. and Rowan Nominees
Limited relating to the approval of the conversion of the Purchaser Series A
Preferred Stock into Purchaser Common Stock in the forms attached hereto as
Exhibit 9.7.
9.8. Issuance of Options. Purchaser shall have authorized the issuance of
stock options under its Omnibus Equity-based Incentive Plan to those Company
option holders whose options were not terminated pursuant to Section 4.16
hereof, with the number of shares of Purchaser Common Stock subject to the
options and the per share exercise price of the options determined pursuant to
Section 4.16 hereof.
ARTICLE 10.
TERMINATION
10.1. Termination. This Agreement may be terminated at any time (the
"Termination Date") before the Closing Date:
(a) by mutual written consent of Purchaser and the Company;
(b) by Purchaser upon the occurrence or upon its discovery of a Company
Material Adverse Consequence;
(c) by the Company upon the occurrence or upon its discovery of a Purchaser
Material Adverse Consequence;
(d) by Purchaser or the Company pursuant to Section 4.15(b) hereof; or
(e) by Purchaser or the Company if the Closing is not consummated on or
before August 15, 1999, unless the failure to close by such date is attributable
to actions or omissions of the party seeking to terminate this Agreement under
this subsection.
10.2. Effect of Termination. In the event this Agreement is terminated
pursuant to Sections 10.1(a), 10.1(b), 10.1(c) or 10.1(e) above, no party shall
have any obligations to the others hereunder except for those obligations with
respect to confidentiality and the return of confidential information set forth
below and in the Confidentiality Agreement. If this Agreement is terminated
pursuant to Section 10.1(d), the remedies available to Purchaser set forth in
Section 4.15(b) hereof shall apply. If this Agreement is terminated, each party
shall promptly return to each other all copies of the due diligence materials
previously provided to such party or their representatives, and the obligations
in respect of confidentiality set forth in the Confidentiality Agreement shall
remain in effect.
10.3. NASDAQ Approval. The parties hereto acknowledge and agree that
Purchaser is seeking written confirmation from NASDAQ that the issuance by
Purchaser of the Purchaser Series A Preferred Stock will not require the
approval of Purchaser's shareholders until such stock is converted into
Purchaser Common Stock. In the event that such confirmation from NASDAQ is not
received by August 15, 1999, or if NASDAQ determines that approval of
Purchaser's shareholders is required prior to issuance of the Purchaser Series A
Preferred Stock, the parties shall use commercially reasonable best efforts to
amend this Agreement and restructure the Transactions on an equivalent economic
basis to the terms set forth hereto, pursuant to which Purchaser Common Stock
would be issued to the Company Preferred Shareholders and holders of Company
Shareholder Notes in lieu of Purchaser Series A Preferred Stock, and the parties
would seek to close as soon as possible in accordance with NASDAQ requirements
and the Delaware Act. In connection with such a restructuring of the
Transactions, the parties shall use commercially reasonable best efforts to
provide for the operation, funding and management of Company's business on terms
mutually satisfactory to Purchaser and the Company until the closing of such a
restructured transaction.
ARTICLE 11.
MISCELLANEOUS PROVISIONS
11.1. Severability. If any provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws apply to this Agreement, that provision
shall be ineffective to the extent of such prohibition and shall, to the extent
possible, be modified to conform with such laws, without invalidating the
remaining provisions hereto.
11.2. Modification. This Agreement may not be changed or modified except in
writing specifically referring to this Agreement and signed by each of the
parties hereto.
11.3. Assignment, Survival and Binding Agreement. This Agreement and the
Transaction Documents may not be assigned by the Company and may not be assigned
by Purchaser or Newco without the prior written consent of the Company. The
terms and conditions hereof shall survive the Closing as provided herein and
shall inure to the benefit of and be binding upon the parties hereto and their
respective heirs, personal representatives, successors and permitted assigns.
11.4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.5. Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below.
If to the Company: CareCentric Solutions, Inc.
00000 Xxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to: Long Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxxx X. Short, Esq.
Facsimile: (000) 000-0000
If to Purchaser or Newco: Xxxxxxx Central Holdings, Inc.
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to: Arnall Golden & Xxxxxxx, LLP
2800 One Atlantic Center
0000 X. Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
or at such other address as any party hereto notifies the other parties hereof
in writing.
11.6. Entire Agreement; Third Party Beneficiaries. Except for the
Confidentiality Agreement, the restrictions and obligations of which shall
survive according to its terms, this Agreement, together with the Exhibits and
Schedules attached hereto, constitutes the entire agreement and supersedes any
and all other prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof and,
except as otherwise expressly provided herein, is not intended to confer upon
any Person other than Purchaser, Newco and the Company, any rights or remedies
hereunder (provided, however, that the parties hereto acknowledge that the
Company Shareholders are third party beneficiaries with respect to Sections 3.1
and 4.1 and Article 7 hereof). No provision of this Agreement shall be construed
against any party on the ground that such party drafted the provision or caused
it to be drafted or the provision contains a covenant of such party.
11.7. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Georgia, excluding those
relating to conflicts of laws.
11.8. Arbitration. Any claim arising out of or related to this Agreement or
the alleged breach of a representation, warranty or covenant thereof or arising
out of any of the Transactions, which has not been resolved by mutual agreement
of the parties after a sixty (60) day negotiation period in which the parties
try to resolve the claim, shall be finally settled by arbitration. Such
arbitration shall be conducted in Atlanta, Georgia in accordance with the
Commercial Rules of the American Arbitration Association then in effect, as
modified or supplemented herein, or as the parties mutually agree otherwise.
Notwithstanding the rules of the arbitral body, the parties hereto agree (a)
that any arbitration shall be presided over by a single arbitrator, who shall
have been admitted to the practice of law, and be in good standing or on
retirement status in any of the fifty United States or the District of Columbia,
(b) that the arbitrator shall base his decision on the facts as presented into
evidence, and (c) that the arbitrator shall prepare a written memorandum of
decision setting forth the findings of fact and conclusions of law. The
arbitrator shall be selected by Purchaser and the Major Shareholders. If they
cannot agree on such selection within a thirty (30) day period, they shall ask
the American Arbitration Association to appoint an arbitrator. The decision of
the arbitrator shall be final, and judgment may be entered upon it in accordance
with the applicable law in any court having jurisdiction. Subject to the other
express limitations under this Agreement, any claim for relief made pursuant to
this Agreement shall be made no later than three years and one month after the
Closing Date. All costs of the arbitration shall be borne by the party
determined to be the losing party by the arbitrator. For purposes of determining
the prevailing and losing party, the arbitrator may consider offers of
settlement by either Purchaser or the Major Shareholders, or both of them.
11.9. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.10. Incorporation of Exhibit and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
11.11. Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
11.12. Time of Essence. Time is of the essence in this Agreement.
11.13. Appointment of Agent. By operation of this Agreement and upon the
approval of this Agreement by the holders of Company Preferred Stock, the
Representative shall be appointed as the designated agent of the Company
Shareholders for the purpose of enforcing the rights of and the obligations to
the Company Shareholders pursuant to (i) certain express provisions of this
Agreement; (ii) the voting agreements in the form of Exhibit 9.7, between the
Agent, the Purchaser, certain shareholders of the Purchaser, and Mestek, Inc.
relating to the conversion of the Purchaser Series A Preferred Stock into
Purchaser Common Stock; and (iii) the Indemnity Escrow Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Company: Purchaser:
CARECENTRIC SOLUTIONS, INC. XXXXXXX CENTRAL HOLDINGS, INC.
By: ________________________ By: ____________________________
Name: ________________________ Name: ____________________________
Title: ________________________ Title: ____________________________
Newco:
XXXXXXX ACQUISITION CORPORATION
By: ________________________
Name: ________________________
Title: ________________________
MAJOR SHAREHOLDERS:
The undersigned Major Shareholders have executed this Agreement solely in
order to be contractually bound by Section 4.1, Article 7 and Section 11.8
hereof.
________________________________
________________________________
________________________________
AGREEMENT AND PLAN OF MERGER
LIST OF SCHEDULES*
Schedules Description
Schedule 1.1 Major Shareholders
Schedule 2.5(c) Company Designees
Schedule 3.1(a) Holders of Company Shareholder Notes;
Preferred Exchange Ratio and Common Exchange Ratio
Schedule 3.3 Options and Warrants
Schedule 4.1(j) Notices - Company Shareholders and Major Shareholders
Schedule 4.6 Exceptions to conduct of Company pending Merger
Schedule 4.7(b) Severance Payment Obligations
Schedule 4.16 Option Conversion Formula
Schedule 5.1 States of Qualification - Company
Schedule 5.2 Officers and Directors - Company
Schedule 5.3 Encumbrances - Company
Schedule 5.4 Required Consents and Approvals - Company
Schedule 5.5(a) Capitalization of the Company -- Outstanding Stock
Schedule 5.5(b) Rights to Securities
Schedule 5.8 Company Financial Statements; Liabilities not disclosed
on Financials - Company
Schedule 5.9 Taxes
Schedule 5.10 Material Contracts - Company
Schedule 5.12(a) Intellectual Property - Company
Schedule 5.12(b) Owned Software - Company
Schedule 5.12(c) Licensed Software - Company
Schedule 5.13 Labor Matters - Company
Schedule 5.14(a) Work-in-Process, Orders and Returns - Company
Schedule 5.14(b) Cancellations Arising from Transactions - Company
Schedule 5.15 Exceptions to Absence of Certain Changes - Company
Schedule 5.16 Leases - Company
Schedule 5.17 Litigation - Company
Schedule 5.18 Employee Benefit Plans of All Kinds - Company
Schedule 5.21 Bank Accounts - Company
Schedule 5.23 Insurance - Company
Schedule 6.1 States of Qualification - Purchaser
Schedule 6.3 Purchaser Consents
Schedule 6.4 Encumbrances - Purchaser
Schedule 6.5 Capitalization - Purchaser
Schedule 6.8 Exceptions regarding Securities Filings - Purchaser
Schedule 7.5 Allocation of Escrow Shares
Exhibit 3.1(e) Investment Letter
Exhibit 7.5 Form of Indemnity Escrow Agreement
Exhibit 8.4(i)** Major Shareholders Voting Agreement
Exhibit 9.3(e) Certificate of Designations - Purchaser Series A
Preferred Stock
Exhibit 9.7*** Purchaser Shareholders and Mestek, Inc. Voting Agreement
*In accordance with Item 601(b)(2) of Regulation S-K, the schedules have been
omitted, except as otherwise indicated. The Registrant will furnish
supplementally a copy of any omitted schedule to the Commission upon request.
**Filed as Exhibit 10.1 to this Form 8-K.
***Filed as Exhibit 10.2 to this Form 8-K.
