<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 25, 1998
DAOU SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-22073 330284454
(Commission File Number) (IRS Employer Identification No.)
5120 Shoreham Place, San Diego, California 92122
(Address of principal executive offices, including zip code)
(619) 452-2221
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 25, 1998, DAOU Systems, Inc., a Delaware corporation (the
"Company"), acquired 100% of the issued and outstanding shares of Technology
Management, Inc., an Indiana corporation ("TMI"), through the issuance of
1,078,963 shares of the Company's Common Stock, par value $.001 per share
("Common Stock"), to the stockholders of TMI (the "TMI Stockholders"). The
acquisition was accomplished by means of a merger (the "TMI Merger") of TMI
with and into DAOU-TMI, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company ("DAOU-TMI"), pursuant to the terms of an Agreement
and Plan of Merger, dated as of June 16, 1998 (the "TMI Merger Agreement"),
by and among the Company, DAOU-TMI, TMI and the TMI Stockholders.
As a result of the TMI Merger, all of the shares of TMI were
canceled and retired, and TMI was merged with and into DAOU-TMI. Pursuant to
the terms of the TMI Merger Agreement, the TMI Stockholders received
1,078,963 shares of Common Stock, having an aggregate value of approximately
$18.6 million at the time of the TMI Merger. The TMI Merger constituted a
nontaxable reorganization under Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended, and will be recorded as a pooling of interests for
accounting purposes.
TMI is a provider of information technology consulting services
primarily to the healthcare industry. Its services include executive
counseling and education, management decision support, information
engineering, process improvement re-engineering, and project management and
implementation services.
In addition, on June 25, 1998, the Company acquired 100% of the
issued and outstanding shares of International Health Care Systems, Inc., a
Florida corporation ("IHCS"), through the issuance of 224,668 shares of
Common Stock to the stockholders of IHCS (the "IHCS Stockholders"). The
acquisition was accomplished by means of a merger (the "IHCS Merger") of IHCS
with and into DAOU-TMI, pursuant to the terms of an Agreement and Plan of
Merger, dated as of June 16, 1998 (the "IHCS Merger Agreement"), by and among
the Company, DAOU-TMI, IHCS and the IHCS Stockholders.
As a result of the IHCS Merger, all of the shares of IHCS were
canceled and retired, and IHCS was merged with and into DAOU-TMI. Pursuant
to the terms of the IHCS Merger Agreement, the IHCS Stockholders received
224,668 shares of Common Stock, having an aggregate value of approximately
$3.9 million at the time of the IHCS Merger. The IHCS Merger constituted a
nontaxable reorganization under Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended, and will be recorded as a pooling of interests for
accounting purposes.
IHCS was established to provide certain services in connection with
the above described information technology consulting services of TMI.
-2-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of businesses acquired.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Company to provide the financial statements, if any,
required by Item 7(a) of Form 8-K. In accordance with Item 7(a)(4) of Form
8-K, such financial statements, if any, shall be filed by amendment to this
Current Report on Form 8-K on or about August 1, 1998.
(b) Pro forma financial information.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Company to provide the pro forma financial information,
if any, required by Item 7(b) of Form 8-K. In accordance with Item 7(b)(2)
of Form 8-K, such pro forma financial information, if any, shall be filed by
amendment to this Current Report on Form 8-K on or about August 1, 1998.
(c) Exhibits.
The following exhibits are filed herewith or incorporated
by reference as part of this report:
<TABLE>
<CAPTION>
Exhibit
No. Document Description
- --------- -------------------------------------------------
<S> <C>
2.1*+ Agreement and Plan of Merger, dated as of June 16,
1998 (the "TMI Merger Agreement"), by and among
DAOU Systems, Inc., a Delaware corporation, DAOU-
TMI, Inc., a Delaware corporation and wholly-owned
subsidiary of DAOU Systems, Inc., Technology
Management, Inc., an Indiana corporation, and the
stockholders of Technology Management, Inc.
2.2**+ Agreement and Plan of Merger, dated as of June 16,
1998 (the "IHCS Merger Agreement"), by and among
DAOU Systems, Inc., a Delaware corporation, DAOU-
TMI, Inc., a Delaware corporation and wholly-owned
subsidiary of DAOU Systems, Inc., International
Health Care Systems, Inc., a Florida corporation,
and the stockholders of International Health Care
Systems, Inc.
99.1*** Press release entitled "DAOU Systems Merges with
Technology Management, Inc."
</TABLE>
* The table of contents to the TMI Merger Agreement lists the
exhibits and schedules to the TMI Merger Agreement. In accordance with Item
601(b)(2) of Regulation S-K, the exhibits
- 3 -
<PAGE>
and schedules to the TMI Merger Agreement have been excluded; such exhibits
and/or schedules will be furnished supplementally upon request by the
Securities and Exchange Commission.
** The table of contents to the IHCS Merger Agreement lists the
exhibits and schedules to the IHCS Merger Agreement. In accordance with Item
601(b)(2) of Regulation S-K, the exhibits and schedules to the IHCS Merger
Agreement have been excluded; such exhibits and/or schedules will be furnished
supplementally upon request by the Securities and Exchange Commission.
*** Filed as an exhibit to the Company's Current Report on Form 8-K
which was filed with the Securities and Exchange Commission on June 19, 1998 and
incorporated herein by reference.
+ Confidential treatment has been requested for portions of this
exhibit.
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 9, 1998 DAOU SYSTEMS, INC.
By: /s/ FRED C. McGEE
--------------------------------------
Fred C. McGee, Chief Financial Officer
-5-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Document Description
- --------- --------------------------------------------------
<S> <C>
2.1*+ Agreement and Plan of Merger, dated as of June 16,
1998 (the "Merger Agreement"), by and among DAOU
Systems, Inc., a Delaware corporation, DAOU-TMI,
Inc., a Delaware corporation and wholly- owned
subsidiary of DAOU Systems, Inc.,Technology
Management, Inc., an Indiana corporation, and the
stockholders of Technology Management, Inc.
2.2**+ Agreement and Plan of Merger, dated as of June 16,
1998 (the "IHCS Merger Agreement"), by and among
DAOU Systems, Inc., a Delaware corporation, DAOU-
TMI, Inc., a Delaware corporation and wholly-owned
subsidiary of DAOU Systems, Inc., International
Health Care Systems, Inc., a Florida corporation,
and the stockholders of International Health Care
Systems, Inc.
99.1*** Press release entitled "DAOU Systems Merges with
Technology Management, Inc."
</TABLE>
* The table of contents to the TMI Merger Agreement lists the exhibits
and schedules to the TMI Merger Agreement. In accordance with Item 601(b)(2) of
Regulation S-K, the exhibits and schedules to the TMI Merger Agreement have been
excluded; such exhibits and/or schedules will be furnished supplementally upon
request by the Securities and Exchange Commission.
** The table of contents to the IHCS Merger Agreement lists the
exhibits and schedules to the IHCS Merger Agreement. In accordance with Item
601(b)(2) of Regulation S-K, the exhibits and schedules to the IHCS Merger
Agreement have been excluded; such exhibits and/or schedules will be furnished
supplementally upon request by the Securities and Exchange Commission.
*** Filed as an exhibit to the Company's Current Report on Form 8-K
which was filed with the Securities and Exchange Commission on June 19, 1998 and
incorporated herein by reference.
+ Confidential treatment has been requested for portions of this
exhibit.
-6-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DAOU SYSTEMS, INC.,
DAOU-TMI, INC.,
TECHNOLOGY MANAGEMENT, INC.
AND
THE STOCKHOLDERS OF TECHNOLOGY MANAGEMENT, INC.
LISTED ON THE SIGNATURE PAGE HERETO
Dated as of June 16, 1998
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE MERGER . . .. . . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 1.01 THE MERGER . . . . . . . . . . . . . . . . . . . -2-
SECTION 1.02 EFFECTIVE TIME . . . . . . . . . . . . . . . . . -2-
SECTION 1.03 EFFECT OF THE MERGER . . . . . . . . . . . . . . -2-
SECTION 1.04 CERTIFICATE OF INCORPORATION; BY-LAWS. . . . . . -2-
SECTION 1.05 DIRECTORS AND OFFICERS . . . . . . . . . . . . . -2-
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE
OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . -3-
SECTION 2.01 CONVERSION OF SECURITIES . . . . . . . . . . . . -3-
SECTION 2.02 EXCHANGE OF CERTIFICATES . . . . . . . . . . . . -4-
SECTION 2.03 STOCK TRANSFER BOOKS . . . . . . . . . . . . . . -6-
SECTION 2.04 DISSENTING SHARES. . . . . . . . . . . . . . . . -6-
ARTICLE IIA VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . -6-
SECTION 2.01A CONSENT AND VOTING AGREEMENT . . . . . . . . . . -6-
SECTION 2.02A [[RESERVED]] . . . . . . . . . . . . . . . . . . -7-
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANY AND ITS SUBSIDIARIES. . . . . . . . . . . . . . . . -7-
SECTION 3.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES . . -7-
SECTION 3.02 ARTICLES OF INCORPORATION AND BY-LAWS. . . . . . -7-
SECTION 3.03 CAPITALIZATION . . . . . . . . . . . . . . . . . -7-
SECTION 3.04 AUTHORITY. . . . . . . . . . . . . . . . . . . . -8-
SECTION 3.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . -8-
SECTION 3.06 PERMITS; COMPLIANCE. . . . . . . . . . . . . . . -9-
SECTION 3.07 FINANCIAL STATEMENTS . . . . . . . . . . . . . . -9-
SECTION 3.08 NO UNDISCLOSED LIABILITIES . . . . . . . . . . .-10-
SECTION 3.09 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . .-10-
SECTION 3.10 ABSENCE OF LITIGATION. . . . . . . . . . . . . .-12-
SECTION 3.11 VOTE REQUIRED. . . . . . . . . . . . . . . . . .-12-
SECTION 3.12 BROKERS. . . . . . . . . . . . . . . . . . . . .-12-
SECTION 3.13 COMPANY ACTION . . . . . . . . . . . . . . . . .-13-
SECTION 3.14 TAX MATTERS; "POOLING OF INTERESTS". . . . . . .-13-
SECTION 3.15 REAL PROPERTY. . . . . . . . . . . . . . . . . .-14-
SECTION 3.16 INTELLECTUAL PROPERTY. . . . . . . . . . . . . .-15-
SECTION 3.17 TANGIBLE ASSETS. . . . . . . . . . . . . . . . .-17-
SECTION 3.18 INVENTORY. . . . . . . . . . . . . . . . . . . .-17-
SECTION 3.19 CONTRACTS. . . . . . . . . . . . . . . . . . . .-17-
SECTION 3.20 NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . .-18-
SECTION 3.21 POWERS OF ATTORNEY . . . . . . . . . . . . . . .-18-
SECTION 3.22 INSURANCE. . . . . . . . . . . . . . . . . . . .-18-
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
i
<PAGE>
<CAPTION>
TABLE OF CONTENTS PAGE
(CONTINUED) ----
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SECTION 3.23 EMPLOYEES. . . . . . . . . . . . . . . . . . . .-19-
SECTION 3.24 EMPLOYEE BENEFITS. . . . . . . . . . . . . . . .-19-
SECTION 3.25 GUARANTIES . . . . . . . . . . . . . . . . . . .-21-
SECTION 3.26 ENVIRONMENT, HEALTH AND SAFETY . . . . . . . . .-21-
SECTION 3.27 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY.-22-
SECTION 3.28 [[RESERVED]] . . . . . . . . . . . . . . . . . .-22-
SECTION 3.29 PRODUCT AND SERVICE WARRANTIES . . . . . . . . .-22-
SECTION 3.30 PRODUCT AND SERVICE LIABILITY. . . . . . . . . .-22-
SECTION 3.31 CUSTOMER/SUPPLIER RELATIONSHIPS. . . . . . . . .-22-
SECTION 3.32 CERTAIN BUSINESS PRACTICES . . . . . . . . . . .-22-
SECTION 3.33 DISCLOSURE . . . . . . . . . . . . . . . . . . .-23-
SECTION 3.34 LIMITATION ON REPRESENTATIONS AND WARRANTIES . .-23-
ARTICLE IIIA REPRESENTATIONS AND WARRANTIES OF
EACH STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . . . .-23-
SECTION 3.01A AUTHORIZATION OF TRANSACTION . . . . . . . . . .-23-
SECTION 3.02A NONCONTRAVENTION . . . . . . . . . . . . . . . .-23-
SECTION 3.03A BROKERS. . . . . . . . . . . . . . . . . . . . .-23-
SECTION 3.04A COMPANY SHARES . . . . . . . . . . . . . . . . .-24-
SECTION 3.05A ACCREDITED INVESTOR. . . . . . . . . . . . . . .-24-
SECTION 3.06A INVESTMENT INTENTION . . . . . . . . . . . . . .-24-
SECTION 3.07A EMPLOYMENT . . . . . . . . . . . . . . . . . . .-24-
SECTION 3.08A LIMITATION ON REPRESENTATIONS AND WARRANTIES . .-24-
SECTION 3.09A DELIVERY OF INFORMATION. . . . . . . . . . . . .-24-
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
PARENT SUB . . .. . . . . . . . . . . . . . . . . . . . . . . .-25-
SECTION 4.01 ORGANIZATION AND QUALIFICATION . . . . . . . . .-25-
SECTION 4.02 CERTIFICATES OF INCORPORATION AND BY-LAWS. . . .-25-
SECTION 4.03 PARENT COMMON STOCK; CAPITALIZATION. . . . . . .-25-
SECTION 4.04 AUTHORITY. . . . . . . . . . . . . . . . . . . .-26-
SECTION 4.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . .-26-
SECTION 4.06 REPORTS; FINANCIAL STATEMENTS. . . . . . . . . .-27-
SECTION 4.07 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . .-27-
SECTION 4.08 OWNERSHIP OF PARENT SUB; NO PRIOR ACTIVITIES . .-27-
SECTION 4.09 BROKERS. . . . . . . . . . . . . . . . . . . . .-28-
SECTION 4.10 [[RESERVED]] . . . . . . . . . . . . . . . . . .-28-
SECTION 4.11 LIMITATION ON REPRESENTATIONS AND WARRANTIES . .-28-
SECTION 4.12 ***. . . . . . . . . . . . . . . . . . . . . . .-28-
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ii
<PAGE>
<CAPTION>
TABLE OF CONTENTS PAGE
(CONTINUED) ----
<S> <C>
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . .-29-
SECTION 5.01 AFFIRMATIVE COVENANTS OF THE COMPANY . . . . . .-29-
SECTION 5.02 NEGATIVE COVENANTS OF THE COMPANY. . . . . . . .-29-
SECTION 5.03 NEGATIVE COVENANTS OF PARENT . . . . . . . . . .-31-
SECTION 5.04 ACCESS AND INFORMATION . . . . . . . . . . . . .-32-
SECTION 5.05 ESCROW AGREEMENT . . . . . . . . . . . . . . . .-32-
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . .-33-
SECTION 6.01 APPROPRIATE ACTION; CONSENTS; FILINGS. . . . . .-33-
SECTION 6.02 TAX TREATMENT; "POOLING OF INTERESTS";
AFFILIATES. . . . . . . . . . . . . . . . . . .-34-
SECTION 6.03 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . .-34-
SECTION 6.04 OBLIGATIONS OF PARENT SUB. . . . . . . . . . . .-35-
SECTION 6.05 RESTRICTIVE LEGEND . . . . . . . . . . . . . . .-35-
SECTION 6.06 ***. . . . . . . . . . . . . . . . . . . . . . .-35-
SECTION 6.07 DELIVERY OF SEC FILINGS. . . . . . . . . . . . .-38-
SECTION 6.08 TERMINATION OF STOCKHOLDERS' AGREEMENT . . . . .-38-
SECTION 6.09 BEST EFFORTS . . . . . . . . . . . . . . . . . .-39-
SECTION 6.10 ***. . . . . . . . . . . . . . . . . . . . . . .-39-
SECTION 6.11 ***. . . . . . . . . . . . . . . . . . . . . . .-39-
SECTION 6.12 ***. . . . . . . . . . . . . . . . . . . . . . .-39-
ARTICLE VII CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .-40-
SECTION 7.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY
UNDER THIS AGREEMENT . . . . . . . . . . . . . .-40-
SECTION 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS
OF PARENT. . . . . . . . . . . . . . . . . . . .-40-
SECTION 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF
THE COMPANY. . . . . . . . . . . . . . . . . . .-42-
ARTICLE VIII TERMINATION, AMENDMENT, WAIVER AND
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . .-42-
SECTION 8.01 TERMINATION. . . . . . . . . . . . . . . . . . .-42-
SECTION 8.02 INVESTIGATION. . . . . . . . . . . . . . . . . .-43-
SECTION 8.03 AMENDMENT. . . . . . . . . . . . . . . . . . . .-43-
SECTION 8.04 WAIVER; REMEDIES CUMULATIVE. . . . . . . . . . .-43-
SECTION 8.05 ***. . . . . . . . . . . . . . . . . . . . . . .-44-
SECTION 8.06 STOCKHOLDER INDEMNIFICATION, HOLD BACK
AND ESCROW . . . . . . . . . . . . . . . . . . .-44-
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
iii
<PAGE>
<CAPTION>
TABLE OF CONTENTS PAGE
(CONTINUED) ----
<S> <C>
ARTICLE IX GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . .-47-
SECTION 9.01 EFFECTIVENESS OF REPRESENTATIONS,
WARRANTIES AND AGREEMENTS. . . . . . . . . . . .-47-
SECTION 9.02 NOTICES. . . . . . . . . . . . . . . . . . . . .-48-
SECTION 9.03 CERTAIN DEFINITIONS. . . . . . . . . . . . . . .-49-
SECTION 9.04 HEADINGS; CONSTRUCTION . . . . . . . . . . . . .-56-
SECTION 9.05 SEVERABILITY . . . . . . . . . . . . . . . . . .-56-
SECTION 9.06 ENTIRE AGREEMENT; AMENDMENT. . . . . . . . . . .-56-
SECTION 9.07 ASSIGNMENT . . . . . . . . . . . . . . . . . . .-56-
SECTION 9.08 PARTIES IN INTEREST. . . . . . . . . . . . . . .-56-
SECTION 9.09 FURTHER ASSURANCES . . . . . . . . . . . . . . .-57-
SECTION 9.10 GOVERNING LAW. . . . . . . . . . . . . . . . . .-57-
SECTION 9.11 BINDING ARBITRATION. . . . . . . . . . . . . . .-57-
SECTION 9.12 WAIVER; REMEDIES CUMULATIVE. . . . . . . . . . .-58-
SECTION 9.13 COUNTERPARTS . . . . . . . . . . . . . . . . . .-58-
</TABLE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
iv
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit 2.01A Written Consent of the Stockholders of the Company
Exhibit 5.05 Form of Escrow Agreement
Exhibit 7.02(f) Legal Opinion of Counsel to the Company
Exhibit 7.02(g) Form of Affiliate Agreement
Exhibit 7.02(h)(i) Form of Vincent K. Roach Employment Agreement
Exhibit 7.02(h)(ii) Form of Kent L. Wall Employment Agreement
Exhibit 7.02(i) Form of Noncompetition Agreement
Exhibit 7.02(j) Form of Spousal Consent
Exhibit 7.03(d) Legal Opinion of Counsel to Parent
</TABLE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
v
<PAGE>
INDEX TO SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
3.02 Officers and Directors and Certificates of Incorporation and By-Laws
3.03(a) Capitalization, Stockholders *** of the Company
3.03(b) Encumbrances
3.05 Filings and Consents of the Company
3.07 Financial Statements of the Company
3.08 Liabilities of the Company
3.09 Certain Changes or Events of the Company
3.10 Litigation Matters
3.14(c) Tax Returns and Tax Related Information of the Company
3.14(f) Gains and Losses of the Company
3.15(b) Real Property Leased or Subleased by the Company
3.16(c) Intellectual Property Owned by the Company
3.16(d) Intellectual Property Agreements or Permission
3.17 Tangible Assets of the Company
3.19 Contracts of the Company
3.20 Notes and Accounts Receivable of the Company
3.22 Insurance Policies of the Company
3.23 Employees
3.24 Employee Benefit Plans of the Company
3.27 Certain Business Relationships with the Company
3.29 Standard Sale, Lease and Performance Terms and Conditions of the
Company
3.31 Customer/Supplier Relationships
5.02 Negative Covenants
6.10 ***
7.02(d) Contracts or Agreements Requiring Consents or Waivers with respect to
the Company
</TABLE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
vi
<PAGE>
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 16, 1998 (this
"AGREEMENT"), by and among DAOU Systems, Inc., a Delaware corporation
("PARENT"), DAOU-TMI, Inc., a Delaware corporation and a wholly-owned subsidiary
of Parent ("PARENT SUB"), Technology Management, Inc., an Indiana corporation
(the "COMPANY"), and all of the stockholders of the Company listed on the
signature page hereto (collectively, the "STOCKHOLDERS").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
("DELAWARE LAW") and the Indiana Business Corporation Law ("INDIANA LAW"), the
Company will merge with and into Parent Sub (the "MERGER");
WHEREAS, the Board of Directors of the Company has determined that the
Merger is in the best interests of the Company and the Stockholders, has
approved and adopted this Agreement and the transactions contemplated hereby,
and has recommended that the Stockholders approve and adopt this Agreement and
the transactions contemplated hereby;
WHEREAS, the Stockholders hold one hundred percent (100%) of the
outstanding voting power of the Company, have irrevocably consented to the
execution and delivery of this Agreement and the consummation of the Merger and
have irrevocably agreed to vote in favor of the Merger at a meeting of
Stockholders or by a written consent executed by each Stockholder, and such
consent and agreement is an essential condition and inducement to Parent and
Parent Sub to enter into this Agreement;
WHEREAS, the Boards of Directors of Parent and Parent Sub have determined
that the Merger is in the best interests of Parent and Parent Sub and their
respective stockholders, and have approved and adopted this Agreement and the
transactions contemplated hereby;
WHEREAS, the Company, Parent and Parent Sub intend that the Merger shall
constitute a "reorganization" under Section 368(a)(1)(A) of the Code, by
application of Section 368(a)(2)(D) of the Code, and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code;
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests"; and
WHEREAS, certain capitalized terms used in this Agreement are defined in
Section 9.03;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Delaware Law and Indiana
Law, at the Effective Time (as defined in Section 1.02), the Company shall be
merged with and into Parent Sub. As a result of the Merger, the separate
corporate existence of the Company shall cease and Parent Sub shall continue as
the surviving corporation in the Merger (the "SURVIVING CORPORATION"). The name
of the Surviving Corporation shall be DAOU-TMI, Inc.
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the closing conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing (a) a certificate of merger (the "CERTIFICATE OF MERGER") with the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with the relevant provisions of, Delaware Law and (b) the
articles of merger (the "ARTICLES OF MERGER") with the Secretary of State of the
State of Indiana, in such form as required by, and executed in accordance with
the relevant provisions of, Indiana Law (the later of the date and time of the
Delaware filing or the Indiana filing, or such later time as may be agreed to in
writing by Parent, Parent Sub and the Company and specified in the Certificate
of Merger and the Articles of Merger, being the "EFFECTIVE TIME").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law and
Indiana Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all of the
property, rights, privileges, powers and franchises of Parent Sub and the
Company shall vest in the Surviving Corporation, and all debts, Liabilities and
duties of Parent Sub and the Company shall become the debts, Liabilities and
duties of the Surviving Corporation.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BY-LAWS. At the Effective
Time, the Certificate of Incorporation of Parent Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, and the By-Laws of Parent Sub shall be the By-Laws of the
Surviving Corporation.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Parent Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Parent Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Parent Sub, the Company or the holders of any of the
following securities, each share of the Company's common stock, no par value per
share ("COMPANY COMMON STOCK"), issued and outstanding immediately prior to the
Effective Time, excluding any treasury shares held by the Company, shares held
by Parent and the Dissenting Shares, if any, shall be converted into the right
to receive that number of fully paid, nonassessable shares of Parent's common
stock, par value $0.001 per share ("PARENT COMMON STOCK"), equal to the Exchange
Ratio, subject to adjustment as set forth in Section 2.01(b) and subject to pro
rata withholding of shares to be held in escrow pursuant to Section 5.05.
(b) If between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock or Company Common Stock shall have
been changed into a different number of shares of a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(c) At the Effective Time, all of the shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each Certificate previously evidencing any such
shares shall thereafter represent only the right to receive the Merger
Consideration (as defined in Section 2.02(b)). The holders of such Certificates
previously evidencing such shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock, except as otherwise provided
herein or by Law. Such Certificates previously evidencing shares of Company
Common Stock shall be exchanged for certificates evidencing whole shares of
Parent Common Stock issued in consideration therefor in accordance with the
allocation procedures of this Section 2.01 and upon the surrender of such
Certificates in accordance with the provisions of Section 2.02. No fractional
shares of Parent Common Stock shall be issued, and, in lieu thereof, a cash
payment shall be made pursuant to Section 2.02(e).
(d) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Parent or any direct or
indirect wholly-owned Subsidiary of Parent or of the Company, if any,
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit,
or shall cause to be deposited, with Baker & McKenzie or such other Person
designated by Parent and reasonably satisfactory to the Company (the "EXCHANGE
AGENT"), for the benefit of the Stockholders and for exchange in accordance with
this Article II through the Exchange Agent (i) certificates evidencing such
number of whole shares of Parent Common Stock equal to the Exchange Ratio
multiplied by the number of shares of Company Common Stock outstanding and (ii)
cash in consideration of fractional shares as provided in Section 2.02(e) (such
Parent Common Stock and cash being hereinafter referred to as the "EXCHANGE
FUND"). The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the shares of Parent Common Stock (except that *** of such shares of Parent
Common Stock shall be delivered to an escrow agent pursuant to Sections 5.05 and
8.06) and cash out of the Exchange Fund. Except as contemplated by Section
2.02(f), the Exchange Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (other than
Dissenting Shares, if applicable) (collectively, the "CERTIFICATES"), (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates evidencing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) certificates evidencing that number
of whole shares of Parent Common Stock which such holder has the right to
receive in respect of the shares of Company Common Stock formerly evidenced by
such Certificate in accordance with Section 2.01, less that holder's pro rata
portion of the shares (rounded to the nearest whole share) to be held in escrow
pursuant to Sections 5.05 and 8.06 and (B) cash in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.02(e)
(such shares of Parent Common Stock and cash, if any, being collectively, the
"MERGER CONSIDERATION"), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, a
certificate evidencing the proper number of shares of Parent Common Stock may be
issued in accordance with this Article II to a transferee if the Certificate
evidencing such shares of Company Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02, each of the
Certificates shall be deemed at any time after the Effective Time to evidence
only the right to receive, upon such surrender, the Merger Consideration.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT COMMON
STOCK. No dividends or other distributions declared or made after the Effective
Time with respect to Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock evidenced thereby, and no other part of the
Merger Consideration shall be paid to any such holder, until the holder of such
Certificate shall surrender such Certificate, at which time, subject to the
effect of applicable Laws, there shall be issued to the holder (i) certificates
evidencing whole shares of Parent Common Stock issued in exchange therefor, and
the amount of any cash payable with respect to a fractional share of Parent
Common Stock to which such holder is entitled pursuant to Section 2.02(e) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions (without interest thereon), with a record date after the
Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole shares of Parent Common Stock. No
interest shall be paid on the Merger Consideration.
(d) NO FURTHER RIGHTS IN COMPANY COMMON STOCK. All shares of Parent
Common Stock issued and cash paid upon exchange of the shares of Company Common
Stock in accordance with the terms hereof shall be deemed to have been issued or
paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip evidencing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of the
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent.
(ii) Each holder of a Certificate having a fractional interest
arising upon the conversion of such Certificate shall, at the time of surrender
of such Certificate, be paid by the Exchange Agent an amount in cash equal to
the value of such fractional interest based on a price per share equal to the
Market Price.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Common Stock for two (2)
years after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent for the Merger Consideration to
which they are entitled.
(g) NO LIABILITY. Neither Parent nor the Surviving Corporation shall
be liable to any holder of shares of Company Common Stock for any shares of
Parent Common Stock, cash or
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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dividends or distributions with respect thereto delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law.
SECTION 2.03. STOCK TRANSFER BOOKS. On the date hereof, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. On or after the Effective Time, any Certificates
presented to the Exchange Agent for any reason shall be converted into the
Merger Consideration.
SECTION 2.04. DISSENTING SHARES. If required under Delaware Law,
notwithstanding any other provisions of this Agreement to the contrary, shares
of Company Common Stock that are outstanding immediately prior to the Effective
Time and which are held by stockholders who shall have not voted in favor of the
Merger or consented thereto in writing and who shall have demanded properly, in
writing, appraisal for such shares in accordance with Section 262 of Delaware
Law (collectively, the "DISSENTING SHARES") shall not be converted into or
represent the right to receive the Merger Consideration. Such stockholders
shall be entitled to receive payment of the appraised value of such shares of
Company Common Stock held by them in accordance with the provisions of Section
262 of Delaware Law, except that all Dissenting Shares held by stockholders who
have failed to perfect or who effectively have withdrawn or lost their rights to
appraisal of such shares of Company Common Stock under Section 262 of Delaware
Law shall thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration, upon surrender, in the manner
provided in Section 2.02, of the Certificate or Certificates that formerly
evidenced such shares of Company Common Stock. Any payments required to be made
to the holders of any Dissenting Shares shall be funded by Parent or the
Surviving Corporation.
ARTICLE IIA
VOTING RIGHTS
SECTION 2.01A. CONSENT AND VOTING AGREEMENT. Each Stockholder hereby (a)
irrevocably consents to the execution and delivery of this Agreement and to the
consummation of the Merger and shall contemporaneously herewith execute the
written consent attached hereto as EXHIBIT 2.01A (the "CONSENT"), and (b) as
long as this Agreement has not been terminated prior to the date specified in
Section 8.01(f), further irrevocably agrees to vote all Company Common Stock as
to which such Stockholder is entitled to vote at a meeting of the stockholders
of the Company if any meeting is so held, or by written consent without a
meeting as follows: (i) in favor of approval and adoption of this Agreement and
the transactions contemplated hereby; (ii) against any action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company or such Stockholder under this
Agreement; (iii) against any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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action or agreement (other than this Agreement or the transactions contemplated
by this Agreement or the termination of this Agreement in accordance with its
terms), that would, directly or indirectly, impede, interfere with, delay,
postpone or attempt to discourage the Merger, including, without limitation:
(A) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company and its Subsidiaries; (B) a
sale or transfer of a material amount of Assets of the Company and its
Subsidiaries or a reorganization, recapitalization or liquidation of the Company
and its Subsidiaries; (C) any change in the management or board of directors of
the Company or any Competing Transaction, except as otherwise agreed to in
writing by Parent; (D) any material change in the present capitalization or
dividend policy of the Company; or (E) any other material change in the
Company's corporate structure or business.
SECTION 2.02A. [[Reserved]]
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES
Each of the Company and the *** Stockholders hereby represents and warrants
jointly and severally *** to Parent and Parent Sub as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its incorporation or
organization, has all requisite corporate or other power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary.
Notwithstanding anything herein to the contrary, the Company does not, directly
or indirectly, own or have an economic interest in any Subsidiary or other
Person.
SECTION 3.02. ARTICLES OF INCORPORATION AND BY-LAWS. SCHEDULE 3.02
contains (i) a list of the officers and directors of the Company and its
Subsidiaries and (ii) complete and correct copies of the Articles of
Incorporation and By-Laws or equivalent organizational documents, in each case
as amended or restated, of the Company. The Company is not in violation of any
of the provisions of its Articles of Incorporation or By-Laws or equivalent
organizational documents, in each case as amended or restated.
SECTION 3.03. CAPITALIZATION.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(a) The authorized capital stock of the Company consists of One
Thousand (1,000) shares of Company Common Stock. As of May 31, 1998, (i) Four
Hundred Forty-One (441) shares of Company Common Stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, the
Company's Articles of Incorporation or By-Laws or any agreement to which the
Company is a party or bound, (ii) except as set forth on SCHEDULE 3.03(a), no
shares of Company Common Stock were held in treasury of the Company and
(iii) SCHEDULE 3.03(a) sets forth the name and address of each holder of Company
Common Stock and the number of shares of Company Common Stock held by such
holder ***. There are no bonds, debentures, notes or other indebtedness, issued
or outstanding, having the right to vote on any matters on which the
Stockholders may vote. Except as set forth on SCHEDULE 3.03(a), there are no
options, warrants, calls or other rights (including registration rights),
agreements, arrangements or commitments of any character, presently outstanding,
which (x) obligate the Company to issue, deliver or sell shares of its capital
stock or debt securities, (y) obligate the Company to grant, extend or enter
into any such option, warrant, call or other such right, agreement, arrangement
or commitment, or (z) obligate the Company to repurchase, redeem or otherwise
acquire any shares of Company Common Stock.
(b) All the outstanding shares of capital stock of, or other equity
interests in, each Subsidiary of the Company are duly authorized, validly
issued, fully paid and nonassessable and except as set forth in SCHEDULE
3.03(b), such shares or other equity interests are owned solely by the Company
free and clear of any Security Interests, Liens, claims, pledges, agreements,
limitations on voting rights, charges or other Encumbrances of any nature
whatsoever. Except as set forth on SCHEDULE 3.03(b), there are no options,
warrants, calls or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company or any of its
Subsidiaries is a party relating to the issued or unissued capital stock of, or
other equity interests in, any of the Subsidiaries of the Company. The Company
does not directly or indirectly own any interest in any other corporation,
partnership, joint venture or other business association or entity.
SECTION 3.04. AUTHORITY. The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
(including, with respect to the Merger, the approval and adoption of this
Agreement by the Stockholders who hold one hundred percent (100%) of the
outstanding shares of Company Common Stock) and no other corporate proceeding on
the part of the Company is necessary to authorize the execution, delivery and
performance of this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by the
Stockholders, Parent and Parent Sub, constitutes the legal, valid and binding
obligation of the Company enforceable in accordance with its terms.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in SCHEDULE 3.05, the execution and delivery
of this Agreement by the Company does not, and the performance of this Agreement
by the Company will not (i) conflict with or violate the Articles of
Incorporation or By-Laws or the equivalent organizational documents, in each
case as amended or restated, of the Company or any of its Subsidiaries, (ii)
conflict with or violate any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively, "LAWS") in
effect as of the date of this Agreement and applicable to the Company or any of
its Subsidiaries or by which any of their respective properties is bound or
subject to, or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of an
Encumbrance on, any of the properties or Assets of the Company or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, Contract,
agreement, lease, license, permit, franchise, stock option or other instrument
or obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their respective
properties is bound or subject.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require the
Company to obtain any consent, approval, authorization or permit of, or to make
any filing with or notification to, any governmental or regulatory authority,
domestic or foreign ("GOVERNMENTAL ENTITIES") based on Laws and other
requirements of Governmental Entities in effect as of the date of this
Agreement, except for applicable requirements, if any, of the state securities
or blue sky laws ("BLUE SKY LAWS"), and the Hart-Scott Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), and the filing and
recordation of appropriate merger documents as required by Delaware Law and
Indiana Law.
SECTION 3.06. PERMITS; COMPLIANCE. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and there is no action, proceeding or investigation pending or ***
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of (a) any Law applicable to the Company or any of its
Subsidiaries or which any of their respective properties is bound by or subject
to or (b) any of the Company Permits. Since December 31, 1996, neither the
Company nor any of its Subsidiaries has received from any Governmental Entity
any written notification with respect to possible conflicts, defaults or
violations of Laws.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 3.07. FINANCIAL STATEMENTS. SCHEDULE 3.07 contains true,
correct and complete copies of (i) the unaudited balance sheet of the Company
as of December 31, 1997 (the "BALANCE SHEET") and as of December 31, 1996 and
1995, and the related statements of operations for the fiscal years then
ended (collectively, the "FINANCIAL STATEMENTS"), and (ii) the unaudited
balance sheet of the Company as of March 31, 1998 (the "INTERIM BALANCE
SHEET"), and the related unaudited statement of operations of the Company for
the three months ended March 31, 1998, excluding any adjustments (which will
not individually or in the aggregate have a Company Material Adverse Effect)
and notes (that, if presented, would not differ materially from those
included in the Balance Sheet), which would be included in a year-end
financial statement (collectively, the "INTERIM FINANCIAL STATEMENTS"). For
purposes of this Agreement and except with respect to the representations and
warranties made in this Section 3.07, references to the Balance Sheet and the
Interim Balance Sheet shall not include any notes and schedules in the
Financial Statements and the Interim Financial Statements, respectively. The
Financial Statements and the Interim Financial Statements are attached hereto
as SCHEDULE 3.07 and have been prepared from books and records of the Company
*** consistent with preceding years and throughout the periods involved
(except as otherwise noted therein). The Financial Statements and the
Interim Financial Statements fairly present the financial condition and
results of operations of the Company as at the dates thereof and for the
periods indicated in the statements of operations, except, in the case of the
Interim Financial Statements, subject to normal year-end adjustments. No
financial statement of any Person other than the Company is required to be
included in the Financial Statements.
SECTION 3.08. NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE
3.08, there are no liabilities or other obligations of the Company or any
Subsidiary of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise ("LIABILITIES"), and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such Liabilities (other than Liabilities set forth on Schedule
3.08) through the Effective Time, and (b) Liabilities under this Agreement and
fees and expenses related hereto.
SECTION 3.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1997, there has not been any material adverse change in the business, financial
condition, operations, results of operations or future prospects of the Company
or any of its Subsidiaries. Without limiting the generality of the foregoing,
since that date and except as otherwise disclosed in SCHEDULE 3.09:
(a) none of the Company and its Subsidiaries has sold, leased,
transferred, or assigned any of its Assets, tangible or intangible, other than
sales to its customers for fair consideration in the Ordinary Course of Business
or other than as fully reflected on the face of the Interim Balance Sheet;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(b) none of the Company and its Subsidiaries has entered into any
agreement, Contract, lease or license (or series of related agreements,
Contracts, leases and licenses) outside the Ordinary Course of Business;
(c) there is no fact, condition or event relating to (i) the
potential loss of the benefit of, or any *** change in, any relationship with
any customers, clients, suppliers, key employees or insurers, or (ii) price
increases for parts, raw materials, supplies, services or equipment purchased
from present suppliers or vendors which is, with the lapse of time or the
occurrence of such event or condition, reasonably likely to be materially
adverse to the financial condition, business, Assets, properties or operations
of the Company;
(d) no party (including any of the Company and its Subsidiaries) has
accelerated, terminated, modified or canceled any agreement, Contract, lease or
license (or series of related agreements, Contracts, leases and licenses) to
which any of the Company and its Subsidiaries is a party or by which any of them
is bound;
(e) none of the Company and its Subsidiaries has imposed any Security
Interest upon any of its Assets, tangible or intangible;
(f) none of the Company and its Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either involving more
than *** or outside the Ordinary Course of Business;
(g) none of the Company and its Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or Assets of,
any other Person (or series of related capital investments, loans, and
acquisitions);
(h) none of the Company and its Subsidiaries has issued any note,
bond, or other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
(i) none of the Company and its Subsidiaries has delayed or
postponed the payment of accounts payable or other Liabilities outside the
Ordinary Course of Business;
(j) none of the Company and its Subsidiaries has canceled,
compromised, waived or released any right or claim (or series of related rights
and claims);
(k) none of the Company and its Subsidiaries has granted any license
or sublicense of any rights under or with respect to any Intellectual Property;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
11
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(l) there has been no change made or authorized in the Articles of
Incorporation or By-Laws or equivalent organizational documents, in each case as
amended or restated, of the Company or any of its Subsidiaries;
(m) none of the Company and its Subsidiaries has issued, sold or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(n) none of the Company and its Subsidiaries has declared, set aside,
or paid any dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired any
of its capital stock;
(o) none of the Company and its Subsidiaries has experienced any
damage, destruction or Loss (whether or not covered by insurance) to its
property;
(p) none of the Company and its Subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors, officers or
employees;
(q) none of the Company and its Subsidiaries has entered into any
employment Contract or collective bargaining agreement, written or oral, or
modified the terms of any such Contract or agreement existing as of the date
hereof;
(r) none of the Company and its Subsidiaries has granted any increase
in the base compensation of any of its directors, officers or employees;
(s) none of the Company and its Subsidiaries has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive, severance or other
plan, Contract or commitment for the benefit of any of its directors, officers
and employees (or taken any such action with respect to any other Employee
Benefit Plan);
(t) none of the Company and its Subsidiaries has made any other
change in employment terms for any of its directors, officers or employees
outside the Ordinary Course of Business;
(u) none of the Company and its Subsidiaries has made or pledged to
make any charitable or other capital contribution;
(v there has not been any other occurrence, event, incident,
action, failure to act or transaction outside the Ordinary Course of Business
involving the Company; and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
12
<PAGE>
(w) none of the Company and its Subsidiaries has committed to any of
the foregoing.
SECTION 3.10. ABSENCE OF LITIGATION. Except as set forth on SCHEDULE
3.10, (a) there is no claim, action, suit, litigation, proceeding, arbitration
or investigation of any kind, at law or in equity (including actions or
proceedings seeking injunctive relief), pending or *** threatened against the
Company or any of its Subsidiaries or any properties or rights of the Company or
any of its Subsidiaries, and (b) neither the Company nor any of its Subsidiaries
is subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with or continuing investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, decree or award
of any Governmental Entity or arbitrator. In respect of the matters relating to
or arising in connection with the actions set forth in SCHEDULE 3.10, there is
no fact, event, condition, circumstance or other matter which either has, or is
reasonably likely to have resulted in, an event or determination having a
Company Material Adverse Effect. The Company has delivered to Parent copies of
all pleadings, correspondence and other documents relating to each matter
disclosed in SCHEDULE 3.10.
SECTION 3.11. VOTE REQUIRED. The affirmative vote of the holders of at
least a majority of the outstanding shares of Company Common Stock is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve the Merger. The Stockholders, by executing this Agreement,
have irrevocably consented to the Merger and have irrevocably agreed to vote in
favor of the Merger. Such action by the Stockholders is sufficient to
constitute stockholder approval of the Merger.
SECTION 3.12. BROKERS. The Company has no Liability or obligation to pay
any fees or commissions to any broker, finder or agent (excluding attorneys and
accountants) with respect to the transactions contemplated by this Agreement or
for which Parent or Parent Sub could become liable or obligated.
SECTION 3.13. COMPANY ACTION. The Board of Directors of the Company (at a
meeting duly called and held in compliance with Indiana Law or by written
consent) has (a) determined that the Merger is in the best interests of the
Company and fair to the Stockholders, (b) approved the Merger in accordance with
the provisions of Indiana Law, and (c) recommended the approval of this
Agreement and the Merger by the holders of the Company Common Stock.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
13
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SECTION 3.14. TAX MATTERS; "POOLING OF INTERESTS".
(a) *** neither the Company nor any of its Subsidiaries or Affiliates
has taken or agreed to take any action that would prevent the Merger from
constituting (i) a "reorganization" under Section 368(a)(1)(A) of the Code, by
application of Section 368(a)(2)(D) of the Code, or (ii) a "pooling of
interests" in accordance with GAAP and applicable SEC rules, including, without
limitation, the sale of any shares of Company Common Stock or Parent Common
Stock during the period commencing on the date which is thirty (30) days prior
to the Effective Time and ending on the Financial Result Date. The Company has
timely filed or will timely file all Tax Returns that it was or is required to
file. All such Tax Returns were correct and complete ***. Except as set forth
on SCHEDULE 3.14(c), all Taxes owed by the Company (whether or not shown on any
Tax Return) have been paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. *** no claim has ever
been made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the Assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) Except as set forth on SCHEDULE 3.14(c), the Company has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(c) Except as set forth on SCHEDULE 3.14(c), there is no dispute or
claim concerning any Tax Liability of the Company claimed or raised by any
Governmental Entity. SCHEDULE 3.14(c) lists all federal, state, local and
foreign income Tax Returns filed with respect to the Company for taxable periods
ended on or after December 31, 1995, and indicates those Tax Returns that have
been audited and those Tax Returns that currently are the subject of audit by
any Governmental Entity. The Company has delivered to Parent correct and
complete copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company for
taxable periods ended on or after December 31, 1995.
(d) 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 made any payments, or is not obligated to
make any payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code.
(f) SCHEDULE 3.14(f) sets forth the following information with
respect to the Company, as of the most recent practicable date: (i) the tax
basis of the Company in its Assets; (ii) the amount of any net operating loss,
net capital loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to the Company; and (iii) the amount of
any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
14
<PAGE>
intercompany items or any deferred gain or loss allocable to the Company with
respect to any intercompany transaction.
SECTION 3.15. REAL PROPERTY.
(a) The Company does not own any real property.
(b) SCHEDULE 3.15(b) lists and describes briefly all real property
leased or subleased to the Company. The Company has delivered to Parent correct
and complete copies of the leases and subleases listed in SCHEDULE 3.15(b).
With respect to each lease and sublease listed in SCHEDULE 3.15(b):
(i) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect ***;
(ii) except as set forth on SCHEDULE 3.15(b), the lease or
sublease will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(iii) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification of a *** term or
condition, or acceleration thereunder, except as disclosed in SCHEDULE 3.15(b);
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(vi) The Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(vii) *** all facilities leased or subleased thereunder have
received all approvals of Governmental Entities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained in accordance with applicable Laws; and
(viii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
15
<PAGE>
SECTION 3.16. INTELLECTUAL PROPERTY.
(a) The Company owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property necessary for the
operation of the Company's business as presently conducted. Each item of
Intellectual Property owned or used by the Company is owned or available for use
by the Company on identical terms and conditions immediately subsequent to the
Effective Time. The Company has taken all reasonably necessary and desirable
action to maintain and protect each item of Intellectual Property that it owns
or uses.
(b) *** the Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Stockholders and none of the directors
and officers of the Company has ever received any oral or written charge,
complaint, claim, demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that the Company must license
or refrain from using any Intellectual Property rights of any third party). ***
no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of the
Company.
(c) SCHEDULE 3.16(c) identifies each patent or trademark and
copyright registration which has been issued to the Company or any Affiliate
with respect to any of its Intellectual Property, identifies each pending patent
application or application for registration which the Company or any Affiliate
has made with respect to any of its Intellectual Property, and identifies each
license, sublicense, agreement, or other permission which the Company or any
Affiliate has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Company has delivered to Parent
correct and complete copies of all such patents, registrations, applications,
licenses, sublicenses, agreements and permissions (as amended to date).
SCHEDULE 3.16(c) also identifies each trade name or unregistered trademark used
by the Company or any Affiliate in connection with any of its businesses. With
respect to each item of Intellectual Property required to be identified in
SCHEDULE 3.16(c):
(i) the Company possesses all right, title, and interest in and
to the item, free and clear of any Security Interest, license or other
restriction;
(ii) such item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
16
<PAGE>
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or *** threatened which challenges the
legality, validity, enforceability, use or ownership of such item; and
(iv) the Company has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to such item.
(d) SCHEDULE 3.16(d) identifies each item of Intellectual Property
that any third party owns and that the Company or any Affiliate uses pursuant to
any license, sublicense, agreement or permission, other than shrink-wrap
licenses for personal computer software. The Company has delivered to Parent
correct and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of Intellectual
Property required to be identified in SCHEDULE 3.16(d):
(i) the license, sublicense, agreement or permission covering
such item is legal, valid, binding, enforceable and in full force and effect;
(ii) the license, sublicense, agreement or permission will
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the Effective Time;
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification or acceleration thereunder;
(iv) no party to the license, sublicense, agreement or permission
has repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in items (i) through (iv) above are true and correct with
respect to the underlying license;
(vi) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or threatened which challenges the
legality, validity or enforceability of the underlying item of Intellectual
Property; and
(viii) the Company has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
17
<PAGE>
SECTION 3.17. TANGIBLE ASSETS. Except as set forth on SCHEDULE 3.17, the
Company and its Subsidiaries own and have good and marketable title to the
tangible property and Assets necessary for the conduct of their businesses as
presently conducted. Except as set forth on SCHEDULE 3.17, the tangible Assets
are free from defects ***, have been maintained in accordance with normal
industry practice and are in good operating condition and repair (subject to
normal wear and tear).
SECTION 3.18. INVENTORY. The Company and its Subsidiaries have no
inventory.
SECTION 3.19. CONTRACTS. SCHEDULE 3.19 lists the following Contracts and
other agreements to which the Company or any of its Subsidiaries is a party as
of the date hereof:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of *** per annum or a term of more than one (1) year;
(b) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products or other personal
property, which involves consideration in excess of ***, or for the furnishing
or receipt of services, the performance of which has a term more than six
months, or involves consideration in excess of ***;
(c) any partnership or joint venture agreement;
(d) any agreement (or group of related agreements) under which it has
created, incurred, assumed or guaranteed any indebtedness for borrowed money, or
any capitalized lease obligation, in excess of ***, or under which it has
imposed a Security Interest on any of its Assets, tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement with any of the Stockholders and their respective
Affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other *** plan or arrangement
(including any Employee Benefit Plan) for the benefit of its current or former
directors, officers and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing annual compensation in
excess of ***, or providing severance benefits;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
18
<PAGE>
(j) any agreement under which the consequences of a default or
termination could have a Company Material Adverse Effect; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of ***.
The Company has delivered to Parent a correct and complete copy of each
written agreement listed in SCHEDULE 3.19 and a written summary setting forth
the material terms and conditions of each oral agreement referred to in SCHEDULE
3.19. With respect to each such agreement, and except as otherwise disclosed in
SCHEDULE 3.19: (i) such agreement is legal, valid, binding, enforceable and in
full force and effect in all material respects; (ii) such agreement will
continue to be legal, valid, binding, enforceable and in full force and effect
in all material respects following the consummation of the transactions
contemplated hereby; (iii) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification of any material term or condition
or acceleration, under such agreement; and (iv) no party has repudiated any
provision of such agreement.
SECTION 3.20. NOTES AND ACCOUNTS RECEIVABLE. Except as set forth on
SCHEDULE 3.20, all notes and accounts receivable of the Company are reflected
properly on its books and records and are valid receivables subject to no
setoffs or counterclaims, are current and collectible and will be collected in
accordance with their terms at their recorded amounts.
SECTION 3.21. POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company or any of its Subsidiaries.
SECTION 3.22. INSURANCE. SCHEDULE 3.22 sets forth the following
information with respect to each current insurance policy (including policies
providing property, casualty, liability and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was on
a claims made, occurrence or other Basis) and amount (with a summary of the
amount of any deductibles and ceilings) of coverage; and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
19
<PAGE>
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (i) such policy is legal, valid,
binding, enforceable and in full force and effect ***; (ii) such policy will
continue to be legal, valid, binding, enforceable and in full force and
effect *** following the consummation of the transactions contemplated
hereby; (iii) neither the Company nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under such policy; and (iv) no party to the
policy has repudiated any provision thereof. The Company has been covered
during the past three (3) years by insurance in scope and amount customary
and reasonable for the business in which it has engaged during the
aforementioned period. SCHEDULE 3.22 also describes any self-insurance
arrangements affecting the Company.
SECTION 3.23. EMPLOYEES. The Company has delivered to Parent a true and
complete list of all employees of the Company and its Subsidiaries, their
respective positions, locations, salaries or hourly wages and severance
arrangements, each as of the date hereof. *** no executive, key employee or
group of employees has any plans to terminate employment with any of the Company
and its Subsidiaries. Except as set forth on SCHEDULE 3.23, each employee of
the Company and its Subsidiaries is employed on an "at will" basis and has no
right to any *** compensation following termination of employment. Except as
set forth on SCHEDULE 3.23, each employee of the Company and its Subsidiaries
has executed a proprietary information and inventions agreement in the form
provided to counsel to Parent. The Company is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. ***
the Company has not committed any unfair labor practice and there is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
SECTION 3.24. EMPLOYEE BENEFITS.
(a) Except as set forth on SCHEDULE 3.24, with respect to all
employees, former employees, directors and independent contractors of the
Company and its Subsidiaries and their dependents and beneficiaries, neither the
Company, its Subsidiaries nor any ERISA Affiliate presently maintains,
contributes to or has any Liability under or with respect to any Employee
Benefit Plan. The plans, programs and arrangements set forth on SCHEDULE 3.24
are herein referred to as the "COMPANY EMPLOYEE BENEFIT PLANS." *** each Company
Employee Benefit Plan (and each related trust, insurance Contract or other
funding arrangement) complies in form and in operation *** with the applicable
requirements of ERISA, the Code, other applicable Laws and governing documents
and agreements. With respect to each Company Employee Benefit Plan *** there
has been no act or omission by the Company or any of its Subsidiaries or any
ERISA Affiliate that
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
20
<PAGE>
would impair the right or ability of the Company or any of its Subsidiaries or
ERISA Affiliate to unilaterally amend in whole or part or terminate such Company
Employee Benefit Plan at any time, subject to the terms of any insurance
Contract or other contractual arrangements with third parties, and the Company
has delivered to Parent true and complete copies of: (i) the plan documents,
including any related trust agreements, insurance Contracts or other funding
arrangements and all amendments thereto, or a written summary of the terms and
conditions of the plan if there is no written plan document; (ii) the most
recent IRS Form 5500; (iii) the most recent financial statement and, if
applicable, actuarial valuation; (iv) all correspondence with the Internal
Revenue Service, the Department of Labor and other Governmental Entities with
respect to the past three (3) plan years other than IRS Form 5500 filings; and
(v) the most recent summary plan description with a summary of material
modifications to such plan.
(b) *** neither the Company nor any of its Subsidiaries and none of
their respective directors, officers or employees has any Liability with respect
to any Company Employee Benefit Plan for failure to comply with ERISA, the Code,
any other applicable Laws or any governing documents or agreements.
(c) Except as set forth on SCHEDULE 3.24, no Company Employee Benefit
Plan is an Employee Pension Benefit Plan, and no Company Employee Benefit Plan
has any unfunded Liability. With respect to the Company Employee Benefit Plans,
all applicable contributions and premium payments for all periods ending prior
to the Effective Time (including periods from the first day of the then current
plan year to the Effective Time) shall be made prior to the Effective Time in
accordance with past practice or as expressly agreed to in advance by Parent.
(d) Neither the Company, any of its Subsidiaries nor any ERISA
Affiliate maintains, maintained, contributes to, or has any Liability
(including, but not limited to, current or potential withdrawal Liability) with
respect to any Multiemployer Plan or Employee Pension Benefit Plan.
(e) With respect to all employees and former employees of the Company
and its Subsidiaries, neither the Company, any of its Subsidiaries nor any ERISA
Affiliate presently maintains, contributes to or has any Liability under any
funded or unfunded medical, health or life insurance plan or arrangement for
present or future retirees or present or future terminated employees except as
required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, or state continuation coverage Laws. There has been no act or acts or
failure or failures to act which would result in a disallowance of a deduction
or the imposition of a Tax pursuant to Section 4980B, or any predecessor
provision, of the Code or any related regulations. No event has occurred with
respect to which the Company or any of its Subsidiaries or Affiliates could be
liable for a Tax imposed by any of Sections 4972, 4976, 4977, 4979 or 4980 of
the Code, or for a civil penalty under Section 502(c) of ERISA.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
21
<PAGE>
(f) There is no pending, or *** threatened legal action, proceeding,
audit, examination or investigation against or involving any Company Employee
Benefit Plan maintained by the Company or any ERISA Affiliate (other than
routine claims for benefits). *** there is no Basis for, and there are no facts
which could give rise to, any such condition, legal action, proceeding or
investigation. Any bonding required with respect to any Company Employee
Benefit Plans in accordance with applicable provisions of ERISA has been
obtained and is in full force and effect.
SECTION 3.25. GUARANTIES. None of the Company and its Subsidiaries is a
guarantor or otherwise is liable for any Liability or obligation (including
indebtedness) of any other Person.
SECTION 3.26. ENVIRONMENT, HEALTH AND SAFETY.
(a) *** the Company and its Subsidiaries have complied with all
Environmental, Health and Safety Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against any of them alleging any failure so to comply. Without
limiting the generality of the preceding sentence, the Company and its
Subsidiaries have obtained and been in compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are required
under, and have complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health and Safety Laws.
(b) *** the Company and its Subsidiaries have no Liability (and the
Company and its Subsidiaries have not handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any property or
facility in any manner that could form the Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Company or its Subsidiaries giving rise to any Liability) for
damage to any site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual, or for any
reason under any Environmental, Health and Safety Law.
(c) *** all properties owned or leased and equipment used in the
business of the Company and its Subsidiaries, and their respective predecessors
and Affiliates, have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-transdichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances.
SECTION 3.27. CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as
described in SCHEDULE 3.27, none of the Stockholders and their Affiliates has
been involved in any business arrangement or relationship with the Company or
any of its Subsidiaries (other than in an employment or consulting capacity)
within the past twelve (12) months, and none of the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
22
<PAGE>
Stockholders and their Affiliates owns any Asset, tangible or intangible, which
is used in the business of the Company or any of its Subsidiaries.
SECTION 3.28. [[RESERVED]]
SECTION 3.29. PRODUCT AND SERVICE WARRANTIES. Each product sold or
delivered, and each service performed, by the Company and its Subsidiaries has
been in conformity with all applicable contractual commitments and all express
and implied warranties, and none of the Company and its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
any of them giving rise to any Liability) for the replacement or repair of any
product, the substandard performance of any service, or other damages in
connection with the products sold or services performed by the Company and its
Subsidiaries. No product sold or delivered, or service performed, by the
Company and its Subsidiaries is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale, lease or
performance. SCHEDULE 3.29 includes copies of the standard terms and conditions
of sale, lease or performance for each of the Company and its Subsidiaries
(containing applicable guaranty, warranty and indemnity provisions).
SECTION 3.30. PRODUCT AND SERVICE LIABILITY. None of the Company and its
Subsidiaries has any Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against any of them giving rise to any Liability) arising out of any
injury or damages (whether actual or alleged) to any Person or its property or
its business operations or prospects as a result of the ownership, possession or
use of any product sold, leased or delivered or any service performed by the
Company and its Subsidiaries.
SECTION 3.31. CUSTOMER/SUPPLIER RELATIONSHIPS. Except as set forth on
SCHEDULE 3.31, the Company and its Subsidiaries enjoy good commercial
relationships with each of their customers and suppliers. Since December 31,
1996, neither the Company nor any of its Subsidiaries has received any
communication from any of their customers or suppliers expressing significant
dissatisfaction with its commercial relationship with the Company and its
Subsidiaries.
SECTION 3.32. CERTAIN BUSINESS PRACTICES. Neither the Company, any of its
Subsidiaries nor any director, officer, stockholder, agent or employee
(excluding independent contractors) of the Company or its Subsidiaries has (i)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 3.33. DISCLOSURE. No representation or warranty made by the
Company and/or the Stockholders, nor any document, written information,
statement, financial statement, certificate, schedule or exhibit prepared and
furnished or to be prepared and furnished by the Company, its Subsidiaries, or
its representatives pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a ***
fact, or omits or will omit to state a *** fact necessary to make the statements
of facts contained herein or therein not misleading in light of the
circumstances under which they were furnished.
SECTION 3.34. LIMITATION ON REPRESENTATIONS AND WARRANTIES. The Company
makes no representation or warranty to the Parent regarding the probable success
or profitability of the Surviving Corporation.
ARTICLE IIIA
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder hereby represents and warrants *** to Parent and Parent
Sub as follows:
SECTION 3.01A. AUTHORIZATION OF TRANSACTION. Such Stockholder has full
power and authority to execute and deliver this Agreement and the Consent and to
perform its obligations hereunder and thereunder. This Agreement constitutes
the valid and legally binding obligation of such Stockholder, enforceable in
accordance with its terms and conditions. Such Stockholder is a natural person,
is over 21 years of age and has not had a legal representative appointed by a
court of law or otherwise act in his or her behalf or with respect to any of his
or her property. Such Stockholder need not give any notice to, make any filing
with, or obtain any authorization, consent or approval of any Governmental
Entity in order to consummate the transactions contemplated by this Agreement.
SECTION 3.02A. NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement and the Consent, nor the consummation of the transactions
contemplated hereby and thereby, will (a) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, Governmental Entity, or court to which such
Stockholder is subject or (b) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under any
agreement, Contract, lease, license, instrument or other arrangement to which
such Stockholder is a party, by which it is bound or to which any of its Assets
is subject.
SECTION 3.03A. BROKERS. Such Stockholder has no Liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement or for which Parent or Parent Sub
could become liable or obligated.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 3.04A. COMPANY SHARES. Such Stockholder holds of record and owns
beneficially the number of shares of Company Common Stock set forth next to his
name on the signature page hereto, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws and the restrictions in the Stockholders' Agreement (as defined
herein) that is to be terminated pursuant to Section 6.08), Encumbrances,
Security Interests, options, warrants, purchase rights, Contracts, commitments
and/or equities. Except for the Stockholders' Agreement, such Stockholder is
not a party to any option, warrant, purchase right or other Contract or
commitment that could require such Stockholder to sell, transfer or otherwise
dispose of any capital stock of the Company or any of its Subsidiaries (other
than this Agreement). Such Stockholder is not a party to any voting trust,
proxy or other agreement or understanding with respect to the voting of any
capital stock of the Company (other than this Agreement).
SECTION 3.05A. ACCREDITED INVESTOR. Such Stockholder (a) is an "accredited
investor" as that term is defined in Regulation D of the Securities Act or (b)
hereby designates Vincent K. Roach as his or her purchaser representative (the
"Purchaser Representative") and, either alone or together with the Purchaser
Representative, has sufficient knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks of
the transactions contemplated by this Agreement and making an informed business
decision. Such Stockholder represents and warrants that he or she has had the
opportunity to ask questions and receive answers concerning the terms and
conditions of the Merger and this Agreement and to obtain any additional
information that is necessary to verify the accuracy of the information
furnished pursuant to Section 3.09A. In addition, Purchaser Representative
acknowledges that Parent has informed him that Parent is pursuing potential
acquisitions of other companies, some of which are larger than the Company, and
the consummation or success of such potential acquisitions cannot be assured.
SECTION 3.06A. INVESTMENT INTENTION. Such Stockholder has no present
intention to dispose of any shares of Parent Common Stock to be issued in the
Merger, except for sales of shares of Parent Common Stock *** pursuant to
Rule 144 promulgated under the Securities Act.
SECTION 3.07A. EMPLOYMENT. In the event that such Stockholder is entering
into an Employment Agreement pursuant to Section 7.02(h), such Stockholder
currently intends to remain in the employ of the Surviving Corporation (and/or
Parent and its Subsidiaries) and has no intention to seek other employment
opportunities. Each of the Stockholders has no intention to compete with the
Surviving Corporation (and/or Parent and its Subsidiaries).
SECTION 3.08A. LIMITATION ON REPRESENTATIONS AND WARRANTIES. The
Stockholders make no representation or warranty to the Parent regarding the
probable success or profitability of the Surviving Corporation.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 3.09A. DELIVERY OF INFORMATION. Each of the Stockholders has
received a copy of the following documents relating to Parent: (i) the Annual
Report on Form 10-KSB for the year ended December 31, 1997; and (ii) the
Quarterly Report on Form 10-Q for the quarter March 31, 1998. Such Stockholder
acknowledges that he has reviewed carefully the risk factors contained in the
above referenced annual report.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
Parent and Parent Sub hereby represent and warrant, jointly and severally,
to the Company and each Stockholder that:
SECTION 4.01. ORGANIZATION AND QUALIFICATION. Each of Parent and Parent
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, and Parent is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
the business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, except for such failures to be so qualified or
licensed and in good standing as would not, individually or in the aggregate,
have a Parent Material Adverse Effect.
SECTION 4.02. CERTIFICATES OF INCORPORATION AND BY-LAWS. Neither Parent
nor Parent Sub is in violation of any of the provisions of its Certificate of
Incorporation or By-Laws, respectively, in each case as amended or restated.
SECTION 4.03. PARENT COMMON STOCK; CAPITALIZATION.
(a) The shares of Parent Common Stock to be issued pursuant to the
Merger *** will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute,
Parent's Certificate of Incorporation or By-Laws or any agreement to which
Parent is a party or is bound ***
(b) The authorized capital stock of Parent consists of Fifty Million
(50,000,000) shares of Parent Common Stock and Five Million (5,000,000) shares
of preferred stock, par value $.001 per share (the "PARENT PREFERRED STOCK").
As of May 13, 1998, (i) Thirteen Million Four Hundred Five Thousand Four Hundred
Forty-Seven (13,405,447) shares of Parent Common Stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable, (ii) no shares of Parent Preferred Stock were outstanding, (iii)
no shares of Parent Common Stock were held in treasury of Parent and (iv) Four
Million (4,000,000) shares of Parent
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Common Stock were reserved for issuance pursuant to option and employee benefit
plans and in connection with the exercise of outstanding warrants.
(c) The authorized capital stock of Parent Sub consists of one
thousand (1,000) shares of Parent Sub Common Stock, of which one hundred (100)
shares are issued and outstanding and held by Parent.
SECTION 4.04. AUTHORITY. Each of Parent and Parent Sub has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action and no other corporate proceeding on the part
of Parent or Parent Sub is necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Parent Sub and, assuming the due
authorization, execution and delivery thereof by the Stockholders and the
Company, constitutes the legal, valid and binding obligations of Parent and
Parent Sub enforceable in accordance with its terms.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and Parent
Sub do not, and the performance of this Agreement by Parent and Parent Sub will
not, (i) conflict with or violate the Certificate of Incorporation or By-Laws,
as amended or restated, of Parent or Parent Sub, (ii) conflict with or violate
any Laws in effect as of the date of this Agreement applicable to Parent or
Parent Sub or by which any of their respective properties is bound, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or require
payment under, or result in the creation of a Lien or Encumbrance on, any of the
properties or Assets of Parent or Parent Sub pursuant to, any note, bond,
mortgage, indenture, Contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Parent Sub is a party or by
which Parent or Parent Sub or any of their respective properties is bound by or
subject to, except for breaches, defaults, events, rights of termination,
amendment, acceleration or cancellation, payment obligations or Liens or
Encumbrances that would not have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Parent
Sub do not, and the performance of this Agreement by Parent and Parent Sub will
not, require Parent or Parent Sub to obtain any consent, approval, authorization
or permit of, or to make any filing with or notification to, any Governmental
Entities, except (i) for applicable requirements, if any, of the Securities Act,
the Exchange Act, Blue Sky Laws, the Nasdaq and the filing and recordation of
appropriate merger documents as required by Delaware Law and Indiana Law and
(ii) where the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, either individually or in the
aggregate, prevent Parent or Parent Sub from performing its obligations under
this Agreement.
SECTION 4.06. REPORTS; FINANCIAL STATEMENTS.
(a) Since February 12, 1997, Parent has timely filed all forms,
reports, statements and other documents required to be filed by it with the SEC
(collectively, the "PARENT SEC REPORTS"). The Parent SEC Reports, including all
Parent SEC Reports filed after the date of this Agreement and prior to the
Effective Time, were or will be prepared in all material respects in accordance
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Parent SEC Reports. As of their respective dates, the Parent SEC Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports filed prior
to, on or after the date of this Agreement (i) have been or will be prepared in
accordance with, and complied or will comply as to form with, the published
rules and regulations of the SEC and GAAP applied on a consistent basis
throughout the periods involved (except as otherwise noted therein) and (ii)
fairly present or will fairly present the consolidated financial position of
Parent and its Subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their cash flows for the periods
indicated, except that any unaudited interim financial statements were or will
be subject to normal and recurring year-end adjustments.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and to
the extent disclosed in the Parent SEC Reports filed prior to the date of
this Agreement or as contemplated in this Agreement or as otherwise disclosed
in writing by Parent to the Stockholders prior to the Effective Time, since
March 31, 1998, there has not been *** any significant change by Parent in
its accounting methods, principles or practices.
SECTION 4.08. OWNERSHIP OF PARENT SUB; NO PRIOR ACTIVITIES.
(a) Parent Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement. All of the outstanding capital
stock of Parent Sub is owned directly by Parent.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(b) Except for obligations or liabilities incurred in connection with
its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Parent Sub has not and will not have incurred,
directly or indirectly, through any Subsidiary or Affiliate, any obligations or
liabilities or engaged in any business activities or any type or kind whatsoever
or entered into any agreements or arrangements with any Person.
SECTION 4.09. BROKERS. There is no broker, finder or investment banker
which is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Parent Sub. Notwithstanding
anything herein to the contrary, the Stockholders shall not be liable or
obligated for any such brokerage, finder's or other fee or commission.
SECTION 4.10. [[RESERVED]]
SECTION 4.11. LIMITATION ON REPRESENTATIONS AND WARRANTIES.
(a) Except as and to the extent expressly set forth in this Article
IV, included on any schedule hereto or included in any writing delivered by
Parent to the Company concurrently herewith or subsequent hereto expressly
pursuant to this Agreement, each of Parent and Parent Sub makes no other
representation or warranty and disclaims all Liability and responsibility for
any representation, warranty, statement or information (financial or otherwise)
made or communicated (orally or in writing) to the Company or any of its
stockholders, employees, agents, consultants or representatives.
(b) Parent makes no representation or warranty to the Company or the
Stockholders regarding the probable success or profitability of Parent.
SECTION 4.12. ***
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Parent,
the Company will, and will cause each of its Subsidiaries to: (a) operate only
in the Ordinary Course of Business; and (b) use its best efforts to (i) preserve
and/or maintain, in all material respects and consistent with past custom and
practice, its business and properties, including its present operations,
physical facilities, working conditions and relationships with its present
employees and Persons having significant business relations with it, including,
without limitation, suppliers and customers, (ii) maintain and keep its
properties and Assets in as good repair and condition as at present, ordinary
wear and tear excepted, and (iii) keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that currently maintained.
SECTION 5.02. NEGATIVE COVENANTS OF THE COMPANY. Except as expressly
contemplated by this Agreement or as previously disclosed to Parent in writing
on SCHEDULE 5.02, or otherwise consented to in writing by Parent, from the date
of this Agreement until the Effective Time, the Company shall not, directly or
indirectly through any Affiliate or otherwise (and the Stockholders shall not
and shall not cause the Company to), and shall not permit any Affiliate to
directly or indirectly, do any of the following:
(a) (i) increase the compensation payable to, or to become payable
to, any employee, director or executive officer; (ii) grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or employee; (iii) establish, adopt, enter into, amend,
modify or terminate any Employee Benefit Plan or arrangement except as may be
required by applicable Law; or (iv) hire any salaried person earning annual
compensation, including salary, cash bonuses and commissions, in excess of ***;
(b) declare or pay any dividend on or make any other distribution in
respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of its or
any of its Subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its Subsidiaries'
capital stock, or any options, warrants or conversion or other rights to acquire
any shares of its or its Subsidiaries' capital stock or any such securities or
obligations; (ii) effect any reorganization or recapitalization; or (iii) split,
combine or reclassify any of its or its Subsidiaries' capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for, shares of its or its Subsidiaries' capital stock;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(d) (i) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale (including the grant of any
Security Interests, Liens, claims, pledges, limitations in voting rights,
charges or other Encumbrances) of, any shares of any class of its or its
Subsidiaries' capital stock (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any other shares, or any
rights, warrants or options to acquire, any such shares; and (ii) amend or
otherwise modify the terms of any such rights, warrants or options the effect of
which shall be to make such terms more favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in, all or a portion of the Assets of, or by any
other manner, any corporation, partnership, association or other business,
organization or division thereof, or otherwise acquire or agree to acquire any
Assets of any other Person (other than the purchase of Assets from suppliers or
vendors in the Ordinary Course of Business)***;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its *** Assets or any *** Assets of any of its
Subsidiaries;
(g) initiate, solicit or encourage (including by way of furnishing
information or assistance), respond to, or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Competing Transaction, or enter into discussions or
negotiate with any person or entity in furtherance of such inquiries to obtain a
Competing Transaction, or enter into an agreement with respect to any Competing
Transaction or agree to or endorse any Competing Transaction, or authorize or
permit any of the officers, directors or employees of the Company or any of its
Subsidiaries or any investment banker, financial advisor, attorney, accountant
or other representative retained by the Company or any of its Subsidiaries to
take any such action, and the Company shall promptly notify Parent of all
relevant terms of any such inquiries and proposals received by the Company or
any of its Subsidiaries or by any such officer, director, employee, investment
banker, financial advisor or attorney, and if such inquiry or proposal is in
writing, the Company shall deliver or cause to be delivered to Parent a copy of
such inquiry or proposal.
(h) propose or adopt any amendments to its Articles of Incorporation
or its By-Laws;
(i) (A) change any of its methods of accounting in effect at December
31, 1997, or (B) make or rescind any material election relating to Taxes, settle
or compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes (except where the amount
of such settlements or controversies, individually or in the aggregate, does not
exceed ***), or change in any material respect any of its methods of reporting
income or deductions for federal income Tax purposes from those employed in the
preparation of the federal
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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income Tax Return for the taxable year ended December 31, 1997, except, in the
case of clause (A) or clause (B), as may be required by Law or GAAP;
(j) enter into any Contract outside the Ordinary Course of Business;
(k) create, or permit the creation of, any Lien upon any Assets
outside the Ordinary Course of Business;
(l) enter into any employment Contract or collective bargaining
agreement, or modify the terms of any existing such Contract or agreement;
(m) sell, lease, exchange, mortgage, pledge, transfer, assign or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer, assign or otherwise dispose of, any Assets with a Fair Market Value of
*** or more, or Assets with an aggregate Fair Market Value of *** or more, in
each case tangible or intangible;
(n) make any capital expenditures other than in the Ordinary Course
of Business, or make any capital expenditures in the aggregate in excess of ***;
(o) amend or renew, or enter into any Contract involving operations
outside of the United States;
(p) take or agree to take any action that would or is reasonably
likely to result in any of the Company's representations and warranties set
forth in this Agreement being untrue or in any of the conditions to the Merger
not being satisfied; or
(q) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03. NEGATIVE COVENANTS OF PARENT. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by the
Company, from the date of this Agreement until the Effective Time, Parent will
not do any of the following:
(a) amend any of the terms or provisions of the Parent Common Stock
which amendment would have a material adverse effect on the Stockholders;
(b) knowingly take any action which would result in a failure to
maintain the quotation of the Parent Common Stock on Nasdaq;
(c) declare or pay any dividends or other distribution (whether in
cash, stock or other property) on outstanding shares of capital stock;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(d) take or agree to take any action that would or is reasonably
likely to result in any of Parent's representations and warranties set forth in
this Agreement being untrue in any material respect or in any of the conditions
to the Merger not being satisfied in any material respect; or
(e) agree in writing or otherwise to do any of the foregoing.
SECTION 5.04. ACCESS AND INFORMATION. The Company shall, and shall cause
its Subsidiaries to, provide Parent and its officers, directors, employees,
agents, counsel, accountants, financial advisors, consultants and other
representatives (collectively, the "PARENT REPRESENTATIVES"), with full access,
upon reasonable prior notice, to all officers, employees and accountants of the
Company and its Subsidiaries and to their Assets, properties, Contracts, books,
records and all such other information and data concerning the business and
operations of the Company and its Subsidiaries as Parent or any of the Parent
Representatives reasonably may request in connection with such investigation.
Such investigation will involve, among other things, Parent's review and
confirmation of the Company's Financial Statements, the legal review of the
Contracts and leases of the Company and its Subsidiaries, the review of the
client lists of the Company and its Subsidiaries and reference checks of the
Company and its Subsidiaries. Parent will provide the Stockholders with all
information reasonably requested by them to enable them to evaluate the merits
of the Merger.
SECTION 5.05. ESCROW AGREEMENT. At or before the Effective Time, Kent L.
Wall, as representative and attorney-in-fact for the Stockholders (the
"STOCKHOLDERS' REPRESENTATIVE"), Parent, and a third party acceptable to Parent
and the Stockholders' Representative, as escrow agent, shall execute and deliver
the escrow agreement, substantially in the form of EXHIBIT 5.05 hereof (the
"ESCROW AGREEMENT"). Each Stockholder hereby authorizes and appoints the
Stockholders' Representative to serve as its attorney-in-fact to execute the
Escrow Agreement, and agrees to be bound by the provisions thereof.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company, Parent and Parent Sub shall each use its best
efforts to: (i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable under applicable Law
or otherwise to consummate and make effective the transactions contemplated by
this Agreement; (ii) obtain from any Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Parent, Parent Sub or the Company or any of their
Subsidiaries in connection with the authorization,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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execution and delivery of this Agreement and the consummation of the
transactions contemplated herein, including, without limitation, the Merger;
(iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
Delaware Law and Indiana Law (including holding a stockholders meeting and/or
sending notice of merger and appraisal rights) and the federal securities laws
and the rules and regulations thereunder, if any, and any other applicable
federal or state securities laws, and (B) the HSR Act, and (C) any other
applicable Law; provided that Parent, Parent Sub and the Company shall cooperate
with each other in connection with the making of all such filings, including
providing copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, accepting all reasonable additions, deletions
or changes suggested in connection therewith. The Company, Parent and Parent
Sub shall furnish all information required for any application or other filing
to be made pursuant to the rules and regulations of any applicable Law in
connection with the transactions contemplated by this Agreement.
(b) (i) Each of the Company, Parent and Parent Sub shall give, and
shall cause each of their respective Subsidiaries to give, any notices to third
parties, and use, and cause each of their respective Subsidiaries to use, its
best efforts to obtain any third party consents (A) necessary, proper or
advisable to consummate the transactions contemplated in this Agreement, (B)
disclosed or required to be disclosed in the schedules contained herein, (C)
otherwise required under any Contracts, licenses, leases or other agreements in
connection with the consummation of the transactions contemplated herein or (D)
required to prevent a Company Material Adverse Effect from occurring prior to or
after the Effective Time or a Parent Material Adverse Effect from occurring
prior to or after the Effective Time.
(ii) In the event that any party shall fail to obtain any third
party consent described in subsection (b) (i) above, such party shall use its
best efforts, and shall take any such actions reasonably requested by the
other party hereto, to minimize any adverse effect upon the Company, Parent,
Parent Sub, their respective Subsidiaries and their respective businesses
resulting, or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent.
SECTION 6.02. TAX TREATMENT; "POOLING OF INTERESTS"; AFFILIATES. The
Company, Parent and Parent Sub shall use their best efforts, and shall cause
their respective Subsidiaries and Affiliates to use their best efforts, to cause
the Merger to qualify, and will not take any actions which would prevent the
Merger from qualifying, as a "reorganization" under Section 368(a)(1)(A) of the
Code, by application of Section 368(a)(2)(D) of the Code. The Company, Parent
and the Stockholders shall, and shall cause each of their respective
Subsidiaries and Affiliates to, use their best efforts not to take any action
(regardless of whether such action would otherwise be permitted or not
prohibited hereunder) that would prevent Parent from accounting for the Merger
as a "pooling of interests." Each Stockholder agrees and undertakes that from
the date hereof until such time as financial results (including combined sales
and net income) covering at least thirty (30) days of post-
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
34
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Merger operations have been published (the date on which such financial results
are published shall be the "FINANCIAL RESULT DATE"), such Stockholder shall not
sell or in any other way alter his risk relative to any shares of Parent Common
Stock received in the Merger (within the meaning of the Codification of
Financial Reporting Policies 201.01 (reprinted in 7 Fed. Sec. L. Rep. (CCH)
72,951)). Each Stockholder understands that Parent will advise it when the
Financial Result Date shall have occurred. Each Stockholder undertakes to
inform the Company and Parent of any transactions involving Company Common Stock
or Parent Common Stock that he may wish to consummate during any time prior to
the Financial Result Date and will not consummate such transaction unless Parent
shall consent thereto in writing.
SECTION 6.03. PUBLIC ANNOUNCEMENTS.
(a) Any public announcement or similar publicity with respect to this
Agreement or the transactions contemplated hereby will be issued, if at all, at
such time and in such manner as Parent determines. Subject to Section 6.03(b)
below and prior to the Effective Time, each of the Stockholders and Parent
shall, and the Stockholders shall cause the Company and its Subsidiaries to,
keep this Agreement and the transactions contemplated hereby strictly
confidential and shall not make any disclosure of this Agreement or the
transactions contemplated hereby to any Person. The parties hereto shall
consult with each other concerning the means by which the Company's employees,
customers and suppliers and other Persons having dealings with the Company will
be informed of the transactions contemplated hereby and Parent will have the
right to be present for any such communication.
(b) Each party hereto acknowledges that, as a publicly traded
company, Parent has disclosure obligations under the federal securities laws
and, depending on the facts and circumstances, may be required to announce the
existence of this Agreement and/or the Merger prior to the Effective Time. If
so required, Parent will first consult with the Company regarding the timing and
contents of any such announcement. Each of the parties hereto further
acknowledges that this Agreement and/or the Merger may constitute material,
non-public information and agrees that it or he shall not, and shall cause its
respective representatives or Affiliates to not, engage in or effect any
transaction of Parent's securities until the Effective Time, subject to the
additional restrictions imposed by the federal securities laws concerning the
purchase or sale of securities.
SECTION 6.04. OBLIGATIONS OF PARENT SUB. Parent shall take all action
necessary to cause Parent Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
SECTION 6.05. RESTRICTIVE LEGEND. Each of the Stockholders acknowledges
and agrees that the certificates of Parent Common Stock issued to the
Stockholders pursuant to the Merger shall bear a restrictive legend in
substantially the following form and a stop-transfer order may be placed against
their transfer:
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
35
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The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended.
The securities have been acquired for investment and may not
be sold, transferred or assigned in the absence of an
effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of
counsel that registration is not required under said Act or
unless sold pursuant to Rule 144.
The legend set forth above shall be removed and Parent shall issue a
certificate without such legend to the holder of the shares of Parent Common
Stock upon which it is stamped, if, unless otherwise required by applicable
state securities laws, (a) the such shares are included in an effective
registration statement under the Securities Act covering the resale thereof, or
(b) such holder provides Parent with an opinion of legal counsel, in form,
substance and scope reasonably acceptable to Parent and its legal counsel, to
the effect that a public sale or transfer of such shares may be made without
registration under the Securities Act and such shares are being sold or
transferred in accordance with the method described therein, or (c) such holder
provides Parent with reasonable assurances that such shares can be sold pursuant
to Rule 144 under the Securities Act (or a successor rule thereto) without any
restriction as to the number of shares acquired as of a particular date that can
then be immediately sold. Each of the Stockholders agrees to sell all of the
shares of Parent Common Stock acquired pursuant to the Merger, including those
represented by a certificate(s) from which the legend has been removed, (x) in
compliance with the prospectus delivery requirements, if any, under applicable
securities Laws, (y) through an investment bank designated by Parent and (z) in
a manner reasonably designed not to affect adversely the market price of the
Parent Common Stock.
SECTION 6.06. ***
SECTION 6.07. DELIVERY OF SEC FILINGS. Parent shall promptly deliver to
the Company or to the Company's counsel a copy of all filings of the Parent SEC
Reports with the SEC, from the date hereof to the Effective Time, or any other
document which Parent deems to be appropriate for provision to the Stockholders.
Upon delivery of any such document by Parent to the Company, the Company shall
promptly deliver to each holder of capital stock of the Company a copy of such
document, including all exhibits thereto, and an officer of the Company shall
promptly provide to Parent an affidavit of delivery of such copies.
SECTION 6.08. TERMINATION OF STOCKHOLDERS' AGREEMENT. Each of the
Stockholders (as applicable) and the Company hereby agree to and approve of the
termination, effective as of immediately before the Effective Time, of: (a) that
certain Amended Stock Transfer Agreement, effective July 1, 1997, by and among
the Company and the Stockholders named therein (as so executed and amended from
time to time, the "STOCKHOLDERS' AGREEMENT"); and (b) any buy-sell or stock
transfer agreement or other agreement or arrangement similar to the
Stockholders' Agreement
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
36
<PAGE>
between and among such parties (including, without limitation, the Restrictive
Stock Transfer Agreement dated December 7, 1983, the Stock Transfer Agreement
dated January 2, 1987 and the Amended Stock Transfer Agreement, effective
January 1, 1994).
SECTION 6.09. BEST EFFORTS. The parties hereto shall use their best
efforts to consummate the Merger and the other transactions contemplated hereby
as soon as reasonably practicable after the date of this Agreement. The parties
hereto agree to execute such amendments to this Agreement, the Escrow Agreement
and any other document as may be necessary to enable the Merger to qualify for
"pooling of interests" accounting treatment; provided that such amendments or
documents do not adversely affect such party.
SECTION 6.10. ***
SECTION 6.11. ***
SECTION 6.12. ***
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated herein shall be subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part, to the extent permitted by applicable
Law:
(a) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(b) CONSENTS AND APPROVALS. All material consents, approvals and
authorizations legally required to be obtained to consummate the Merger shall
have been obtained from all required Governmental Entities.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT. The
obligations of Parent to effect the Merger and the other transactions
contemplated herein are also subject to the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
37
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following conditions, each of which may be waived by Parent, in whole or in
part, to the extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES.
(i) Notwithstanding any due diligence performed by Parent and
the Parent Representatives, each of the representations and warranties of the
Company contained in this Agreement shall be true and correct when made and on
and as of the Effective Time, as if made on and as of such date, except where
failure to be so true and correct would not have a Company Material Adverse
Effect, individually or in the aggregate, and except that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date, except where the failure to be so true and
correct would not have a Company Material Adverse Effect. Parent shall have
received a certificate of the President of the Company to such effect; and
(ii) Notwithstanding any due diligence performed by Parent and
the Parent Representatives, each of the representations and warranties of the
Stockholders contained in this Agreement shall be true and correct when made and
on and as of the Effective Time, as if made on and as of such date, except that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time. Parent shall have received a certificate of the President or
Chief Financial Officer of the Company to that effect.
(c) "POOLING OF INTERESTS". The Merger shall qualify for "pooling of
interests" accounting treatment and Parent shall have received a letter, dated
as of the Effective Time, from Ernst & Young LLP regarding such firm's
concurrence with Parent's conclusion as to the appropriateness of "pooling of
interests" accounting treatment for the Merger under Accounting Principles Board
Opinion No. 16 if the Merger is closed and consummated in accordance with this
Agreement.
(d) THIRD PARTY CONSENTS AND WAIVERS. The Company shall have
obtained consents and waivers, in form and substance reasonably satisfactory to
Parent, in respect of the Contracts or agreements set forth on SCHEDULE 7.02(d).
(e) COMPANY MATERIAL ADVERSE EFFECT. The Company shall not have
become subject to any action or event which resulted in or may likely result in
a Company Material Adverse Effect.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
38
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(f) LEGAL OPINION. Parent shall have received the legal opinion of
Lowe Gray Steele & Darko, LLP, covering the matters set forth on EXHIBIT
7.02(f)
hereto.
(g) AFFILIATE AGREEMENTS. Parent shall have received from each
Affiliate of the Company and any other Person who may be deemed to have become
an Affiliate of the Company (under Rule 145 under the Securities Act or
otherwise under applicable SEC accounting releases with respect to "pooling of
interests" accounting treatment) after the date of this Agreement and or prior
to the Effective Time a signed Affiliate Agreement in the form of EXHIBIT
7.02(g). Each such Affiliate agrees to execute and deliver similar Affiliate
Agreements upon the reasonable request of Parent (or any of its Subsidiaries or
Affiliates) in connection with future business transactions of Parent (or any of
its Subsidiaries or Affiliates).
(h) EMPLOYMENT AGREEMENTS. Vincent K. Roach and Kent L. Wall shall
execute the employment agreements (the "EMPLOYMENT AGREEMENTS") in the
respective forms attached hereto as EXHIBIT 7.02(h)(i) and EXHIBIT 7.02(h)(ii).
(i) NONCOMPETITION AGREEMENTS. Each of Vincent K. Roach and
Kent L. Wall shall execute the noncompetition agreement in the form attached
hereto as EXHIBIT 7.02(i).
(j) SPOUSAL CONSENTS. Parent shall have obtained from each of the
spouses of the Stockholders, respectively, the executed consent, in the form
attached hereto as EXHIBIT 7.02(j), in respect of the consummation of the Merger
and the transactions contemplated by this Agreement.
(k) ***
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement is subject to the following conditions, each of
which may be waived, in whole or in part, to the extent permitted by applicable
Law, by the Company:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Parent and Parent Sub contained in this Agreement shall be true
and correct when made and on and as of the Effective Time as if made on and as
of such date, except where the failure to be so true and correct would not have
a Parent Material Adverse Effect, and except that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date, except where the failure to be so true and correct
would not have a Parent Material
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
39
<PAGE>
Adverse Effect. The Company shall have received a certificate of the President
of Parent to such effect.
(b) AGREEMENTS AND COVENANTS. Parent shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate of the President
of Parent to that effect.
(c) PARENT MATERIAL ADVERSE EFFECT. Parent shall not have become
subject to any action or event which resulted in or may likely result in a
Parent Material Adverse Effect.
(d) LEGAL OPINION. The Company shall have received the legal opinion
of Baker & McKenzie, covering the matters set forth on EXHIBIT 7.03(d).
ARTICLE VIII
TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by Parent, upon a material breach of any covenant or agreement on
the part of the Company set forth in this Agreement;
(c) by the Company, upon a material breach of any covenant or
agreement on the part of Parent or Parent Sub set forth in this Agreement;
(d) by either Parent or the Company, if there shall be any order of a
Governmental Entity which is final and nonappealable preventing the consummation
of the Merger;
(e) by Parent, upon a material breach of a representation and
warranty made by the Company or the Stockholders which has resulted in a Company
Material Adverse Effect, or which constitutes a material breach of any
representation and warranty set forth in Article IIIA; or
(f) by the Company, upon a material breach of a representation and
warranty made by Parent which has resulted in a Parent Material Adverse Effect.
SECTION 8.02. INVESTIGATION. Notwithstanding any of the foregoing, the
right of any party hereto to terminate this Agreement pursuant to Section 8.01
shall remain operative and in full
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
40
<PAGE>
force and effect regardless of any investigation made by or on behalf of any
party hereto, any Person controlling any such party or any of their respective
officers or directors, whether prior to or after the execution of this
Agreement.
SECTION 8.03. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto (in the case of the
Stockholders, by a number of Stockholders who are entitled to receive or have
received, in the aggregate, *** of the shares of Parent Common Stock to be
issued hereby at the Effective Time if prior to the Effective Time, or a
majority of the shares of Parent Common Stock issued hereby if subsequent to the
Effective Time).
SECTION 8.04. WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of any party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Agreement or the documents referred to in
this Agreement can be discharged by one party hereto, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other party or parties hereto (in the case of the Stockholders, by a number of
Stockholders who are entitled to receive or have received, in the aggregate, ***
of the shares of Parent Common Stock to be issued hereby at the Effective Time
if prior to the Effective Time, or a majority of the shares of Parent Common
Stock issued hereby if subsequent to the Effective Time); (b) no waiver that may
be given by a party hereto will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement. All rights and remedies existing under this Agreement are in
addition to, and not exclusive of, any rights or remedies otherwise available.
SECTION 8.05. ***
SECTION 8.06. STOCKHOLDER INDEMNIFICATION, HOLD BACK AND ESCROW.
(a) Each of the *** Stockholders jointly and severally shall ***
indemnify and defend each of Parent and Parent Sub, and hold it harmless,
from and against any and all losses, damages, Liabilities, claims, demands,
judgments,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
41
<PAGE>
settlements, costs and expenses of any nature whatsoever (including
reasonable attorneys' fees) (collectively, "LOSS"), resulting from or arising
out of any: (i) breach of any representation or warranty or agreement of the
Company or any Stockholder contained herein; or (ii) Liability of the
Company, whether or not addressed by a representation or warranty, which was
*** created incurred or arose from facts, events, conditions or circumstances
existing on or before the Effective Time (provided that the items listed on
SCHEDULE 3.08 shall be deemed to be incurred in the Ordinary Course of
Business) *** no claim for indemnification pursuant to this Section 8.06(a)
may be made subsequent to the date which is *** after the Effective Time or
in respect of a Loss in respect of accounts receivable or for which Parent
has otherwise been previously reimbursed by the Stockholders.
(b) (i) If any third party shall notify Parent with respect to any
third party claim (a "THIRD PARTY CLAIM") that may give rise to a Loss, then
Parent shall promptly notify the Stockholders' Representative thereof in
writing; PROVIDED, HOWEVER, that no delay on the part of Parent in notifying the
Stockholders' Representative shall relieve the Stockholders from any obligation
hereunder unless (and then solely to the extent) such Stockholders thereby are
prejudiced.
(ii) The Stockholders will have the right to defend Parent
against the Third Party Claim with counsel of their choice reasonably
satisfactory to Parent, so long as: (A) the Stockholders so notify Parent in
writing within fifteen (15) days, acknowledging that such claim is in respect of
a Loss described in Section 8.06(a); (B) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief; (C)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of Parent, likely to establish a precedential
custom or practice materially adverse to the continuing business interests of
Parent; and (D) the Stockholders conduct the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Stockholders are conducting the defense of
the Third Party Claim in accordance with Section 8.06(b)(ii), (A) Parent may
retain separate co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (B) Parent will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Stockholders' Representative (which
consent will not be withheld unreasonably); and (C) the Stockholders will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of Parent (which
consent will not be withheld unreasonably).
(iv) In the event that any of the conditions in Section
8.06(b)(ii) is or becomes unsatisfied, (A) Parent may defend against the Third
Party Claim in any manner it reasonably may deem appropriate; PROVIDED, HOWEVER,
that Parent shall not consent to the entry of any judgment or enter into any
settlement or agreement to settle a Third Party Claim without the prior written
consent of the Stockholders' Representative, which consent will not be withheld
unreasonably; (B) Parent shall be reimbursed from the Escrow Account promptly
and periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses); and (C) the Stockholders
will remain responsible for any Loss that Parent actually suffers resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Section 8.06.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
42
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(c) (i) Each Stockholder of the Company hereby agrees that, at the
Effective Time, Parent shall hold back and place into escrow pursuant to the
Escrow Agreement (the "ESCROW ACCOUNT"), a number of Parent Shares equal to ***,
rounded up to the next whole share, of the total number of shares of Parent
Common Stock to be received by such Stockholder (the total value of all such
shares as valued at the Market Price to be collectively referred to as the
"INDEMNIFICATION AMOUNT"), as partial security for such Stockholder's indemnity
obligations herein.
(ii) At any time Parent shall have a claim for indemnification,
Parent shall submit such claim to the Stockholders' Representative and within
thirty (30) calendar days thereof the Stockholders' Representative shall notify
Parent, in writing, whether he agrees with such claim; PROVIDED, HOWEVER, that
in the event that the Stockholders' Representative fails to so notify Parent,
the Stockholders' Representative shall be deemed to have agreed to the release
of securities or cash from the Escrow Account. In the event that the
Stockholders' Representative notifies Parent that he disagrees with such claim,
the Stockholders' Representative shall provide Parent with a written notice
specifying the Basis for such disagreement and, if the Stockholders'
Representative and Parent shall be unable to reach agreement within thirty (30)
days, the matter will be submitted to arbitration pursuant to the terms of
Section 9.11.
(iii) For purposes of calculating quantities of shares to be paid
to Parent pursuant to this Section 8.06, each share of Parent Common Stock shall
be valued at the Market Price at the time described in Section 8.06(c)(iv). Any
and all distributions to and from the Escrow Account shall be allocated among
the Stockholders in accordance with the terms and conditions of this Agreement
(based on each Stockholder's interest in shares of Parent Common Stock to be
issued pursuant to the Merger), as separate subaccounts for each holder.
(iv) ***
(d) For the purposes of this Section 8.06, holders of a majority of
the shares of Parent Common Stock in the Escrow Account may, by written notice
signed by them and delivered to Parent, appoint any other individual to act in
the place and stead of the Stockholders' Representative. In the event of the
death, incapacity or resignation of the Stockholders' Representative, if no such
replacement is appointed within thirty (30) days, Parent may designate an
interim replacement to serve until such appointment.
(e) In connection with this Agreement and the Escrow Agreement and
the transactions contemplated hereby and thereby, respectively, the Company and
the Stockholders agree that the Stockholders' Representative shall not be liable
for any error of judgment or for any act done or omitted by the Stockholders'
Representative in good faith or for any mistake in fact or law, except its own
willful misconduct or gross negligence.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
43
<PAGE>
(f) The right to indemnification, payment of damages or other remedy
based on the representations, warranties, covenants and obligations of the
Company and the Stockholders contained herein will not be affected by any
investigation conducted by Parent or the Parent Representatives with respect to,
or any Knowledge acquired (or capable of being acquired) by Parent or the Parent
Representatives, at any time whether before or after the execution and delivery
of this Agreement or the Effective Time, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant or
obligation. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants
and obligations.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as set forth below in Section 9.01(b), the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any Person controlling any such party or
any of its officers or directors, whether prior to or after the execution of
this Agreement.
(b) The representations, warranties and agreements in this Agreement
shall terminate (i) with respect to the Stockholders and the Company, on the ***
anniversary of the Effective Time and (ii) with respect to Parent and Parent
Sub, *** the Effective Time; PROVIDED, HOWEVER, that the representations,
warranties and agreements set forth in *** shall not so terminate.
SECTION 9.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the facsimile number
specified below:
(a) If to Parent or Parent Sub:
DAOU Systems, Inc.
5120 Shoreham Place
San Diego, CA 92122
ATTENTION: President and Chief Financial Officer
Facsimile No.: (619) 452-2789
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
44
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with a copy to:
Baker & McKenzie
101 West Broadway, Twelfth Floor
San Diego, California 92101
ATTENTION: John J. Hentrich, Esq.
Facsimile No.: (619) 236-0429
(b) If to the Company:
Technology Management, Inc.
101 West Washington Street, Suite 1110-E
Indianapolis, IN 46204
ATTENTION: Vincent K. Roach
Facsimile No.: (317) 686-5010
with a copy to:
Lowe Gray Steele & Darko, LLP
Bank One Tower
111 Monument Circle, Suite 4600
Indianapolis, IN 46204-5146
ATTENTION: Sydney L. Steele, Esq.
Facsimile No.: (317) 236-6472
(c) If to the Stockholders:
Technology Management, Inc.
101 West Washington Street, Suite 1110-E
Indianapolis, IN 46204
ATTENTION: Vincent K. Roach
Facsimile No.: (317) 686-5010
SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
"AAA" as defined in Section 9.11;
"AFFILIATE" means a Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned Person, except that, in the case of the Company and the
Stockholders, "Affiliate" does not mean any of Systems Integration, Inc.,
MSO/USA, Inc. and The Kent Group, Inc.;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
45
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"AGREEMENT" as defined in the preamble to this Agreement;
"ASSETS" means any and all properties and assets (real, personal or mixed,
tangible or intangible) of any Person;
"BALANCE SHEET" as defined in Section 3.07;
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence;
"BLUE SKY LAWS" as defined in Section 3.05(b);
"BUSINESS DAY" means any day other than a day on which banks in the State
of California are authorized or obligated to be closed;
"CERTIFICATE OF MERGER" as defined in Section 1.02;
"CERTIFICATES" as defined in Section 2.02(b);
"CODE" means the Internal Revenue Code of 1986, as amended;
"COMPANY" as defined in the preamble to this Agreement;
"COMPANY COMMON STOCK" as defined in Section 2.01(a);
"COMPANY EMPLOYEE BENEFIT PLAN" as defined in Section 3.24(a);
"COMPANY MATERIAL ADVERSE EFFECT" means any change or effect that,
individually or when taken together with all other such changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
Assets, condition (financial or otherwise), liabilities, operations or prospects
of the Company at the time of such change or effect. A Company Material Adverse
Effect shall be deemed to exist if there shall occur any event which causes or
may reasonably be expected to cause or result in estimable monetary loss which,
individually or when aggregated with all other events, exceeds ***;
"COMPANY PERMITS" as defined in Section 3.06;
"COMPETING TRANSACTION" means any of the following involving the Company or
any Subsidiary or Affiliate of the Company: (i) any merger, consolidation, share
exchange, business combination, or other similar transaction (other than the
transactions contemplated by this
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
46
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Agreement); (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of ten percent (10%) or more of the Assets of the Company in a
single transaction or series of transactions; (iii) any offer (whether cash or
securities) for ten percent (10%) or more of the outstanding shares of capital
stock of the Company; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing;
"CONSENT" as defined in Section 2.01A;
"CONTRACT" of any Person means any contract, agreement or instrument of any
type whatsoever (i) to which such Person is a party and by which such Person
either has made a binding undertaking to perform an obligation or is entitled to
any property or right, or (ii) by which any of the Assets of such Person is
bound;
"CONTROL" (including the terms "CONTROLLING," "CONTROLLED," "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or as
trustee or executor, by Contract or credit arrangement or otherwise;
"DELAWARE LAW" as defined in the recitals to this Agreement;
"DISSENTING SHARES" as defined in Section 2.04;
***;
"EFFECTIVE TIME" as defined in Section 1.02;
"EMPLOYEE BENEFIT PLAN" means (a) any bonus, incentive compensation, profit
sharing, retirement, pension, group insurance, death benefit, group health,
medical expense reimbursement, workers' compensation, dependent care, flexible
benefits or cafeteria, stock option, stock purchase, stock appreciation rights,
savings, deferred compensation, consulting, severance pay or termination pay,
vacation pay, life insurance, disability, welfare or other employee benefit or
fringe benefit plan, program or arrangement; or (b) any plan, program or
arrangement which is an Employee Pension Benefit Plan, Employee Welfare Benefit
Plan or Multiemployer Plan.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Section
3(2);
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Section
3(1);
"EMPLOYMENT AGREEMENTS" as defined in Section 7.02(h);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
47
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"ENCUMBRANCES" means any Security Interests, Liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature whatsoever;
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other Laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including Laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes;
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended;
"ERISA AFFILIATE" means each person (as defined in Section 3(9) of ERISA)
that together with the Company (or any person whose Liabilities the Company has
assumed or is otherwise subject to) would be considered or has been a single
employer under Section 4001(b) of ERISA or would be considered or has been a
member of the same "controlled group," under common control, a member of the
same affiliated service group or otherwise a single employer within the meaning
of Section 414(b), (c), (m) and (o) of the Code (PROVIDED, HOWEVER, that when
the subject of the provision is a Multiemployer Plan only subsections (b) and
(c) of Section 414 of the Code shall be taken into account).
"ESCROW ACCOUNT" as defined in Section 8.06(c);
"ESCROW AGREEMENT" as defined in Section 5.05;
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended;
"EXCHANGE AGENT" as defined in Section 2.02(a);
"EXCHANGE FUND" as defined in Section 2.02(a);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
48
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"EXCHANGE RATIO" means, subject to adjustment as set forth in Sections
2.01(b), the quotient obtained from dividing (i) as the numerator of such
quotient, One Million Seventy-Eight Thousand Nine Hundred Sixty-Three shares
of Parent Common Stock, by (ii) as the denominator of such quotient, the
total number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (excluding any Dissenting Shares, if
applicable). All calculations made to determine the Exchange Ratio shall be
made through the fourth decimal place (i.e., rounded to the closest
ten-thousandth);
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended;
"FAIR MARKET VALUE" of any Asset means the value that would be obtained in
an arm's length transaction between an informed and willing buyer and an
informed and willing seller;
"FINANCIAL RESULT DATE" as defined in Section 6.02;
"FINANCIAL STATEMENTS" as defined in Section 3.07;
"GAAP" means United States generally accepted accounting principles as in
effect from time to time;
"GOVERNMENTAL ENTITIES" as defined in Section 3.05(b);
"HSR ACT" as defined in Section 3.05(b);
***
"INDEMNIFICATION AMOUNT" as defined in Section 8.06(c);
"INDIANA LAW" as defined in the recitals to this Agreement;
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
49
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compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium);
"INTERIM BALANCE SHEET" as defined in Section 3.07;
"INTERIM FINANCIAL STATEMENTS" as defined in Section 3.07;
"KNOWLEDGE" or "KNOWN" means, with respect to a particular fact or other
matter, that (i) an individual should be aware of such fact or other matter or
(ii) such individual could reasonably be expected to discover or otherwise
become aware of such fact or other matter; a Person (other than an individual)
will be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving, or who has at any time served, as a director,
officer, partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter;
"LAWS" as defined in Section 3.05(a);
"LIABILITIES" as defined in Section 3.08;
"LIEN" means any lien, charge, Encumbrance, mortgage, conditional sale
agreement, title retention agreement, financing lease, pledge or Security
Interest of any kind or type and whether arising by Contract or under Law;
"LOSS" as defined in Section 8.06(a);
***
***
"MARKET PRICE" means the average of the closing prices of the Parent Common
Stock as reported on the Nasdaq National Market Quotation System for the ten
(10) trading days prior to the Effective Time or other date, as applicable;
"MERGER" as defined in the recitals to this Agreement;
"MERGER CONSIDERATION" as defined in Section 2.02(b);
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
50
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"NASDAQ" means The Nasdaq Stock Market, Inc.;
"ORDINARY COURSE OF BUSINESS" with respect to any entity, means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency) of that entity;
"PARENT" as defined in the preamble to this Agreement;
"PARENT COMMON STOCK" as defined in Section 2.01(a);
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change or effect that,
individually or when taken together with all such other changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
Assets, condition (financial or otherwise), Liabilities, operations or prospects
of Parent and its Subsidiaries, taken as a whole at the time of such change or
effect. A Parent Material Adverse Effect shall be deemed to exist if there
shall occur any event which causes or may reasonably be expected to cause or
result in estimable monetary loss which, individually or when aggregated with
all other events, exceeds ***;
"PARENT PREFERRED STOCK" as defined in Section 4.03(b);
"PARENT REPRESENTATIVES" as defined in Section 5.04;
"PARENT SEC REPORTS" as defined in Section 4.06(a);
"PARENT SUB" as defined in the preamble to this Agreement;
"PARENT SUB COMMON STOCK" means Parent Sub's common stock, par value $.001
per share;
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a Governmental Entity (or any
department, agency, or political subdivision thereof) or any other entity;
***;
***;
"RULES" as defined in Section 9.11;
"SEC" means the Securities and Exchange Commission;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
51
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"SECURITIES ACT" means the Securities Act of 1933, as amended;
"SECURITY INTEREST" means any mortgage, pledge, Lien, Encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar Liens, (b) Liens for Taxes not yet due and payable, (c) purchase money
Liens and Liens securing rental payments under capital lease arrangements, and
(d) other Liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money;
***;
"STOCKHOLDERS" as defined in the preamble to this Agreement;
"STOCKHOLDERS' AGREEMENT" as defined in Section 6.08;
"STOCKHOLDERS' REPRESENTATIVE" as defined in Section 5.05;
"SUBSIDIARY" or "SUBSIDIARIES" of the Company, Parent, the Surviving
Corporation or any other Person, means any corporation, partnership, joint
venture or other legal entity of which the Company, Parent, the Surviving
Corporation or such other Person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, fifty percent
(50%) or more of the capital stock or other equity interests which the holders
thereof are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity;
"SURVIVING CORPORATION" as defined in Section 1.01;
"TAX" or "TAXES" shall mean any and all taxes, charges, fees or levies,
payable to any federal, state, local or foreign taxing authority or agency,
including, without limitation, (i) income, franchise, profits, gross receipts,
minimum, alternative minimum, estimated, AD VALOREM, value added, sales, use,
service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers compensation,
unemployment compensation, utility, severance, excise, stamp, windfall profits,
transfer and capital gains taxes, (ii) custom duties, imposts, charges, levies
or other similar assessments of any kind, and (iii) interest, penalties and
additions to tax imposed with respect thereto;
"TAX RETURN" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof;
"THIRD PARTY CLAIM" as defined in Section 8.06(b); and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
52
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***
SECTION 9.04. HEADINGS; CONSTRUCTION. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
SECTION 9.05. SEVERABILITY. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties hereto as closely
as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 9.06. ENTIRE AGREEMENT; AMENDMENT. This Agreement (together with
the exhibits and schedules) constitutes the entire agreement of the parties and
supersedes all prior agreements and undertakings, both written and oral, between
the parties hereto, or any of them, with respect to the subject matter hereof.
This Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
SECTION 9.07. ASSIGNMENT. This Agreement shall not be assigned by
operation of
law or otherwise except Parent Sub may, without the Company's approval, assign
its interests to a wholly-owned Subsidiary of Parent.
SECTION 9.08. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 9.09. FURTHER ASSURANCES. The parties hereto agree (a) to furnish
upon request to each other such further information, (b) to execute and deliver
to each other such other documents, and (c) to do such other acts and things,
all as another party hereto may reasonably request for the purpose of carrying
out the intent of this Agreement and the documents referred to in this
Agreement.
SECTION 9.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW.
SECTION 9.11. BINDING ARBITRATION. Subject to the arbitration provisions
set forth below, the parties hereto agree that all disputes arising out of or
related to the terms and conditions of this Agreement or to the performance,
breach or termination thereof, shall be submitted to binding arbitration
pursuant to the Expedited Procedures of the Commercial Arbitration Rules (the
"RULES") of the American Arbitration Association (the "AAA"). The arbitration
will take place in San Diego, California at the offices of the AAA. The dispute
will be resolved by a single arbitrator appointed by the AAA in accordance with
the list procedure described in Paragraph 13 of the Rules, except that the AAA
will transmit the list within ten (10) Business Days of the filing of the demand
for arbitration, and the parties thereto will have five (5) Business Days to
return the list to the AAA with their objections and preferences. Discovery
will be limited to no more than seven (7) depositions by each side and written
document requests, requesting the production of specific documents. The parties
to the dispute will voluntarily produce any and all documents that they intend
to use at the hearing before the close of discovery, subject to supplementation
for purposes of rebuttal or good cause shown. The period for taking discovery
will be sixty (60) Business Days, commencing upon the day that the answer is due
under the Rules. The arbitrator will hold a pre-hearing conference within three
(3) Business Days of the close of discovery and will schedule the hearing within
thirty (30) Business Days of the close of discovery. After the arbitrator is
selected, the arbitrator will have sole jurisdiction to hear such applications,
except that any measure ordered by the arbitrator may be immediately and
specifically enforced by a court otherwise having jurisdiction over the parties.
All fees and costs will be allocated to the parties to the arbitration as
determined by the arbitrator. Each party will pay its own fees and costs
associated with the arbitration and each party will pay one-half the estimated
arbitrator's fees up front and if either party fails to do so a default will be
entered against such party solely with respect to such fees. Any determination
of the arbitrator shall be final and binding on the parties hereto. Nothing in
this Agreement will prevent a party hereto from applying to a court that would
otherwise have jurisdiction for provisional or interim injunctive or other
equitable measures.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 9.12. WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of any party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right. To the maximum extent permitted by applicable Law, (a) no
claim or right arising out of this Agreement or the documents referred to in
this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement. All rights and remedies existing under this Agreement are in
addition to, and not exclusive of, any rights or remedies otherwise available.
SECTION 9.13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date first written above by their respective
officer thereunto duly authorized.
TECHNOLOGY MANAGEMENT, INC.
By: /s/ Vincent K. Roach
--------------------------------------
Vincent K. Roach, President
STOCKHOLDERS OF TECHNOLOGY
MANAGEMENT, INC.
/s/ Vincent K. Roach
--------------------------------------
Vincent K. Roach, 190 shares
/s/ Kent L Wall
--------------------------------------
Kent L Wall, 190 shares
/s/ Michael A. Weiher
--------------------------------------
Michael A. Weiher, 25 shares
/s/ Linda K. Gentry
--------------------------------------
Linda K. Gentry, 16 shares
/s/ Micheal D. Fisher
--------------------------------------
Micheal D. Fisher, 12 shares
/s/ Mercedes McKenzie-Veal
--------------------------------------
Mercedes McKenzie-Veal, 7 shares
/s/ Gina M. Craig
--------------------------------------
Gina M. Craig, 1 share
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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DAOU SYSTEMS, INC.
By: /s/ Daniel J. Daou
--------------------------------------
Daniel J. Daou, President
DAOU-TMI, INC.
By: /s/ Daniel J. Daou
--------------------------------------
Daniel J. Daou, President
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DAOU SYSTEMS, INC.,
DAOU-TMI, INC.,
INTERNATIONAL HEALTH CARE SYSTEMS, INC.
AND
THE STOCKHOLDERS OF INTERNATIONAL HEALTH CARE SYSTEMS, INC.
LISTED ON THE SIGNATURE PAGE HERETO
Dated as of June 16, 1998
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
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ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Effective Time . . . . . . . . . . . . . . . . . . 2
SECTION 1.03. Effect of the Merger . . . . . . . . . . . . . . . 2
SECTION 1.04. Certificate of Incorporation; By-Laws. . . . . . . 3
SECTION 1.05. Directors and Officers . . . . . . . . . . . . . . 3
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF
CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.01. Conversion of Securities . . . . . . . . . . . . . 3
SECTION 2.02. Exchange of Certificates . . . . . . . . . . . . . 4
SECTION 2.03. Stock Transfer Books . . . . . . . . . . . . . . . 6
SECTION 2.04. Dissenting Shares. . . . . . . . . . . . . . . . . 7
ARTICLE IIA VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.01A. Consent and Voting Agreement . . . . . . . . . . . 7
SECTION 2.02A. [[Reserved]] . . . . . . . . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANY AND ITS SUBSIDIARIES. . . . . . . . . . . . . . . . . . 8
SECTION 3.01. Organization and Qualification; Subsidiaries . . . 8
SECTION 3.02. Articles of Incorporation and By-Laws. . . . . . . 8
SECTION 3.03. Capitalization . . . . . . . . . . . . . . . . . . 8
SECTION 3.04. Authority. . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.05. No Conflict; Required Filings and Consents . . . . 10
SECTION 3.06. Permits; Compliance. . . . . . . . . . . . . . . . 10
SECTION 3.07. Financial Statements . . . . . . . . . . . . . . . 11
SECTION 3.08. No Undisclosed Liabilities . . . . . . . . . . . . 11
SECTION 3.09. Absence of Certain Changes or Events . . . . . . . 11
SECTION 3.10. Absence of Litigation. . . . . . . . . . . . . . . 14
SECTION 3.11. Vote Required. . . . . . . . . . . . . . . . . . . 14
SECTION 3.12. Brokers. . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.13. Company Action . . . . . . . . . . . . . . . . . . 14
SECTION 3.14. Tax Matters; "Pooling of Interests". . . . . . . . 15
SECTION 3.15. Real Property. . . . . . . . . . . . . . . . . . . 16
SECTION 3.16. Intellectual Property. . . . . . . . . . . . . . . 17
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CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
(CONTINUED)
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SECTION 3.17. Tangible Assets. . . . . . . . . . . . . . . . . . 19
SECTION 3.18. Inventory. . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.19. Contracts. . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.20. Notes and Accounts Receivable. . . . . . . . . . . 21
SECTION 3.21. Powers of Attorney . . . . . . . . . . . . . . . . 21
SECTION 3.22. Insurance. . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.23. Employees. . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.24. Employee Benefits. . . . . . . . . . . . . . . . . 22
SECTION 3.25. Guaranties . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.26. Environment, Health and Safety . . . . . . . . . . 24
SECTION 3.27. Certain Business Relationships with the
Company. . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.28. [[Reserved]] . . . . . . . . . . . . . . . . . . . 25
SECTION 3.29. Product and Service Warranties . . . . . . . . . . 25
SECTION 3.30. Product and Service Liability. . . . . . . . . . . 25
SECTION 3.31. Customer/Supplier Relationships. . . . . . . . . . 25
SECTION 3.32. Certain Business Practices . . . . . . . . . . . . 26
SECTION 3.33. Disclosure . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.34. Limitation on Representations and Warranties . . . 26
ARTICLE IIIA REPRESENTATIONS AND WARRANTIES OF EACH
STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.01A. Authorization of Transaction . . . . . . . . . . . 26
SECTION 3.02A. Noncontravention . . . . . . . . . . . . . . . . . 27
SECTION 3.03A. Brokers. . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.04A. Company Shares . . . . . . . . . . . . . . . . . . 27
SECTION 3.05A. Accredited Investor. . . . . . . . . . . . . . . . 27
SECTION 3.06A. Investment Intention . . . . . . . . . . . . . . . 28
SECTION 3.07A. Employment . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.08A. Limitation on Representations and Warranties . . . 28
SECTION 3.09A. Delivery of Information. . . . . . . . . . . . . . 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
PARENT SUB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.01. Organization and Qualification . . . . . . . . . . 28
SECTION 4.02. Certificates of Incorporation and By-Laws. . . . . 29
SECTION 4.03. Parent Common Stock; Capitalization. . . . . . . . 29
</TABLE>
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TABLE OF CONTENTS
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SECTION 4.04. Authority. . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.05. No Conflict; Required Filings and Consents . . . . 30
SECTION 4.06. Reports; Financial Statements. . . . . . . . . . . 30
SECTION 4.07. Absence of Certain Changes or Events . . . . . . . 31
SECTION 4.08. Ownership of Parent Sub; No Prior Activities . . . 31
SECTION 4.09. Brokers. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.10. [[Reserved]] . . . . . . . . . . . . . . . . . . . 32
SECTION 4.11. Limitation on Representations and Warranties . . . 32
SECTION 4.12. ***. . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.01. Affirmative Covenants of the Company. . . . . . . . 32
SECTION 5.02. Negative Covenants of the Company . . . . . . . . . 33
SECTION 5.03. Negative Covenants of Parent. . . . . . . . . . . . 35
SECTION 5.04. Access and Information. . . . . . . . . . . . . . . 36
SECTION 5.05. Escrow Agreement. . . . . . . . . . . . . . . . . . 36
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.01. Appropriate Action; Consents; Filings . . . . . . . 36
SECTION 6.02. Tax Treatment; "Pooling of Interests"; Affiliates . 37
SECTION 6.03. Public Announcements. . . . . . . . . . . . . . . . 38
SECTION 6.04. Obligations of Parent Sub . . . . . . . . . . . . . 38
SECTION 6.05. Restrictive Legend. . . . . . . . . . . . . . . . . 39
SECTION 6.06. *** . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.07. Delivery of SEC Filings . . . . . . . . . . . . . . 39
SECTION 6.08. Termination of Stockholders' Agreement. . . . . . . 40
SECTION 6.09. Best Efforts. . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.01. Conditions to Obligations of Each Party Under This
Agreement . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.02. Additional Conditions to Obligations of Parent. . . 41
SECTION 7.03. Additional Conditions to Obligations of the Company 42
</TABLE>
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CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
(CONTINUED)
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ARTICLE VIII TERMINATION, AMENDMENT, WAIVER AND
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.02. Investigation . . . . . . . . . . . . . . . . . . . 44
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.04. Waiver; Remedies Cumulative . . . . . . . . . . . . 44
SECTION 8.05. *** . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.06. Stockholder Indemnification, Hold Back and Escrow . 44
ARTICLE IX GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.01. Effectiveness of Representations, Warranties and
Agreements. . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.03. Certain Definitions . . . . . . . . . . . . . . . . 49
SECTION 9.04. Headings; Construction. . . . . . . . . . . . . . . 57
SECTION 9.05. Severability. . . . . . . . . . . . . . . . . . . . 57
SECTION 9.06. Entire Agreement; Amendment . . . . . . . . . . . . 57
SECTION 9.07. Assignment. . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.08. Parties in Interest . . . . . . . . . . . . . . . . 58
SECTION 9.09. Further Assurances. . . . . . . . . . . . . . . . . 58
SECTION 9.10. Governing Law . . . . . . . . . . . . . . . . . . . 58
SECTION 9.11. Binding Arbitration . . . . . . . . . . . . . . . . 58
SECTION 9.12. Waiver; Remedies Cumulative . . . . . . . . . . . . 59
SECTION 9.13. Counterparts. . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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CONFIDENTIAL TREATMENT REQUESTED
INDEX TO EXHIBITS
Exhibit 2.01A Written Consent of the Stockholders of the Company
Exhibit 5.05 Form of Escrow Agreement
Exhibit 7.02(f) Legal Opinion of Counsel to the Company
Exhibit 7.02(g) Form of Affiliate Agreement
Exhibit 7.02(h) Form of Noncompetition Agreement
Exhibit 7.02(i) Form of Spousal Consent
Exhibit 7.03(d) Legal Opinion of Counsel to Parent
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CONFIDENTIAL TREATMENT REQUESTED
INDEX TO SCHEDULES
------------------
SCHEDULE
NUMBER DESCRIPTION
- ------ -----------
3.02 Officers and Directors and Certificates of Incorporation and By-Laws
3.03(a) Capitalization, Stockholders *** of the Company
3.03(b) Encumbrances
3.05 Filings and Consents of the Company
3.07 Financial Statements of the Company
3.08 Liabilities of the Company
3.09 Certain Changes or Events of the Company
3.10 Litigation Matters
3.14(c) Tax Returns and Tax Related Information of the Company
3.14(f) Gains and Losses of the Company
3.15(b) Real Property Leased or Subleased by the Company
3.16(c) Intellectual Property Owned by the Company
3.16(d) Intellectual Property Agreements or Permission
3.17 Tangible Assets of the Company
3.19 Contracts of the Company
3.20 Notes and Accounts Receivable of the Company
3.22 Insurance Policies of the Company
3.23 Employees
3.24 Employee Benefit Plans of the Company
3.27 Certain Business Relationships with the Company
3.29 Standard Sale, Lease and Performance Terms and Conditions of the
Company
3.31 Customer/Supplier Relationships
5.02 Negative Covenants
7.02(d) Contracts or Agreements Requiring Consents or Waivers with respect to
the Company
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CONFIDENTIAL TREATMENT REQUESTED
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 16, 1998 (this
"AGREEMENT"), by and among DAOU Systems, Inc., a Delaware corporation
("PARENT"), DAOU-TMI, Inc., a Delaware corporation and a wholly-owned subsidiary
of Parent ("PARENT SUB"), International Health Care Systems, Inc., a Florida
corporation (the "COMPANY"), and all of the stockholders of the Company listed
on the signature page hereto (collectively, the "STOCKHOLDERS").
W I T N E S S E T H:
--------------------
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
("DELAWARE LAW") and the Florida Business Corporation Act ("FLORIDA LAW"), the
Company will merge with and into Parent Sub (the "MERGER");
WHEREAS, the Board of Directors of the Company has determined that the
Merger is in the best interests of the Company and the Stockholders, has
approved and adopted this Agreement and the transactions contemplated hereby,
and has recommended that the Stockholders approve and adopt this Agreement and
the transactions contemplated hereby;
WHEREAS, the Stockholders hold one hundred percent (100%) of the
outstanding voting power of the Company, have irrevocably consented to the
execution and delivery of this Agreement and the consummation of the Merger and
have irrevocably agreed to vote in favor of the Merger at a meeting of
Stockholders or by a written consent executed by each Stockholder, and such
consent and agreement is an essential condition and inducement to Parent and
Parent Sub to enter into this Agreement;
WHEREAS, the Boards of Directors of Parent and Parent Sub have determined
that the Merger is in the best interests of Parent and Parent Sub and their
respective stockholders, and have approved and adopted this Agreement and the
transactions contemplated hereby;
WHEREAS, the Company, Parent and Parent Sub intend that the Merger shall
constitute a "reorganization" under Section 368(a)(1)(A) of the Code, by
application of Section 368(a)(2)(D) of the Code, and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code;
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests"; and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
WHEREAS, certain capitalized terms used in this Agreement are defined in
Section 9.03;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with Delaware Law and
Florida Law, at the Effective Time (as defined in Section 1.02), the Company
shall be merged with and into Parent Sub. As a result of the Merger, the
separate corporate existence of the Company shall cease and Parent Sub shall
continue as the surviving corporation in the Merger (the "SURVIVING
CORPORATION"). The name of the Surviving Corporation shall be DAOU-TMI, Inc.
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the closing conditions set forth
in Article VII, the parties hereto shall cause the Merger to be consummated
by filing (a) a certificate of merger (the "CERTIFICATE OF MERGER") with the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with the relevant provisions of, Delaware Law and (b)
the articles of merger (the "ARTICLES OF MERGER") with the Secretary of State
of Florida, in such form as required by, and executed in accordance with the
relevant provisions of, Florida Law (the later of the date and time of the
Delaware filing or the Florida filing, or such later time as may be agreed to
in writing by Parent, Parent Sub and the Company and specified in the
Certificate of Merger and the Articles of Merger, being the "EFFECTIVE TIME").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law and Florida Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all of the property, rights, privileges, powers and
franchises of Parent Sub and the Company shall vest in the Surviving
Corporation, and all debts, Liabilities and duties of Parent Sub and the
Company shall become the debts, Liabilities and duties of the Surviving
Corporation.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
2
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 1.04. CERTIFICATE OF INCORPORATION; BY-LAWS. At the Effective
Time, the Certificate of Incorporation of Parent Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, and the By-Laws of Parent Sub shall be the By-Laws of the
Surviving Corporation.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Parent Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Parent Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Parent Sub, the Company or the holders of any of the
following securities, each share of the Company's common stock, no par value per
share ("COMPANY COMMON STOCK"), issued and outstanding immediately prior to the
Effective Time, excluding any treasury shares held by the Company, shares held
by Parent and the Dissenting Shares, if any, shall be converted into the right
to receive that number of fully paid, nonassessable shares of Parent's common
stock, par value $0.001 per share ("PARENT COMMON STOCK"), equal to the Exchange
Ratio, subject to adjustment as set forth in Section 2.01(b) and subject to pro
rata withholding of shares to be held in escrow pursuant to Section 5.05.
(b) If between the date of this Agreement and the Effective Time
the outstanding shares of Parent Common Stock or Company Common Stock shall have
been changed into a different number of shares of a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(c) At the Effective Time, all of the shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
3
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CONFIDENTIAL TREATMENT REQUESTED
exist, and each Certificate previously evidencing any such shares shall
thereafter represent only the right to receive the Merger Consideration (as
defined in Section 2.02(b)). The holders of such Certificates previously
evidencing such shares of Company Common Stock outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
shares of Company Common Stock, except as otherwise provided herein or by
Law. Such Certificates previously evidencing shares of Company Common Stock
shall be exchanged for certificates evidencing whole shares of Parent Common
Stock issued in consideration therefor in accordance with the allocation
procedures of this Section 2.01 and upon the surrender of such Certificates
in accordance with the provisions of Section 2.02. No fractional shares of
Parent Common Stock shall be issued, and, in lieu thereof, a cash payment
shall be made pursuant to Section 2.02(e).
(d) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Parent or any direct or
indirect wholly-owned Subsidiary of Parent or of the Company, if any,
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall
deposit, or shall cause to be deposited, with Baker & McKenzie or such other
Person designated by Parent and reasonably satisfactory to the Company (the
"EXCHANGE AGENT"), for the benefit of the Stockholders and for exchange in
accordance with this Article II through the Exchange Agent (i) certificates
evidencing such number of whole shares of Parent Common Stock equal to the
Exchange Ratio multiplied by the number of shares of Company Common Stock
outstanding and (ii) cash in consideration of fractional shares as provided in
Section 2.02(e) (such Parent Common Stock and cash being hereinafter referred to
as the "EXCHANGE FUND"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the shares of Parent Common Stock (except that *** of such
shares of Parent Common Stock shall be delivered to an escrow agent pursuant to
Sections 5.05 and 8.06) and cash out of the Exchange Fund. Except as
contemplated by Section 2.02(f), the Exchange Fund shall not be used for any
other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after
the Effective Time, Parent will instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (other than
Dissenting Shares, if applicable) (collectively, the "CERTIFICATES"), (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
4
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates evidencing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter
of transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall
be entitled to receive in exchange therefor (A) certificates evidencing that
number of whole shares of Parent Common Stock which such holder has the right
to receive in respect of the shares of Company Common Stock formerly
evidenced by such Certificate in accordance with Section 2.01, less that
holder's pro rata portion of the shares (rounded to the nearest whole share)
to be held in escrow pursuant to Sections 5.05 and 8.06 and (B) cash in lieu
of fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.02(e) (such shares of Parent Common Stock and cash, if
any, being collectively, the "MERGER CONSIDERATION"), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of shares of Company Common Stock which is not registered in the
transfer records of the Company, a certificate evidencing the proper number
of shares of Parent Common Stock may be issued in accordance with this
Article II to a transferee if the Certificate evidencing such shares of
Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.02, each of the Certificates shall be deemed
at any time after the Effective Time to evidence only the right to receive,
upon such surrender, the Merger Consideration.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT
COMMON STOCK. No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock evidenced
thereby, and no other part of the Merger Consideration shall be paid to any
such holder, until the holder of such Certificate shall surrender such
Certificate, at which time, subject to the effect of applicable Laws, there
shall be issued to the holder (i) certificates evidencing whole shares of
Parent Common Stock issued in exchange therefor, and the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 2.02(e) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions (without interest thereon), with a record date after the
Effective Time but prior to surrender and a payment date occurring after
surrender, payable
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
5
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
with respect to such whole shares of Parent Common Stock. No interest shall
be paid on the Merger Consideration.
(d) NO FURTHER RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued and cash paid upon exchange of the shares of
Company Common Stock in accordance with the terms hereof shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to
such shares of Company Common Stock.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip evidencing fractional shares
of Parent Common Stock shall be issued upon the surrender for exchange of the
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent.
(ii) Each holder of a Certificate having a fractional
interest arising upon the conversion of such Certificate shall, at the time
of surrender of such Certificate, be paid by the Exchange Agent an amount in
cash equal to the value of such fractional interest based on a price per
share equal to the Market Price.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of Company Common Stock for
two (2) years after the Effective Time shall be delivered to Parent, upon
demand, and any holders of Company Common Stock who have not theretofore
complied with this Article II shall thereafter look only to Parent for the
Merger Consideration to which they are entitled.
(g) NO LIABILITY. Neither Parent nor the Surviving Corporation
shall be liable to any holder of shares of Company Common Stock for any
shares of Parent Common Stock, cash or dividends or distributions with
respect thereto delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
SECTION 2.03. STOCK TRANSFER BOOKS. On the date hereof, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. On or after the Effective Time, any Certificates
presented to the Exchange Agent for any reason shall be converted into the
Merger Consideration.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
6
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
SECTION 2.04. DISSENTING SHARES. If required under Delaware Law,
notwithstanding any other provisions of this Agreement to the contrary,
shares of Company Common Stock that are outstanding immediately prior to the
Effective Time and which are held by stockholders who shall have not voted in
favor of the Merger or consented thereto in writing and who shall have
demanded properly, in writing, appraisal for such shares in accordance with
Section 262 of Delaware Law (collectively, the "DISSENTING SHARES") shall not
be converted into or represent the right to receive the Merger Consideration.
Such stockholders shall be entitled to receive payment of the appraised
value of such shares of Company Common Stock held by them in accordance with
the provisions of Section 262 of Delaware Law, except that all Dissenting
Shares held by stockholders who have failed to perfect or who effectively
have withdrawn or lost their rights to appraisal of such shares of Company
Common Stock under Section 262 of Delaware Law shall thereupon be deemed to
have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, the Merger
Consideration, upon surrender, in the manner provided in Section 2.02, of the
Certificate or Certificates that formerly evidenced such shares of Company
Common Stock. Any payments required to be made to the holders of any
Dissenting Shares shall be funded by Parent or the Surviving Corporation.
ARTICLE IIA
VOTING RIGHTS
SECTION 2.01A. CONSENT AND VOTING AGREEMENT. Each Stockholder hereby
(a) irrevocably consents to the execution and delivery of this Agreement and
to the consummation of the Merger and shall contemporaneously herewith
execute the written consent attached hereto as EXHIBIT 2.01A (the "CONSENT"),
and (b) as long as this Agreement has not been terminated prior to the date
specified in Section 8.01(f), further irrevocably agrees to vote all Company
Common Stock as to which such Stockholder is entitled to vote at a meeting of
the stockholders of the Company if any meeting is so held, or by written
consent without a meeting as follows: (i) in favor of approval and adoption
of this Agreement and the transactions contemplated hereby; (ii) against any
action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the
Company or such Stockholder under this Agreement; (iii) against any action or
agreement (other than this Agreement or the transactions contemplated by this
Agreement or the termination of this Agreement in accordance with its terms),
that would, directly or indirectly, impede, interfere with, delay, postpone
or attempt to discourage the Merger, including, without limitation: (A) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company and its Subsidiaries; (B) a sale
or transfer of a material amount of Assets of the Company and its
Subsidiaries or a reorganization, recapitalization or
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
liquidation of the Company and its Subsidiaries; (C) any change in the
management or board of directors of the Company or any Competing Transaction,
except as otherwise agreed to in writing by Parent; (D) any material change
in the present capitalization or dividend policy of the Company; or (E) any
other material change in the Company's corporate structure or business.
SECTION 2.02A. [[RESERVED]].
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES
Each of the Company and the *** hereby represents and warrants jointly and
severally *** to Parent and Parent Sub as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, has all requisite corporate or other power and
authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its properties makes
such qualification necessary. Notwithstanding anything herein to the
contrary, the Company does not, directly or indirectly, own or have an
economic interest in any Subsidiary or other Person.
SECTION 3.02. ARTICLES OF INCORPORATION AND BY-LAWS. SCHEDULE 3.02
contains (i) a list of the officers and directors of the Company and its
Subsidiaries and (ii) complete and correct copies of the Articles of
Incorporation and By-Laws or equivalent organizational documents, in each
case as amended or restated, of the Company. The Company is not in violation
of any of the provisions of its Articles of Incorporation or By-Laws or
equivalent organizational documents, in each case as amended or restated.
SECTION 3.03. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of One
Thousand (1,000) shares of Company Common Stock. As of May 31, 1998, (i) One
Hundred Thirty-Five (135) shares of Company Common Stock were issued and
outstanding, all of which are
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
duly authorized, validly issued, fully paid and nonassessable and not subject
to preemptive rights created by statute, the Company's Articles of
Incorporation or By-Laws or any agreement to which the Company is a party or
bound, (ii) no shares of Company Common Stock were held in treasury of the
Company and (iii) SCHEDULE 3.03(A) sets forth the name and address of each
holder of Company Common Stock and the number of shares of Company Common
Stock held by such holder. There are no bonds, debentures, notes or other
indebtedness, issued or outstanding, having the right to vote on any matters
on which the Stockholders may vote. There are no options, warrants, calls or
other rights (including registration rights), agreements, arrangements or
commitments of any character, presently outstanding, which (x) obligate the
Company to issue, deliver or sell shares of its capital stock or debt
securities, (y) obligate the Company to grant, extend or enter into any such
option, warrant, call or other such right, agreement, arrangement or
commitment, or (z) obligate the Company to repurchase, redeem or otherwise
acquire any shares of Company Common Stock.
(b) All the outstanding shares of capital stock of, or other
equity interests in, each Subsidiary of the Company are duly authorized,
validly issued, fully paid and nonassessable and except as set forth in
SCHEDULE 3.03(B), such shares or other equity interests are owned solely by
the Company free and clear of any Security Interests, Liens, claims, pledges,
agreements, limitations on voting rights, charges or other Encumbrances of
any nature whatsoever. Except as set forth on SCHEDULE 3.03(B), there are no
options, warrants, calls or other rights (including registration rights),
agreements, arrangements or commitments of any character to which the Company
or any of its Subsidiaries is a party relating to the issued or unissued
capital stock of, or other equity interests in, any of the Subsidiaries of
the Company. The Company does not directly or indirectly own any interest in
any other corporation, partnership, joint venture or other business
association or entity.
SECTION 3.04. AUTHORITY. The Company has all requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action (including, with respect to the Merger, the approval and
adoption of this Agreement by the Stockholders who hold one hundred percent
(100%) of the outstanding shares of Company Common Stock) and no other corporate
proceeding on the part of the Company is necessary to authorize the execution,
delivery and performance of this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery thereof by
the Stockholders,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
Parent and Parent Sub, constitutes the legal, valid and binding obligation of
the Company enforceable in accordance with its terms.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in SCHEDULE 3.05, the execution and
delivery of this Agreement by the Company does not, and the performance of
this Agreement by the Company will not (i) conflict with or violate the
Articles of Incorporation or By-Laws or the equivalent organizational
documents, in each case as amended or restated, of the Company or any of its
Subsidiaries, (ii) conflict with or violate any federal, state, foreign or
local law, statute, ordinance, rule, regulation, order, judgment or decree
(collectively, "LAWS") in effect as of the date of this Agreement and
applicable to the Company or any of its Subsidiaries or by which any of their
respective properties is bound or subject to, or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of an Encumbrance on, any of the properties
or Assets of the Company or any of its Subsidiaries pursuant to, any note,
bond, mortgage, indenture, Contract, agreement, lease, license, permit,
franchise, stock option or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or any of their respective properties is bound or subject.
(b) The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not,
require the Company to obtain any consent, approval, authorization or permit
of, or to make any filing with or notification to, any governmental or
regulatory authority, domestic or foreign ("GOVERNMENTAL ENTITIES") based on
Laws and other requirements of Governmental Entities in effect as of the date
of this Agreement, except for applicable requirements, if any, of the state
securities or blue sky laws ("BLUE SKY LAWS"), and the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), and the
filing and recordation of appropriate merger documents as required by
Delaware Law and Florida Law.
SECTION 3.06. PERMITS; COMPLIANCE. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and there is no action, proceeding or investigation pending or ***
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
of its Subsidiaries is in conflict with, or in default or violation of (a)
any Law applicable to the Company or any of its Subsidiaries or which any of
their respective properties is bound by or subject to or (b) any of the
Company Permits. Since December 31, 1996, neither the Company nor any of its
Subsidiaries has received from any Governmental Entity any written
notification with respect to possible conflicts, defaults or violations of
Laws.
SECTION 3.07. FINANCIAL STATEMENTS. SCHEDULE 3.07 contains true,
correct and complete copies of all of the Company's financial statements and
records since inception, including, without limitation, all balance sheets,
statements of operations, statements of cash flows and statements of
stockholder's equity, if any (collectively, the "Financial Statements"). The
Financial Statements are attached hereto as SCHEDULE 3.07 and have been
prepared from books and records of the Company applied *** consistent with
preceding years and throughout the periods involved (except as otherwise
noted therein). The Financial Statements fairly present the financial
condition and results of operations of the Company as at the dates thereof
and for the periods indicated in the statements of operations. No financial
statement of any Person other than the Company is required to be included in
the Financial Statements.
SECTION 3.08. NO UNDISCLOSED LIABILITIES. Except as set forth on
SCHEDULE 3.08, there are no liabilities or other obligations of the Company
or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise ("LIABILITIES"), and there is
no existing condition, situation or set of circumstances which could
reasonably be expected to result in such Liabilities (other than Liabilities
set forth on Schedule 3.08) through the Effective Time, and (b) Liabilities
under this Agreement and fees and expenses related hereto.
SECTION 3.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 1997, there has not been any material adverse change in the business,
financial condition, operations, results of operations or future prospects of
the Company or any of its Subsidiaries. Without limiting the generality of
the foregoing, since that date and except as otherwise disclosed in SCHEDULE
3.09:
(a) none of the Company and its Subsidiaries has sold, leased,
transferred, or assigned any of its Assets, tangible or intangible, other
than sales to its customers for fair consideration in the Ordinary Course of
Business or other than as fully reflected on the face of the Interim Balance
Sheet;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
(b) none of the Company and its Subsidiaries has entered into
any agreement, Contract, lease or license (or series of related agreements,
Contracts, leases and licenses) outside the Ordinary Course of Business;
(c) there is no fact, condition or event relating to (i) the
potential loss of the benefit of, or any *** change in, any relationship with
any customers, clients, suppliers, key employees or insurers, or (ii) price
increases for parts, raw materials, supplies, services or equipment purchased
from present suppliers or vendors which is, with the lapse of time or the
occurrence of such event or condition, reasonably likely to be materially
adverse to the financial condition, business, Assets, properties or operations
of the Company;
(d) no party (including any of the Company and its Subsidiaries)
has accelerated, terminated, modified or canceled any agreement, Contract, lease
or license (or series of related agreements, Contracts, leases and licenses) to
which any of the Company and its Subsidiaries is a party or by which any of them
is bound;
(e) none of the Company and its Subsidiaries has imposed any
Security Interest upon any of its Assets, tangible or intangible;
(f) none of the Company and its Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either involving more
than *** or outside the Ordinary Course of Business;
(g) none of the Company and its Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or Assets of,
any other Person (or series of related capital investments, loans, and
acquisitions);
(h) none of the Company and its Subsidiaries has issued any note,
bond, or other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
(i) none of the Company and its Subsidiaries has delayed or
postponed the payment of accounts payable or other Liabilities outside the
Ordinary Course of Business;
(j) none of the Company and its Subsidiaries has canceled,
compromised, waived or released any right or claim (or series of related rights
and claims);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
(k) none of the Company and its Subsidiaries has granted any
license or sublicense of any rights under or with respect to any Intellectual
Property;
(l) there has been no change made or authorized in the Articles of
Incorporation or By-Laws or equivalent organizational documents, in each case as
amended or restated, of the Company or any of its Subsidiaries;
(m) none of the Company and its Subsidiaries has issued, sold or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(n) none of the Company and its Subsidiaries has declared, set
aside, or paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock;
(o) none of the Company and its Subsidiaries has experienced any
damage, destruction or Loss (whether or not covered by insurance) to its
property;
(p) none of the Company and its Subsidiaries has made any loan to,
or entered into any other transaction with, any of its directors, officers or
employees;
(q) none of the Company and its Subsidiaries has entered into any
employment Contract or collective bargaining agreement, written or oral, or
modified the terms of any such Contract or agreement existing as of the date
hereof;
(r) none of the Company and its Subsidiaries has granted any
increase in the base compensation of any of its directors, officers or
employees;
(s) none of the Company and its Subsidiaries has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive, severance or other
plan, Contract or commitment for the benefit of any of its directors, officers
and employees (or taken any such action with respect to any other Employee
Benefit Plan);
(t) none of the Company and its Subsidiaries has made any other
change in employment terms for any of its directors, officers or employees
outside the Ordinary Course of Business;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(u) none of the Company and its Subsidiaries has made or pledged
to make any charitable or other capital contribution;
(v) there has not been any other occurrence, event, incident,
action, failure to act or transaction outside the Ordinary Course of Business
involving the Company; and
(w) none of the Company and its Subsidiaries has committed to any
of the foregoing.
SECTION 3.10. ABSENCE OF LITIGATION. Except as set forth on
SCHEDULE 3.10, (a) there is no claim, action, suit, litigation, proceeding,
arbitration or investigation of any kind, at law or in equity (including
actions or proceedings seeking injunctive relief), pending or *** threatened
against the Company or any of its Subsidiaries or any properties or rights of
the Company or any of its Subsidiaries, and (b) neither the Company nor any
of its Subsidiaries is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with or continuing
investigation by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator. In
respect of the matters relating to or arising in connection with the actions
set forth in SCHEDULE 3.10, there is no fact, event, condition, circumstance
or other matter which either has, or is reasonably likely to have resulted
in, an event or determination having a Company Material Adverse Effect. The
Company has delivered to Parent copies of all pleadings, correspondence and
other documents relating to each matter disclosed in SCHEDULE 3.10.
SECTION 3.11. VOTE REQUIRED. The affirmative vote of the holders of
at least a majority of the outstanding shares of Company Common Stock is the
only vote of the holders of any class or series of the Company's capital
stock necessary to approve the Merger. The Stockholders, by executing this
Agreement, have irrevocably consented to the Merger and have irrevocably
agreed to vote in favor of the Merger. Such action by the Stockholders is
sufficient to constitute stockholder approval of the Merger.
SECTION 3.12. BROKERS. The Company has no Liability or obligation
to pay any fees or commissions to any broker, finder or agent (excluding
attorneys and accountants) with respect to the transactions contemplated by
this Agreement or for which Parent or Parent Sub could become liable or
obligated.
SECTION 3.13. COMPANY ACTION. The Board of Directors of the Company
(at a meeting duly called and held in compliance with Florida Law or by
written consent) has (a)
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
determined that the Merger is in the best interests of the Company and fair
to the Stockholders, (b) approved the Merger in accordance with the
provisions of Florida Law, and (c) recommended the approval of this Agreement
and the Merger by the holders of the Company Common Stock.
SECTION 3.14. TAX MATTERS; "POOLING OF INTERESTS".
(a) *** neither the Company nor any of its Subsidiaries or
Affiliates has taken or agreed to take any action that would prevent the
Merger from constituting (i) a "reorganization" under Section 368(a)(1)(A) of
the Code, by application of Section 368(a)(2)(D) of the Code, or (ii) a
"pooling of interests" in accordance with GAAP and applicable SEC rules,
including, without limitation, the sale of any shares of Company Common Stock
or Parent Common Stock during the period commencing on the date which is
thirty (30) days prior to the Effective Time and ending on the Financial
Result Date. The Company has timely filed or will timely file all Tax
Returns that it was or is required to file. All such Tax Returns were
correct and complete ***. Except as set forth on SCHEDULE 3.14(c), all Taxes
owed by the Company (whether or not shown on any Tax Return) have been paid.
The Company is not currently the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in
a jurisdiction where the Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Security Interests
on any of the Assets of the Company that arose in connection with any failure
(or alleged failure) to pay any Tax.
(b) Except as set forth on SCHEDULE 3.14(c), the Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party.
(c) Except as set forth on SCHEDULE 3.14(c), there is no dispute
or claim concerning any Tax Liability of the Company claimed or raised by any
Governmental Entity. SCHEDULE 3.14(c) lists all federal, state, local and
foreign income Tax Returns filed with respect to the Company for taxable
periods ended on or after December 31, 1996, and indicates those Tax Returns
that have been audited and those Tax Returns that currently are the subject
of audit by any Governmental Entity. The Company has delivered to Parent
correct and complete copies of all federal income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company for taxable periods ended on or after December 31, 1996.
(d) 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.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(e) The Company has not made any payments, or is not obligated
to make any payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code.
(f) SCHEDULE 3.14(f) sets forth the following information with
respect to the Company, as of the most recent practicable date: (i) the tax
basis of the Company in its Assets; (ii) the amount of any net operating
loss, net capital loss, unused investment or other credit, unused foreign
tax, or excess charitable contribution allocable to the Company; and (iii)
the amount of any intercompany items or any deferred gain or loss allocable
to the Company with respect to any intercompany transaction.
SECTION 3.15. REAL PROPERTY.
(a) The Company does not own any real property.
(b) SCHEDULE 3.15(b) lists and describes briefly all real
property leased or subleased to the Company. The Company has delivered to
Parent correct and complete copies of the leases and subleases listed in
SCHEDULE 3.15(b). With respect to each lease and sublease listed in SCHEDULE
3.15(b):
(i) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect ***;
(ii) except as set forth on SCHEDULE 3.15(b), the lease or
sublease will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(iii) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification of a ***
term or condition, or acceleration thereunder, except as disclosed in
SCHEDULE 3.15(B);
(iv) no party to the lease or sublease has repudiated any provision
thereof;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
(v) there are no disputes, oral agreements or forbearance programs
in effect as to the lease or sublease;
(vi) The Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(vii) *** all facilities leased or subleased thereunder have
received all approvals of Governmental Entities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained in accordance with applicable Laws; and
(viii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
SECTION 3.16. INTELLECTUAL PROPERTY.
(a) The Company owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property necessary for the
operation of the Company's business as presently conducted. Each item of
Intellectual Property owned or used by the Company is owned or available for use
by the Company on identical terms and conditions immediately subsequent to the
Effective Time. The Company has taken all reasonably necessary and desirable
action to maintain and protect each item of Intellectual Property that it owns
or uses.
(b) *** the Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Stockholders and none of the directors
and officers of the Company has ever received any oral or written charge,
complaint, claim, demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that the Company must license
or refrain from using any Intellectual Property rights of any third party). ***
no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of the
Company.
(c) SCHEDULE 3.16(c) identifies each patent or trademark and
copyright registration which has been issued to the Company or any Affiliate
with respect to any of its Intellectual Property, identifies each pending patent
application or application for registration which the Company or any Affiliate
has made with respect to any of its Intellectual Property, and identifies each
license, sublicense, agreement, or other permission which the Company or any
Affiliate has granted to any third party with respect to any of its Intellectual
Property (together with any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
exceptions). The Company has delivered to Parent correct and complete copies
of all such patents, registrations, applications, licenses, sublicenses,
agreements and permissions (as amended to date). SCHEDULE 3.16(c) also
identifies each trade name or unregistered trademark used by the Company or
any Affiliate in connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in SCHEDULE 3.16(c):
(i) the Company possesses all right, title, and interest in and
to the item, free and clear of any Security Interest, license or other
restriction;
(ii) such item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or *** threatened which challenges the
legality, validity, enforceability, use or ownership of such item; and
(iv) the Company has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict
with respect to such item.
(d) SCHEDULE 3.16(d) identifies each item of Intellectual
Property that any third party owns and that the Company or any Affiliate uses
pursuant to any license, sublicense, agreement or permission, other than
shrink-wrap licenses for personal computer software. The Company has
delivered to Parent correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect
to each item of Intellectual Property required to be identified in SCHEDULE
3.16(d):
(i) the license, sublicense, agreement or permission covering
such item is legal, valid, binding, enforceable and in full force and effect;
(ii) the license, sublicense, agreement or permission will
continue to be legal, valid, binding, enforceable and in full force and
effect on identical terms following the Effective Time;
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification or acceleration thereunder;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
(iv) no party to the license, sublicense, agreement or permission
has repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in items (i) through (iv) above are true and correct
with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or threatened which challenges the
legality, validity or enforceability of the underlying item of Intellectual
Property; and
(viii) the Company has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
SECTION 3.17. TANGIBLE ASSETS. Except as set forth on SCHEDULE
3.17, the Company and its Subsidiaries own and have good and marketable title
to the tangible property and Assets necessary for the conduct of their
businesses as presently conducted. Except as set forth on SCHEDULE 3.17, the
tangible Assets are free from defects ***, have been maintained in accordance
with normal industry practice and are in good operating condition and repair
(subject to normal wear and tear).
SECTION 3.18. INVENTORY. The Company and its Subsidiaries have no
inventory.
SECTION 3.19. CONTRACTS. SCHEDULE 3.19 lists the following
Contracts and other agreements to which the Company or any of its
Subsidiaries is a party as of the date hereof:
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products or other
personal property, or for the furnishing or receipt of services;
(c) any partnership or joint venture agreement;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, or under which it has imposed a
Security Interest on any of its Assets, tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement with any of the Stockholders and their
respective Affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other *** plan or arrangement
(including any Employee Benefit Plan) for the benefit of its current or former
directors, officers and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis;
(j) any agreement under which the consequences of a default or
termination could have a Company Material Adverse Effect; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of *** .
The Company has delivered to Parent a correct and complete copy of each
written agreement listed in SCHEDULE 3.19 and a written summary setting forth
the material terms and conditions of each oral agreement referred to in
SCHEDULE 3.19. With respect to each such agreement, and except as otherwise
disclosed in SCHEDULE 3.19: (i) such agreement is legal, valid, binding,
enforceable and in full force and effect in all material respects; (ii) such
agreement will continue to be legal, valid, binding, enforceable and in full
force and effect in all material respects following the consummation of the
transactions contemplated hereby; (iii) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification of any material term
or condition or acceleration, under such agreement; and (iv) no party has
repudiated any provision of such agreement.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 3.20. NOTES AND ACCOUNTS RECEIVABLE. Except as set forth on
SCHEDULE 3.20, all notes and accounts receivable of the Company are reflected
properly on its books and records and are valid receivables subject to no
setoffs or counterclaims, are current and collectible and will be collected in
accordance with their terms at their recorded amounts.
SECTION 3.21. POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company or any of its Subsidiaries.
SECTION 3.22. INSURANCE. SCHEDULE 3.22 sets forth the following
information with respect to each current insurance policy (including policies
providing property, casualty, liability and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was
on a claims made, occurrence or other Basis) and amount (with a summary of the
amount of any deductibles and ceilings) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (i) such policy is legal, valid,
binding, enforceable and in full force and effect ***; (ii) such policy will
continue to be legal, valid, binding, enforceable and in full force and effect
*** following the consummation of the transactions contemplated hereby; (iii)
neither the Company nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under such policy; and (iv) no party to the policy has repudiated
any provision thereof. The Company has been covered since its inception by
insurance in scope and amount customary and reasonable for the business in which
it has engaged during the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
aforementioned period. SCHEDULE 3.22 also describes any self-insurance
arrangements affecting the Company.
SECTION 3.23. EMPLOYEES. The Company has delivered to Parent a true
and complete list of all employees of the Company and its Subsidiaries, their
respective positions, locations, salaries or hourly wages and severance
arrangements, each as of the date hereof. *** no executive, key employee or
group of employees has any plans to terminate employment with any of the
Company and its Subsidiaries. Except as set forth on SCHEDULE 3.23, each
employee of the Company and its Subsidiaries is employed on an "at will"
basis and has no right to any *** compensation following termination of
employment. Except as set forth on SCHEDULE 3.23, each employee of the
Company and its Subsidiaries has executed a proprietary information and
inventions agreement in the form provided to counsel to Parent. The Company
is not a party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. *** the Company has not committed any
unfair labor practice and there is no organizational effort presently being
made or threatened by or on behalf of any labor union with respect to
employees of the Company.
SECTION 3.24. EMPLOYEE BENEFITS.
(a) Except as set forth on SCHEDULE 3.24, with respect to all
employees, former employees, directors and independent contractors of the
Company and its Subsidiaries and their dependents and beneficiaries, neither
the Company, its Subsidiaries nor any ERISA Affiliate presently maintains,
contributes to or has any Liability under or with respect to any Employee
Benefit Plan. The plans, programs and arrangements set forth on SCHEDULE
3.24 are herein referred to as the "COMPANY EMPLOYEE BENEFIT PLANS." ***
each Company Employee Benefit Plan (and each related trust, insurance
Contract or other funding arrangement) complies in form and in operation ***
with the applicable requirements of ERISA, the Code, other applicable Laws
and governing documents and agreements. With respect to each Company
Employee Benefit Plan ***, there has been no act or omission by the Company
or any of its Subsidiaries or any ERISA Affiliate that would impair the right
or ability of the Company or any of its Subsidiaries or ERISA Affiliate to
unilaterally amend in whole or part or terminate such Company Employee
Benefit Plan at any time, subject to the terms of any insurance Contract or
other contractual arrangements with third parties, and the Company has
delivered to Parent true and complete copies of: (i) the plan documents,
including any related trust agreements, insurance Contracts or other funding
arrangements and all amendments thereto, or a written summary of the terms
and conditions of the plan if there is no written plan document; (ii) the
most recent IRS Form 5500; (iii) the most recent financial statement and, if
applicable, actuarial valuation; (iv) all correspondence with the Internal
Revenue Service,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
the Department of Labor and other Governmental Entities with respect to the
past three (3) plan years other than IRS Form 5500 filings; and (v) the most
recent summary plan description with a summary of material modifications to
such plan.
(b) *** neither the Company nor any of its Subsidiaries and none
of their respective directors, officers or employees has any Liability with
respect to any Company Employee Benefit Plan for failure to comply with
ERISA, the Code, any other applicable Laws or any governing documents or
agreements.
(c) Except as set forth on SCHEDULE 3.24, no Company Employee
Benefit Plan is an Employee Pension Benefit Plan, and no Company Employee
Benefit Plan has any unfunded Liability. With respect to the Company
Employee Benefit Plans, all applicable contributions and premium payments for
all periods ending prior to the Effective Time (including periods from the
first day of the then current plan year to the Effective Time) shall be made
prior to the Effective Time in accordance with past practice or as expressly
agreed to in advance by Parent.
(d) Neither the Company, any of its Subsidiaries nor any ERISA
Affiliate maintains, maintained, contributes to, or has any Liability
(including, but not limited to, current or potential withdrawal Liability)
with respect to any Multiemployer Plan or Employee Pension Benefit Plan.
(e) With respect to all employees and former employees of the
Company and its Subsidiaries, neither the Company, any of its Subsidiaries
nor any ERISA Affiliate presently maintains, contributes to or has any
Liability under any funded or unfunded medical, health or life insurance plan
or arrangement for present or future retirees or present or future terminated
employees except as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or state continuation coverage Laws.
There has been no act or acts or failure or failures to act which would
result in a disallowance of a deduction or the imposition of a Tax pursuant
to Section 4980B, or any predecessor provision, of the Code or any related
regulations. No event has occurred with respect to which the Company or any
of its Subsidiaries or Affiliates could be liable for a Tax imposed by any of
Sections 4972, 4976, 4977, 4979 or 4980 of the Code, or for a civil penalty
under Section 502(c) of ERISA.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
(f) There is no pending, or *** threatened legal action,
proceeding, audit, examination or investigation against or involving any
Company Employee Benefit Plan maintained by the Company or any ERISA
Affiliate (other than routine claims for benefits). *** there is no Basis
for, and there are no facts which could give rise to, any such condition,
legal action, proceeding or investigation. Any bonding required with respect
to any Company Employee Benefit Plans in accordance with applicable
provisions of ERISA has been obtained and is in full force and effect.
SECTION 3.25. GUARANTIES. None of the Company and its Subsidiaries
is a guarantor or otherwise is liable for any Liability or obligation
(including indebtedness) of any other Person.
SECTION 3.26. ENVIRONMENT, HEALTH AND SAFETY.
(a) *** the Company and its Subsidiaries have complied with all
Environmental, Health and Safety Laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been
filed or commenced against any of them alleging any failure so to comply.
Without limiting the generality of the preceding sentence, the Company and
its Subsidiaries have obtained and been in compliance with all of the terms
and conditions of all permits, licenses, and other authorizations which are
required under, and have complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental, Health and Safety
Laws.
(b) *** the Company and its Subsidiaries have no Liability (and
the Company and its Subsidiaries have not handled or disposed of any
substance, arranged for the disposal of any substance, exposed any employee
or other individual to any substance or condition, or owned or operated any
property or facility in any manner that could form the Basis for any present
or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Company or its Subsidiaries giving
rise to any Liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental,
Health and Safety Law.
(c) *** all properties owned or leased and equipment used in the
business of the Company and its Subsidiaries, and their respective
predecessors and Affiliates, have been free of asbestos, PCB's, methylene
chloride, trichloroethylene, 1,2-transdichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 3.27. CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except
as described in SCHEDULE 3.27, none of the Stockholders and their Affiliates has
been involved in any business arrangement or relationship with the Company or
any of its Subsidiaries (other than in an employment or consulting capacity)
within the past twelve (12) months, and none of the Stockholders and their
Affiliates owns any Asset, tangible or intangible, which is used in the business
of the Company or any of its Subsidiaries.
SECTION 3.28. [[RESERVED]]
SECTION 3.29. PRODUCT AND SERVICE WARRANTIES. Each product sold or
delivered, and each service performed, by the Company and its Subsidiaries has
been in conformity with all applicable contractual commitments and all express
and implied warranties, and none of the Company and its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
any of them giving rise to any Liability) for the replacement or repair of any
product, the substandard performance of any service, or other damages in
connection with the products sold or services performed by the Company and its
Subsidiaries. No product sold or delivered, or service performed, by the
Company and its Subsidiaries is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale, lease or
performance. SCHEDULE 3.29 includes copies of the standard terms and conditions
of sale, lease or performance for each of the Company and its Subsidiaries
(containing applicable guaranty, warranty and indemnity provisions).
SECTION 3.30. PRODUCT AND SERVICE LIABILITY. None of the Company and
its Subsidiaries has any Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against any of them giving rise to any Liability) arising out of
any injury or damages (whether actual or alleged) to any Person or its property
or its business operations or prospects as a result of the ownership, possession
or use of any product sold, leased or delivered or any service performed by the
Company and its Subsidiaries.
SECTION 3.31. CUSTOMER/SUPPLIER RELATIONSHIPS. Except as set forth on
SCHEDULE 3.31, the Company and its Subsidiaries enjoy good commercial
relationships with each of their customers and suppliers. Since December 31,
1996, neither the Company nor any of its Subsidiaries has received any
communication from any of their customers or suppliers expressing significant
dissatisfaction with its commercial relationship with the Company and its
Subsidiaries.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 3.32. CERTAIN BUSINESS PRACTICES. Neither the Company, any
of its Subsidiaries nor any director, officer, stockholder, agent or employee
(excluding independent contractors) of the Company or its Subsidiaries has
(i) used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns or violated any provision
of the Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any
other unlawful payment.
SECTION 3.33. DISCLOSURE. No representation or warranty made by the
Company and/or the Stockholders, nor any document, written information,
statement, financial statement, certificate, schedule or exhibit prepared and
furnished or to be prepared and furnished by the Company, its Subsidiaries,
or its representatives pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a ***
fact, or omits or will omit to state a *** fact necessary to make the
statements of facts contained herein or therein not misleading in light of
the circumstances under which they were furnished.
SECTION 3.34. LIMITATION ON REPRESENTATIONS AND WARRANTIES. The
Company makes no representation or warranty to the Parent regarding the
probable success or profitability of the Surviving Corporation.
ARTICLE IIIA
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder hereby represents and warrants *** to Parent and Parent
Sub as follows:
SECTION 3.01A. AUTHORIZATION OF TRANSACTION. Each Stockholder or
legal guardian, as applicable, has full power and authority to execute and
deliver this Agreement and the Consent. Each Stockholder has full power and
authority to perform its obligations under this Agreement and Consent. This
Agreement constitutes the valid and legally binding obligation of such
Stockholder, enforceable in accordance with its terms and conditions. Each
Stockholder or legal guardian, as applicable, is a natural person, is over 21
years of age and has not had a legal representative appointed by a court of
law or otherwise act in his or her behalf or with respect to any of his or
her property. Such Stockholder need not give any notice to, make any filing
with, or obtain any authorization, consent or approval of any Governmental
Entity in order to consummate the transactions contemplated by this Agreement.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 3.02A. NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement and the Consent, nor the consummation of the
transactions contemplated hereby and thereby, will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, Governmental Entity,
or court to which such Stockholder is subject or (b) conflict with, result in
a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, Contract, lease, license, instrument
or other arrangement to which such Stockholder is a party, by which it is
bound or to which any of its Assets is subject.
SECTION 3.03A. BROKERS. Such Stockholder has no Liability or
obligation to pay any fees or commissions to any broker, finder or agent,
excluding attorneys and accountants, with respect to the transactions
contemplated by this Agreement or for which Parent or Parent Sub could become
liable or obligated.
SECTION 3.04A. COMPANY SHARES. Such Stockholder holds of record and
owns beneficially the number of shares of Company Common Stock set forth next
to his name on the signature page hereto, free and clear of any restrictions
on transfer (other than any restrictions under the Securities Act and state
securities laws and the restrictions in the Stockholders' Agreement (as
defined herein) that is to be terminated pursuant to Section 6.08),
Encumbrances, Security Interests, options, warrants, purchase rights,
Contracts, commitments and/or equities. Except for the Stockholders'
Agreement, such Stockholder is not a party to any option, warrant, purchase
right or other Contract or commitment that could require such Stockholder to
sell, transfer or otherwise dispose of any capital stock of the Company or
any of its Subsidiaries (other than this Agreement). Such Stockholder is not
a party to any voting trust, proxy or other agreement or understanding with
respect to the voting of any capital stock of the Company (other than this
Agreement).
SECTION 3.05A. ACCREDITED INVESTOR. Such Stockholder (a) is an
"accredited investor" as that term is defined in Regulation D of the
Securities Act or (b) hereby designates Vincent K. Roach as his or her
purchaser representative (the "Purchaser Representative") and, either alone
or together with the Purchaser Representative, has sufficient knowledge and
experience in financial and business matters that he or she is capable of
evaluating the merits and risks of the transactions contemplated by this
Agreement and making an informed business decision. Such Stockholder
represents and warrants that he or she has had the opportunity to ask
questions and receive answers concerning the terms and conditions of the
Merger and this Agreement and to obtain any additional information that is
necessary to verify the accuracy of the information furnished pursuant to
Section 3.09A. In addition, Purchaser Representative acknowledges that
Parent has informed him that Parent is pursuing potential acquisitions of
other companies, some of which are
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
larger than the Company, and the consummation or success of such potential
acquisitions cannot be assured.
SECTION 3.06A. INVESTMENT INTENTION. Such Stockholder has no present
intention to dispose of any shares of Parent Common Stock to be issued in the
Merger, except for sales of shares of Parent Common Stock *** pursuant to
Rule 144 promulgated under the Securities Act.
SECTION 3.07A. EMPLOYMENT. In the event that such Stockholder is
entering into an Employment Agreement pursuant to Section 7.02(h), such
Stockholder currently intends to remain in the employ of the Surviving
Corporation (and/or Parent and its Subsidiaries) and has no intention to seek
other employment opportunities. Each of the Stockholders has no intention to
compete with the Surviving Corporation (and/or Parent and its Subsidiaries).
SECTION 3.08A. LIMITATION ON REPRESENTATIONS AND WARRANTIES. The
Stockholders make no representation or warranty to the Parent regarding the
probable success or profitability of the Surviving Corporation.
SECTION 3.09A. DELIVERY OF INFORMATION. Each of the Stockholders has
received a copy of the following documents relating to Parent: (i) the Annual
Report on Form 10-KSB for the year ended December 31, 1997; and (ii) the
Quarterly Report on Form 10-Q for the quarter March 31, 1998. Such
Stockholder acknowledges that he has reviewed carefully the risk factors
contained in the above referenced annual report.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
Parent and Parent Sub hereby represent and warrant, jointly and
severally, to the Company and each Stockholder that:
SECTION 4.01. ORGANIZATION AND QUALIFICATION. Each of Parent and
Parent Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted, and Parent is duly qualified and in good standing to do business
in each jurisdiction in which the nature of the business conducted by it or
the ownership or leasing of its properties makes such qualification
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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necessary, except for such failures to be so qualified or licensed and in
good standing as would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
SECTION 4.02. CERTIFICATES OF INCORPORATION AND BY-LAWS. Neither
Parent nor Parent Sub is in violation of any of the provisions of its
Certificate of Incorporation or By-Laws, respectively, in each case as
amended or restated.
SECTION 4.03. PARENT COMMON STOCK; CAPITALIZATION.
(a) The shares of Parent Common Stock to be issued pursuant to
the Merger *** will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute,
Parent's Certificate of Incorporation or By-Laws or any agreement to which
Parent is a party or is bound *** .
(b) The authorized capital stock of Parent consists of Fifty
Million (50,000,000) shares of Parent Common Stock and Five Million
(5,000,000) shares of preferred stock, par value $.001 per share (the "PARENT
PREFERRED STOCK"). As of May 13, 1998, (i) Thirteen Million Four Hundred
Five Thousand Four Hundred Forty-Seven (13,405,447) shares of Parent Common
Stock were issued and outstanding, all of which are duly authorized, validly
issued, fully paid and nonassessable, (ii) no shares of Parent Preferred
Stock were outstanding, (iii) no shares of Parent Common Stock were held in
treasury of Parent and (iv) Four Million (4,000,000) shares of Parent Common
Stock were reserved for issuance pursuant to option and employee benefit
plans and in connection with the exercise of outstanding warrants.
(c) The authorized capital stock of Parent Sub consists of one
thousand (1,000) shares of Parent Sub Common Stock, of which one hundred
(100) shares are issued and outstanding and held by Parent.
SECTION 4.04. AUTHORITY. Each of Parent and Parent Sub has all
requisite corporate power and authority to execute and deliver this
Agreement, to perform its respective obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action and no other corporate
proceeding on the part of Parent or Parent Sub is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and Parent Sub and,
assuming the due authorization, execution and delivery thereof by the
Stockholders and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
the Company, constitutes the legal, valid and binding obligations of Parent
and Parent Sub enforceable in accordance with its terms.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and
Parent Sub do not, and the performance of this Agreement by Parent and Parent
Sub will not, (i) conflict with or violate the Certificate of Incorporation
or By-Laws, as amended or restated, of Parent or Parent Sub, (ii) conflict
with or violate any Laws in effect as of the date of this Agreement
applicable to Parent or Parent Sub or by which any of their respective
properties is bound, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or require payment under, or result in the
creation of a Lien or Encumbrance on, any of the properties or Assets of
Parent or Parent Sub pursuant to, any note, bond, mortgage, indenture,
Contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or Parent Sub is a party or by which Parent or
Parent Sub or any of their respective properties is bound by or subject to,
except for breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation, payment obligations or Liens or Encumbrances
that would not have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and
Parent Sub do not, and the performance of this Agreement by Parent and Parent
Sub will not, require Parent or Parent Sub to obtain any consent, approval,
authorization or permit of, or to make any filing with or notification to,
any Governmental Entities, except (i) for applicable requirements, if any, of
the Securities Act, the Exchange Act, Blue Sky Laws, the Nasdaq and the
filing and recordation of appropriate merger documents as required by
Delaware Law and Florida Law and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, either individually or in the aggregate, prevent
Parent or Parent Sub from performing its obligations under this Agreement.
SECTION 4.06. REPORTS; FINANCIAL STATEMENTS.
(a) Since February 12, 1997, Parent has timely filed all forms,
reports, statements and other documents required to be filed by it with the
SEC (collectively, the "PARENT SEC REPORTS"). The Parent SEC Reports,
including all Parent SEC Reports filed after the date of this Agreement and
prior to the Effective Time, were or will be prepared in all material
respects in accordance with the requirements of the Securities Act and the
Exchange Act, as the case may be,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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and the rules and regulations of the SEC thereunder applicable to such Parent
SEC Reports. As of their respective dates, the Parent SEC Reports did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Parent SEC Reports
filed prior to, on or after the date of this Agreement (i) have been or will
be prepared in accordance with, and complied or will comply as to form with,
the published rules and regulations of the SEC and GAAP applied on a
consistent basis throughout the periods involved (except as otherwise noted
therein) and (ii) fairly present or will fairly present the consolidated
financial position of Parent and its Subsidiaries as of the respective dates
thereof and the consolidated results of their operations and their cash flows
for the periods indicated, except that any unaudited interim financial
statements were or will be subject to normal and recurring year-end
adjustments.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and
to the extent disclosed in the Parent SEC Reports filed prior to the date of
this Agreement or as contemplated in this Agreement or as otherwise disclosed
in writing by Parent to the Stockholders prior to the Effective Time, since
March 31, 1998, there has not been *** any significant change by Parent in
its accounting methods, principles or practices.
SECTION 4.08. OWNERSHIP OF PARENT SUB; NO PRIOR ACTIVITIES.
(a) Parent Sub was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement. All of the outstanding
capital stock of Parent Sub is owned directly by Parent.
(b) Except for obligations or liabilities incurred in connection
with its incorporation or organization and the transactions contemplated by
this Agreement and except for this Agreement and any other agreements or
arrangements contemplated by this Agreement, Parent Sub has not and will not
have incurred, directly or indirectly, through any Subsidiary or Affiliate,
any obligations or liabilities or engaged in any business activities or any
type or kind whatsoever or entered into any agreements or arrangements with
any Person.
SECTION 4.09. BROKERS. There is no broker, finder or investment
banker which is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Parent or Parent Sub. Notwithstanding anything herein to the contrary, the
Stockholders shall not be liable or obligated for any such brokerage,
finder's or other fee or commission.
SECTION 4.10. [[RESERVED]]
SECTION 4.11. LIMITATION ON REPRESENTATIONS AND WARRANTIES.
(a) Except as and to the extent expressly set forth in this
Article IV, included on any schedule hereto or included in any writing
delivered by Parent to the Company concurrently herewith or subsequent hereto
expressly pursuant to this Agreement, each of Parent and Parent Sub makes no
other representation or warranty and disclaims all Liability and
responsibility for any representation, warranty, statement or information
(financial or otherwise) made or communicated (orally or in writing) to the
Company or any of its stockholders, employees, agents, consultants or
representatives.
(b) Parent makes no representation or warranty to the Company or
the Stockholders regarding the probable success or profitability of Parent.
SECTION 4.12. ***
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company
hereby covenants and agrees that, prior to the Effective Time, unless
otherwise expressly contemplated by this Agreement or consented to in writing
by Parent, the Company will, and will cause each of its Subsidiaries to: (a)
operate only in the Ordinary Course of Business; and (b) use its best efforts
to (i) preserve and/or maintain, in all material respects and consistent with
past custom and practice, its business and properties, including its present
operations, physical facilities, working conditions and relationships with
its present employees and Persons having significant business relations with
it, including, without limitation, suppliers and customers, (ii) maintain and
keep its properties and Assets in as good repair and condition as at present,
ordinary wear and tear excepted, and (iii) keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 5.02. NEGATIVE COVENANTS OF THE COMPANY. Except as
expressly contemplated by this Agreement or as previously disclosed to Parent
in writing on SCHEDULE 5.02, or otherwise consented to in writing by Parent,
from the date of this Agreement until the Effective Time, the Company shall
not, directly or indirectly through any Affiliate or otherwise (and the
Stockholders shall not and shall not cause the Company to), and shall not
permit any Affiliate to directly or indirectly, do any of the following:
(a) (i) increase the compensation payable to, or to become
payable to, any employee, director or executive officer; (ii) grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or employee; (iii) establish, adopt,
enter into, amend, modify or terminate any Employee Benefit Plan or
arrangement except as may be required by applicable Law; or (iv) hire any
salaried person;
(b) declare or pay any dividend on or make any other
distribution in respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of its
or any of its Subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its Subsidiaries'
capital stock, or any options, warrants or conversion or other rights to
acquire any shares of its or its Subsidiaries' capital stock or any such
securities or obligations; (ii) effect any reorganization or
recapitalization; or (iii) split, combine or reclassify any of its or its
Subsidiaries' capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for, shares
of its or its Subsidiaries' capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the grant of
any Security Interests, Liens, claims, pledges, limitations in voting rights,
charges or other Encumbrances) of, any shares of any class of its or its
Subsidiaries' capital stock (including shares held in treasury), any
securities convertible into or exercisable or exchangeable for any other
shares, or any rights, warrants or options to acquire, any such shares; and
(ii) amend or otherwise modify the terms of any such rights, warrants or
options the effect of which shall be to make such terms more favorable to the
holders thereof;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in, all or a portion of the Assets of,
or by any other manner, any corporation, partnership, association or other
business, organization or division thereof, or otherwise acquire or agree to
acquire any Assets of any other Person (other than the purchase of Assets
from suppliers or vendors in the Ordinary Course of Business) ***;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its *** Assets or any *** Assets of
any of its Subsidiaries;
(g) initiate, solicit or encourage (including by way of
furnishing information or assistance), respond to, or take any other action
to facilitate, any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, any Competing Transaction, or enter
into discussions or negotiate with any person or entity in furtherance of
such inquiries to obtain a Competing Transaction, or enter into an agreement
with respect to any Competing Transaction or agree to or endorse any
Competing Transaction, or authorize or permit any of the officers, directors
or employees of the Company or any of its Subsidiaries or any investment
banker, financial advisor, attorney, accountant or other representative
retained by the Company or any of its Subsidiaries to take any such action,
and the Company shall promptly notify Parent of all relevant terms of any
such inquiries and proposals received by the Company or any of its
Subsidiaries or by any such officer, director, employee, investment banker,
financial advisor or attorney, and if such inquiry or proposal is in writing,
the Company shall deliver or cause to be delivered to Parent a copy of such
inquiry or proposal.
(h) propose or adopt any amendments to its Articles of
Incorporation or its By-Laws;
(i) (A) change any of its methods of accounting in effect at
December 31, 1997, or (B) make or rescind any material election relating to
Taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes or change
in any material respect any of its methods of reporting income or deductions
for federal income Tax purposes from those employed in the preparation of the
federal income Tax Return for the taxable year ended December 31, 1997,
except, in the case of clause (A) or clause (B), as may be required by Law or
GAAP;
(j) enter into any Contract outside the Ordinary Course of
Business;
(k) create, or permit the creation of, any Lien upon any Assets
outside the Ordinary Course of Business;
(l) enter into any employment Contract or collective bargaining
agreement, or modify the terms of any existing such Contract or agreement;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(m) sell, lease, exchange, mortgage, pledge, transfer, assign or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer, assign or otherwise dispose of, any Assets whether tangible or
intangible;
(n) make any capital expenditures other than in the Ordinary
Course of Business;
(o) amend or renew, or enter into any Contract involving
operations outside of the United States;
(p) take or agree to take any action that would or is reasonably
likely to result in any of the Company's representations and warranties set
forth in this Agreement being untrue or in any of the conditions to the
Merger not being satisfied; or
(q) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03. NEGATIVE COVENANTS OF PARENT. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by the
Company, from the date of this Agreement until the Effective Time, Parent
will not do any of the following:
(a) amend any of the terms or provisions of the Parent Common
Stock which amendment would have a material adverse effect on the
Stockholders;
(b) knowingly take any action which would result in a failure to
maintain the quotation of the Parent Common Stock on Nasdaq;
(c) declare or pay any dividends or other distribution (whether
in cash, stock or other property) on outstanding shares of capital stock;
(d) take or agree to take any action that would or is reasonably
likely to result in any of Parent's representations and warranties set forth
in this Agreement being untrue in any material respect or in any of the
conditions to the Merger not being satisfied in any material respect; or
(e) agree in writing or otherwise to do any of the foregoing.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 5.04. ACCESS AND INFORMATION. The Company shall, and shall
cause its Subsidiaries to, provide Parent and its officers, directors,
employees, agents, counsel, accountants, financial advisors, consultants and
other representatives (collectively, the "PARENT REPRESENTATIVES"), with full
access, upon reasonable prior notice, to all officers, employees and
accountants of the Company and its Subsidiaries and to their Assets,
properties, Contracts, books, records and all such other information and data
concerning the business and operations of the Company and its Subsidiaries as
Parent or any of the Parent Representatives reasonably may request in
connection with such investigation. Such investigation will involve, among
other things, Parent's review and confirmation of the Company's Financial
Statements, the legal review of the Contracts and leases of the Company and
its Subsidiaries, the review of the client lists of the Company and its
Subsidiaries and reference checks of the Company and its Subsidiaries.
Parent will provide the Stockholders with all information reasonably
requested by them to enable them to evaluate the merits of the Merger.
SECTION 5.05. ESCROW AGREEMENT. At or before the Effective Time,
Vincent K. Roach, as representative and attorney-in-fact for the Stockholders
(the "STOCKHOLDERS' REPRESENTATIVE"), Parent, and a third party acceptable to
Parent and the Stockholders' Representative, as escrow agent, shall execute
and deliver the escrow agreement, substantially in the form of EXHIBIT 5.05
hereof (the "ESCROW AGREEMENT"). Each Stockholder hereby authorizes and
appoints the Stockholders' Representative to serve as its attorney-in-fact to
execute the Escrow Agreement, and agrees to be bound by the provisions
thereof.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company, Parent and Parent Sub shall each use its best
efforts to: (i) take, or cause to be taken, all appropriate action, and do,
or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the transactions
contemplated by this Agreement; (ii) obtain from any Governmental Entities
any consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Parent, Parent Sub or the Company or any
of their Subsidiaries in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein, including, without limitation, the Merger; (iii) make
all necessary filings, and thereafter make any other required submissions,
with respect to this Agreement and the Merger
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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required under (A) Delaware Law and Florida Law (including holding a
stockholders meeting and/or sending notice of merger and appraisal rights)
and the federal securities laws and the rules and regulations thereunder, if
any, and any other applicable federal or state securities laws, and (B) the
HSR Act, and (C) any other applicable Law; provided that Parent, Parent Sub
and the Company shall cooperate with each other in connection with the making
of all such filings, including providing copies of all such documents to the
non-filing party and its advisors prior to filing and, if requested,
accepting all reasonable additions, deletions or changes suggested in
connection therewith. The Company, Parent and Parent Sub shall furnish all
information required for any application or other filing to be made pursuant
to the rules and regulations of any applicable Law in connection with the
transactions contemplated by this Agreement.
(b) (i) Each of the Company, Parent and Parent Sub shall give,
and shall cause each of their respective Subsidiaries to give, any notices to
third parties, and use, and cause each of their respective Subsidiaries to
use, its best efforts to obtain any third party consents (A) necessary,
proper or advisable to consummate the transactions contemplated in this
Agreement, (B) disclosed or required to be disclosed in the schedules
contained herein, (C) otherwise required under any Contracts, licenses,
leases or other agreements in connection with the consummation of the
transactions contemplated herein or (D) required to prevent a Company
Material Adverse Effect from occurring prior to or after the Effective Time
or a Parent Material Adverse Effect from occurring prior to or after the
Effective Time.
(ii) In the event that any party shall fail to obtain any
third party consent described in subsection (b) (i) above, such party shall
use its best efforts, and shall take any such actions reasonably requested by
the other party hereto, to minimize any adverse effect upon the Company,
Parent, Parent Sub, their respective Subsidiaries and their respective
businesses resulting, or which could reasonably be expected to result after
the Effective Time, from the failure to obtain such consent.
SECTION 6.02. TAX TREATMENT; "POOLING OF INTERESTS"; AFFILIATES.
The Company, Parent and Parent Sub shall use their best efforts, and shall
cause their respective Subsidiaries and Affiliates to use their best efforts,
to cause the Merger to qualify, and will not take any actions which would
prevent the Merger from qualifying, as a "reorganization" under Section
368(a)(1)(A) of the Code, by application of Section 368(a)(2)(D) of the Code.
The Company, Parent and the Stockholders shall, and shall cause each of
their respective Subsidiaries and Affiliates to, use their best efforts not
to take any action (regardless of whether such action would otherwise be
permitted or not prohibited hereunder) that would prevent Parent from
accounting for the Merger as a "pooling of interests." Each Stockholder
agrees and undertakes that from the date hereof until
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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such time as financial results (including combined sales and net income)
covering at least thirty (30) days of post-Merger operations have been
published (the date on which such financial results are published shall be
the "FINANCIAL RESULT DATE"), such Stockholder shall not sell or in any other
way alter his risk relative to any shares of Parent Common Stock received in
the Merger (within the meaning of the Codification of Financial Reporting
Policies 201.01 (reprinted in 7 Fed. Sec. L. Rep. (CCH) 72,951)). Each
Stockholder understands that Parent will advise it when the Financial Result
Date shall have occurred. Each Stockholder undertakes to inform the Company
and Parent of any transactions involving Company Common Stock or Parent
Common Stock that he may wish to consummate during any time prior to the
Financial Result Date and will not consummate such transaction unless Parent
shall consent thereto in writing.
SECTION 6.03. PUBLIC ANNOUNCEMENTS.
(a) Any public announcement or similar publicity with respect to
this Agreement or the transactions contemplated hereby will be issued, if at
all, at such time and in such manner as Parent determines. Subject to
Section 6.03(b) below and prior to the Effective Time, each of the
Stockholders and Parent shall, and the Stockholders shall cause the Company
and its Subsidiaries to, keep this Agreement and the transactions
contemplated hereby strictly confidential and shall not make any disclosure
of this Agreement or the transactions contemplated hereby to any Person. The
parties hereto shall consult with each other concerning the means by which
the Company's employees, customers and suppliers and other Persons having
dealings with the Company will be informed of the transactions contemplated
hereby and Parent will have the right to be present for any such
communication.
(b) Each party hereto acknowledges that, as a publicly traded
company, Parent has disclosure obligations under the federal securities laws
and, depending on the facts and circumstances, may be required to announce
the existence of this Agreement and/or the Merger prior to the Effective
Time. If so required, Parent will first consult with the Company regarding
the timing and contents of any such announcement. Each of the parties hereto
further acknowledges that this Agreement and/or the Merger may constitute
material, non-public information and agrees that it or he shall not, and
shall cause its respective representatives or Affiliates to not, engage in or
effect any transaction of Parent's securities until the Effective Time,
subject to the additional restrictions imposed by the federal securities laws
concerning the purchase or sale of securities.
SECTION 6.04. OBLIGATIONS OF PARENT SUB. Parent shall take all
action necessary to cause Parent Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth
in this Agreement.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 6.05. RESTRICTIVE LEGEND. Each of the Stockholders
acknowledges and agrees that the certificates of Parent Common Stock issued to
the Stockholders pursuant to the Merger shall bear a restrictive legend in
substantially the following form and a stop-transfer order may be placed against
their transfer:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under the Securities Act of 1933, as
amended, or an opinion of counsel that registration is not required
under said Act or unless sold pursuant to Rule 144.
The legend set forth above shall be removed and Parent shall issue a
certificate without such legend to the holder of the shares of Parent Common
Stock upon which it is stamped, if, unless otherwise required by applicable
state securities laws, (a) the such shares are included in an effective
registration statement under the Securities Act covering the resale thereof,
or (b) such holder provides Parent with an opinion of legal counsel, in form,
substance and scope reasonably acceptable to Parent and its legal counsel, to
the effect that a public sale or transfer of such shares may be made without
registration under the Securities Act and such shares are being sold or
transferred in accordance with the method described therein, or (c) such
holder provides Parent with reasonable assurances that such shares can be
sold pursuant to Rule 144 under the Securities Act (or a successor rule
thereto) without any restriction as to the number of shares acquired as of a
particular date that can then be immediately sold. Each of the Stockholders
agrees to sell all of the shares of Parent Common Stock acquired pursuant to
the Merger, including those represented by a certificate(s) from which the
legend has been removed, (x) in compliance with the prospectus delivery
requirements, if any, under applicable securities Laws, (y) through an
investment bank designated by Parent and (z) in a manner reasonably designed
not to affect adversely the market price of the Parent Common Stock.
SECTION 6.06. ***
SECTION 6.07. DELIVERY OF SEC FILINGS. Parent shall promptly deliver
to the Company or to the Company's counsel a copy of all filings of the Parent
SEC Reports with the SEC, from the date hereof to the Effective Time, or any
other document which Parent deems to be
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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appropriate for provision to the Stockholders. Upon delivery of any such
document by Parent to the Company, the Company shall promptly deliver to each
holder of capital stock of the Company a copy of such document, including all
exhibits thereto, and an officer of the Company shall promptly provide to
Parent an affidavit of delivery of such copies.
SECTION 6.08. TERMINATION OF STOCKHOLDERS' AGREEMENT. Each of the
Stockholders (as applicable) and the Company hereby agree to and approve of
the termination, effective as of immediately before the Effective Time any
buy-sell or stock transfer agreement or other agreement or arrangement
between and among such parties.
SECTION 6.09. BEST EFFORTS. The parties hereto shall use their best
efforts to consummate the Merger and the other transactions contemplated
hereby as soon as reasonably practicable after the date of this Agreement.
The parties hereto agree to execute such amendments to this Agreement, the
Escrow Agreement and any other document as may be necessary to enable the
Merger to qualify for "pooling of interests" accounting treatment; provided
that such amendments or documents do not adversely affect such party.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated herein shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions,
any or all of which may be waived, in whole or in part, to the extent
permitted by applicable Law:
(a) NO ORDER. No Governmental Entity or federal or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(b) CONSENTS AND APPROVALS. All material consents, approvals
and authorizations legally required to be obtained to consummate the Merger
shall have been obtained from all required Governmental Entities.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT. The
obligations of Parent to effect the Merger and the other transactions
contemplated herein are also subject to the following conditions, each of which
may be waived by Parent, in whole or in part, to the extent permitted by
applicable Law:
(a) REPRESENTATIONS AND WARRANTIES.
(i) Notwithstanding any due diligence performed by Parent and
the Parent Representatives, each of the representations and warranties of the
Company contained in this Agreement shall be true and correct when made and
on and as of the Effective Time, as if made on and as of such date, except
where failure to be so true and correct would not have a Company Material
Adverse Effect, individually or in the aggregate, and except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date, except where the failure
to be so true and correct would not have a Company Material Adverse Effect.
Parent shall have received a certificate of the President of the Company to
such effect; and
(ii) Notwithstanding any due diligence performed by Parent and
the Parent Representatives, each of the representations and warranties of the
Stockholders contained in this Agreement shall be true and correct when made
and on and as of the Effective Time, as if made on and as of such date,
except that those representations and warranties which address matters only
as of a particular date shall remain true and correct as of such date.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior
to the Effective Time. Parent shall have received a certificate of the
President or Chief Financial Officer of the Company to that effect.
(c) "POOLING OF INTERESTS". The Merger shall qualify for
"pooling of interests" accounting treatment and Parent shall have received a
letter, dated as of the Effective Time, from Ernst & Young LLP regarding such
firm's concurrence with Parent's conclusion as to the appropriateness of
"pooling of interests" accounting treatment for the Merger under Accounting
Principles Board Opinion No. 16 if the Merger is closed and consummated in
accordance with this Agreement.
(d) THIRD PARTY CONSENTS AND WAIVERS. The Company shall have
obtained consents and waivers, in form and substance reasonably satisfactory
to Parent, in respect of the Contracts or agreements set forth on SCHEDULE
7.02(d).
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
(e) COMPANY MATERIAL ADVERSE EFFECT. The Company shall not have
become subject to any action or event which resulted in or may likely result
in a Company Material Adverse Effect.
(f) AFFILIATE AGREEMENTS. Parent shall have received from each
Affiliate of the Company and any other Person who may be deemed to have
become an Affiliate of the Company (under Rule 145 under the Securities Act
or otherwise under applicable SEC accounting releases with respect to
"pooling of interests" accounting treatment) after the date of this Agreement
and or prior to the Effective Time a signed Affiliate Agreement in the form
of EXHIBIT 7.02(g). Each such Affiliate agrees to execute and deliver
similar Affiliate Agreements upon the reasonable request of Parent (or any of
its Subsidiaries or Affiliates) in connection with future business
transactions of Parent (or any of its Subsidiaries or Affiliates).
(g) NONCOMPETITION AGREEMENTS. Vincent K. Roach shall execute
the noncompetition agreement in the form attached hereto as EXHIBIT 7.02(h).
(h) SPOUSAL CONSENTS. Parent shall have obtained from each of
the spouses of the Stockholders, respectively, the executed consent, in the
form attached hereto as EXHIBIT 7.02(i), in respect of the consummation of
the Merger and the transactions contemplated by this Agreement.
(i) ***
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement is subject to the following conditions, each
of which may be waived, in whole or in part, to the extent permitted by
applicable Law, by the Company:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of Parent and Parent Sub contained in this Agreement shall be
true and correct when made and on and as of the Effective Time as if made on
and as of such date, except where the failure to be so true and correct would
not have a Parent Material Adverse Effect, and except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date, except where the failure
to be so true and correct would not have a Parent Material Adverse Effect.
The Company shall have received a certificate of the President of Parent to
such effect.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
(b) AGREEMENTS AND COVENANTS. Parent shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate of the
President of Parent to that effect.
(c) PARENT MATERIAL ADVERSE EFFECT. Parent shall not have
become subject to any action or event which resulted in or may likely result
in a Parent Material Adverse Effect.
(d) LEGAL OPINION. The Company shall have received the legal
opinion of Baker & McKenzie, covering the matters set forth on EXHIBIT
7.03(d).
ARTICLE VIII
TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION
SECTION 8.01. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by Parent, upon a material breach of any covenant or
agreement on the part of the Company set forth in this Agreement;
(c) by the Company, upon a material breach of any covenant or
agreement on the part of Parent or Parent Sub set forth in this Agreement;
(d) by either Parent or the Company, if there shall be any order
of a Governmental Entity which is final and nonappealable preventing the
consummation of the Merger;
(e) by Parent, upon a material breach of a representation and
warranty made by the Company or the Stockholders which has resulted in a
Company Material Adverse Effect, or which constitutes a material breach of
any representation and warranty set forth in Article IIIA; or
(f) by the Company, upon a material breach of a representation
and warranty made by Parent which has resulted in a Parent Material Adverse
Effect.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
SECTION 8.02. INVESTIGATION. Notwithstanding any of the foregoing,
the right of any party hereto to terminate this Agreement pursuant to Section
8.01 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
SECTION 8.03. AMENDMENT. This Agreement may not be amended except
by an instrument in writing signed by the parties hereto (in the case of the
Stockholders, by a number of Stockholders who are entitled to receive or have
received, in the aggregate, *** of the shares of Parent Common Stock to be
issued hereby at the Effective Time if prior to the Effective Time, or a
majority of the shares of Parent Common Stock issued hereby if subsequent to
the Effective Time).
SECTION 8.04. WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one party
hereto, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party or parties hereto (in the
case of the Stockholders, by a number of Stockholders who are entitled to
receive or have received, in the aggregate, *** of the shares of Parent
Common Stock to be issued hereby at the Effective Time if prior to the
Effective Time, or a majority of the shares of Parent Common Stock issued
hereby if subsequent to the Effective Time); (b) no waiver that may be given
by a party hereto will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed
to be a waiver of any obligation of such party or of the right of the party
giving such notice or demand to take further action without notice or demand
as provided in this Agreement or the documents referred to in this Agreement.
All rights and remedies existing under this Agreement are in addition to,
and not exclusive of, any rights or remedies otherwise available.
SECTION 8.05. ***
SECTION 8.06. STOCKHOLDER INDEMNIFICATION, HOLD BACK AND ESCROW.
(a) The *** Stockholder jointly and severally shall ***
indemnify and defend each of Parent and Parent Sub, and hold it harmless,
from and against any and all losses, damages, Liabilities, claims, demands,
judgments, settlements, costs and expenses of any nature
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
44
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CONFIDENTIAL TREATMENT REQUESTED
whatsoever (including reasonable attorneys' fees) (collectively, "LOSS"),
resulting from or arising out of any: (i) breach of any representation or
warranty or agreement of the Company or any Stockholder contained herein; or
(ii) Liability of the Company, whether or not addressed by a representation
or warranty, which was *** created, incurred or arose from facts, events,
conditions or circumstances existing on or before the Effective Time
(provided that the items listed on SCHEDULE 3.08 shall be deemed to be
incurred in the Ordinary Course of Business); *** no claim for
indemnification pursuant to this Section 8.06(a) may be made subsequent to
the date which is *** after the Effective Time or in respect of a Loss in
respect of accounts receivable or for which Parent has otherwise been
previously reimbursed by the Stockholders.
(b) (i) If any third party shall notify Parent with respect to
any third party claim (a "THIRD PARTY CLAIM") that may give rise to a Loss,
then Parent shall promptly notify the Stockholders' Representative thereof in
writing; PROVIDED, HOWEVER, that no delay on the part of Parent in notifying
the Stockholders' Representative shall relieve the Stockholders from any
obligation hereunder unless (and then solely to the extent) such Stockholders
thereby are prejudiced.
(ii) The Stockholders will have the right to defend Parent
against the Third Party Claim with counsel of their choice reasonably
satisfactory to Parent, so long as: (A) the Stockholders so notify Parent in
writing within fifteen (15) days, acknowledging that such claim is in respect
of a Loss described in Section 8.06(a); (B) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief;
(C) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of Parent, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of Parent; and (D) the Stockholders conduct the defense of the
Third Party Claim actively and diligently.
(iii) So long as the Stockholders are conducting the defense of
the Third Party Claim in accordance with Section 8.06(b)(ii), (A) Parent may
retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim, (B) Parent will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Stockholders'
Representative (which consent will not be withheld unreasonably); and (C) the
Stockholders will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of Parent (which consent will not be withheld unreasonably).
(iv) In the event that any of the conditions in Section
8.06(b)(ii) is or becomes unsatisfied, (A) Parent may defend against the
Third Party Claim in any manner it
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
45
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CONFIDENTIAL TREATMENT REQUESTED
reasonably may deem appropriate; PROVIDED, HOWEVER, that Parent shall not
consent to the entry of any judgment or enter into any settlement or
agreement to settle a Third Party Claim without the prior written consent of
the Stockholders' Representative, which consent will not be withheld
unreasonably; (B) Parent shall be reimbursed from the Escrow Account promptly
and periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses); and (C) the Stockholders
will remain responsible for any Loss that Parent actually suffers resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Section 8.06.
(c) (i) Each Stockholder of the Company hereby agrees that, at
the Effective Time, Parent shall hold back and place into escrow pursuant to
the Escrow Agreement (the "ESCROW ACCOUNT"), a number of Parent Shares equal
to ***, rounded up to the next whole share, of the total number of shares of
Parent Common Stock to be received by such Stockholder (the total value of
all such shares as valued at the Market Price to be collectively referred to
as the "INDEMNIFICATION AMOUNT"), as partial security for such Stockholder's
indemnity obligations herein.
(ii) At any time Parent shall have a claim for indemnification,
Parent shall submit such claim to the Stockholders' Representative and within
thirty (30) calendar days thereof the Stockholders' Representative shall
notify Parent, in writing, whether he agrees with such claim; PROVIDED,
HOWEVER, that in the event that the Stockholders' Representative fails to so
notify Parent, the Stockholders' Representative shall be deemed to have
agreed to the release of securities or cash from the Escrow Account. In the
event that the Stockholders' Representative notifies Parent that he disagrees
with such claim, the Stockholders' Representative shall provide Parent with a
written notice specifying the Basis for such disagreement and, if the
Stockholders' Representative and Parent shall be unable to reach agreement
within thirty (30) days, the matter will be submitted to arbitration pursuant
to the terms of Section 9.11.
(iii) For purposes of calculating quantities of shares to be paid
to Parent pursuant to this Section 8.06, each share of Parent Common Stock
shall be valued at the Market Price described in Section 8.06(c)(iv). Any
and all distributions to and from the Escrow Account shall be allocated among
the Stockholders in accordance with the terms and conditions of this
Agreement (based on each Stockholder's interest in shares of Parent Common
Stock to be issued pursuant to the Merger), as separate subaccounts for each
holder.
(iv) ***
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
46
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CONFIDENTIAL TREATMENT REQUESTED
(d) For the purposes of this Section 8.06, holders of a majority
of the shares of Parent Common Stock in the Escrow Account may, by written
notice signed by them and delivered to Parent, appoint any other individual
to act in the place and stead of the Stockholders' Representative. In the
event of the death, incapacity or resignation of the Stockholders'
Representative, if no such replacement is appointed within thirty (30) days,
Parent may designate an interim replacement to serve until such appointment.
(e) In connection with this Agreement and the Escrow Agreement
and the transactions contemplated hereby and thereby, respectively, the
Company and the Stockholders agree that the Stockholders' Representative
shall not be liable for any error of judgment or for any act done or omitted
by the Stockholders' Representative in good faith or for any mistake in fact
or law, except its own willful misconduct or gross negligence.
(f) The right to indemnification, payment of damages or other
remedy based on the representations, warranties, covenants and obligations of
the Company and the Stockholders contained herein will not be affected by any
investigation conducted by Parent or the Parent Representatives with respect
to, or any Knowledge acquired (or capable of being acquired) by Parent or the
Parent Representatives, at any time whether before or after the execution and
delivery of this Agreement or the Effective Time, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of damages, or other remedy based on such
representations, warranties, covenants and obligations.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.
(a) Except as set forth below in Section 9.01(b), the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any other party hereto, any Person controlling any such
party or any of its officers or directors, whether prior to or after the
execution of this Agreement.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
(b) The representations, warranties and agreements in this
Agreement shall terminate (i) with respect to the Stockholders and the
Company, on the *** anniversary of the Effective Time and (ii) with respect
to Parent and Parent Sub, *** the Effective Time; PROVIDED, HOWEVER, that the
representations, warranties and agreements set forth in *** shall not so
terminate.
SECTION 9.02. NOTICES. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date delivered, mailed or transmitted, and shall
be effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like changes of address) or sent by electronic transmission to
the facsimile number specified below:
(a) If to Parent or Parent Sub:
DAOU Systems, Inc.
5120 Shoreham Place
San Diego, CA 92122
ATTENTION: President and Chief Financial Officer
Facsimile No.: (619) 452-2789
with a copy to:
Baker & McKenzie
101 West Broadway, Twelfth Floor
San Diego, California 92101
ATTENTION: John J. Hentrich, Esq.
Facsimile No.: (619) 236-0429
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
48
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CONFIDENTIAL TREATMENT REQUESTED
(b) If to the Company:
International Health Care Systems, Inc.
10254 County Highway 30-A
Panama City, FL 32413
Attention: Vincent K. Roach
with a copy to:
Lowe Gray Steele & Darko, LLP
Bank One Tower
111 Monument Circle, Suite 4600
Indianapolis, IN 46204-5146
ATTENTION: Sydney L. Steele, Esq.
Facsimile No.: (317) 236-6472
(c) If to the Stockholders:
Mr. Vincent K. Roach
10254 County Highway 30-A
Panama City, FL 32413
SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement,
the term:
"AAA" as defined in Section 9.11;
"AFFILIATE" means a Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned Person;
"AGREEMENT" as defined in the preamble to this Agreement;
"ASSETS" means any and all properties and assets (real, personal or mixed,
tangible or intangible) of any Person;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
49
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CONFIDENTIAL TREATMENT REQUESTED
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence;
"BLUE SKY LAWS" as defined in Section 3.05(b);
"BUSINESS DAY" means any day other than a day on which banks in the
State of California are authorized or obligated to be closed;
"CERTIFICATE OF MERGER" as defined in Section 1.02;
"CERTIFICATES" as defined in Section 2.02(b);
"CODE" means the Internal Revenue Code of 1986, as amended;
"COMPANY" as defined in the preamble to this Agreement;
"COMPANY COMMON STOCK" as defined in Section 2.01(a);
"COMPANY EMPLOYEE BENEFIT PLAN" as defined in Section 3.24(a);
"COMPANY MATERIAL ADVERSE EFFECT" means any change or effect that,
individually or when taken together with all other such changes or effects,
is or is reasonably likely to be materially adverse to the business,
properties, Assets, condition (financial or otherwise), liabilities,
operations or prospects of the Company at the time of such change or effect.
A Company Material Adverse Effect shall be deemed to exist if there shall
occur any event which causes or may reasonably be expected to cause or result
in estimable monetary loss which, individually or when aggregated with all
other events, exceeds ***;
"COMPANY PERMITS" as defined in Section 3.06;
"COMPETING TRANSACTION" means any of the following involving the Company
or any Subsidiary or Affiliate of the Company: (i) any merger, consolidation,
share exchange, business combination, or other similar transaction (other
than the transactions contemplated by this Agreement); (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of ten percent
(10%) or more of the Assets of the Company in a single transaction or series
of transactions; (iii) any offer (whether cash or securities) for ten percent
(10%) or more of the outstanding shares
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
50
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
of capital stock of the Company; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing;
"CONSENT" as defined in Section 2.01A;
"CONTRACT" of any Person means any contract, agreement or instrument of
any type whatsoever (i) to which such Person is a party and by which such
Person either has made a binding undertaking to perform an obligation or is
entitled to any property or right, or (ii) by which any of the Assets of such
Person is bound;
"CONTROL" (including the terms "CONTROLLING," "CONTROLLED," "CONTROLLED
BY" and "UNDER COMMON CONTROL WITH") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of stock or as trustee or executor, by Contract or credit
arrangement or otherwise;
"DELAWARE LAW" as defined in the recitals to this Agreement;
"DISSENTING SHARES" as defined in Section 2.04;
"EFFECTIVE TIME" as defined in Section 1.02;
"EMPLOYEE BENEFIT PLAN" means (a) any bonus, incentive compensation,
profit sharing, retirement, pension, group insurance, death benefit, group
health, medical expense reimbursement, workers' compensation, dependent care,
flexible benefits or cafeteria, stock option, stock purchase, stock
appreciation rights, savings, deferred compensation, consulting, severance
pay or termination pay, vacation pay, life insurance, disability, welfare or
other employee benefit or fringe benefit plan, program or arrangement; or (b)
any plan, program or arrangement which is an Employee Pension Benefit Plan,
Employee Welfare Benefit Plan or Multiemployer Plan.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2);
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1);
"ENCUMBRANCES" means any Security Interests, Liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of
any nature whatsoever;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
51
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other Laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments
(and all agencies thereof), concerning pollution or protection of the
environment, public health and safety, or employee health and safety,
including Laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes;
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended;
"ERISA AFFILIATE" means each person (as defined in Section 3(9) of
ERISA) that together with the Company (or any person whose Liabilities the
Company has assumed or is otherwise subject to) would be considered or has
been a single employer under Section 4001(b) of ERISA or would be considered
or has been a member of the same "controlled group," under common control, a
member of the same affiliated service group or otherwise a single employer
within the meaning of Section 414(b), (c), (m) and (o) of the Code (PROVIDED,
HOWEVER, that when the subject of the provision is a Multiemployer Plan only
subsections (b) and (c) of Section 414 of the Code shall be taken into
account).
"ESCROW ACCOUNT" as defined in Section 8.06(c);
"ESCROW AGREEMENT" as defined in Section 5.05;
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended;
"EXCHANGE AGENT" as defined in Section 2.02(a);
"EXCHANGE FUND" as defined in Section 2.02(a);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
52
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
"EXCHANGE RATIO" means, subject to adjustment as set forth in Sections
2.01(b), the quotient obtained from dividing (i) as the numerator of such
quotient, Two Hundred Twenty-Four Thousand Six Hundred Sixty-Eight shares of
Parent Common Stock, by (ii) as the denominator of such quotient, the total
number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (excluding any Dissenting Shares, if applicable).
All calculations made to determine the Exchange Ratio shall be made through
the fourth decimal place (i.e., rounded to the closest ten-thousandth);
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended;
"FAIR MARKET VALUE" of any Asset means the value that would be obtained
in an arm's length transaction between an informed and willing buyer and an
informed and willing seller;
"FINANCIAL RESULT DATE" as defined in Section 6.02;
"FINANCIAL STATEMENTS" as defined in Section 3.07;
"FLORIDA LAW" as defined in the recitals to this Agreement;
"GAAP" means United States generally accepted accounting principles as
in effect from time to time;
"GOVERNMENTAL ENTITIES" as defined in Section 3.05(b);
"HSR ACT" as defined in Section 3.05(b);
"INDEMNIFICATION AMOUNT" as defined in Section 8.06(c);
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
53
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CONFIDENTIAL TREATMENT REQUESTED
applications, registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary rights,
and (h) all copies and tangible embodiments thereof (in whatever form or
medium);
"INTERIM BALANCE SHEET" as defined in Section 3.07;
"KNOWLEDGE" or "KNOWN" means, with respect to a particular fact or other
matter, that (i) an individual should be aware of such fact or other matter
or (ii) such individual could reasonably be expected to discover or otherwise
become aware of such fact or other matter; a Person (other than an
individual) will be deemed to have "Knowledge" of a particular fact or other
matter if any individual who is serving, or who has at any time served, as a
director, officer, partner, executor or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter;
"LAWS" as defined in Section 3.05(a);
"LIABILITIES" as defined in Section 3.08;
"LIEN" means any lien, charge, Encumbrance, mortgage, conditional sale
agreement, title retention agreement, financing lease, pledge or Security
Interest of any kind or type and whether arising by Contract or under Law;
"LOSS" as defined in Section 8.06(a);
***
"MARKET PRICE" means the average of the closing prices of the Parent Common
Stock as reported on the Nasdaq National Market Quotation System for the ten
(10) trading days prior to the Effective Time or other date, as applicable.
"MERGER" as defined in the recitals to this Agreement;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
54
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CONFIDENTIAL TREATMENT REQUESTED
"MERGER CONSIDERATION" as defined in Section 2.02(b);
***
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37);
"NASDAQ" means The Nasdaq Stock Market, Inc.;
"ORDINARY COURSE OF BUSINESS" with respect to any entity, means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency) of that entity;
"PARENT" as defined in the preamble to this Agreement;
"PARENT COMMON STOCK" as defined in Section 2.01(a);
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change or effect that,
individually or when taken together with all such other changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
Assets, condition (financial or otherwise), Liabilities, operations or prospects
of Parent and its Subsidiaries, taken as a whole at the time of such change or
effect. A Parent Material Adverse Effect shall be deemed to exist if there
shall occur any event which causes or may reasonably be expected to cause or
result in estimable monetary loss which, individually or when aggregated with
all other events, exceeds ***;
"PARENT PREFERRED STOCK" as defined in Section 4.03(b);
"PARENT REPRESENTATIVES" as defined in Section 5.04;
"PARENT SEC REPORTS" as defined in Section 4.06(a);
"PARENT SUB" as defined in the preamble to this Agreement;
"PARENT SUB COMMON STOCK" means Parent Sub's common stock, par value $.001
per share;
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a Governmental Entity (or any
department, agency, or political subdivision thereof) or any other entity;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
55
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
***
***
"RULES" as defined in Section 9.11;
"SEC" means the Securities and Exchange Commission;
"SECURITIES ACT" means the Securities Act of 1933, as amended;
"SECURITY INTEREST" means any mortgage, pledge, Lien, Encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar Liens, (b) Liens for Taxes not yet due and payable, (c) purchase money
Liens and Liens securing rental payments under capital lease arrangements, and
(d) other Liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money;
***
"STOCKHOLDERS" as defined in the preamble to this Agreement;
"STOCKHOLDERS' AGREEMENT" as defined in Section 6.08;
"STOCKHOLDERS' REPRESENTATIVE" as defined in Section 5.05;
"SUBSIDIARY" or "SUBSIDIARIES" of the Company, Parent, the Surviving
Corporation or any other Person, means any corporation, partnership, joint
venture or other legal entity of which the Company, Parent, the Surviving
Corporation or such other Person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, fifty percent
(50%) or more of the capital stock or other equity interests which the holders
thereof are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity;
"SURVIVING CORPORATION" as defined in Section 1.01;
"TAX" or "TAXES" shall mean any and all taxes, charges, fees or levies,
payable to any federal, state, local or foreign taxing authority or agency,
including, without limitation, (i) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, AD VALOREM, value
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added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, disability, employment, social security,
workers compensation, unemployment compensation, utility, severance, excise,
stamp, windfall profits, transfer and capital gains taxes, (ii) custom
duties, imposts, charges, levies or other similar assessments of any kind,
and (iii) interest, penalties and additions to tax imposed with respect
thereto;
"TAX RETURN" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof;
"THIRD PARTY CLAIM" as defined in Section 8.06(b); and
***
SECTION 9.04. HEADINGS; CONSTRUCTION. The headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
SECTION 9.05. SEVERABILITY. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties
hereto as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.06. ENTIRE AGREEMENT; AMENDMENT. This Agreement (together
with the exhibits and schedules) constitutes the entire agreement of the
parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties hereto, or any of them, with respect to the
subject matter hereof. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
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SECTION 9.07. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise except Parent Sub may, without the Company's
approval, assign its interests to a wholly-owned Subsidiary of Parent.
SECTION 9.08. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
SECTION 9.09. FURTHER ASSURANCES. The parties hereto agree (a) to
furnish upon request to each other such further information, (b) to execute
and deliver to each other such other documents, and (c) to do such other acts
and things, all as another party hereto may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents
referred to in this Agreement.
SECTION 9.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW.
SECTION 9.11. BINDING ARBITRATION. Subject to the arbitration
provisions set forth below, the parties hereto agree that all disputes
arising out of or related to the terms and conditions of this Agreement or to
the performance, breach or termination thereof, shall be submitted to binding
arbitration pursuant to the Expedited Procedures of the Commercial
Arbitration Rules (the "RULES") of the American Arbitration Association (the
"AAA"). The arbitration will take place in San Diego, California at the
offices of the AAA. The dispute will be resolved by a single arbitrator
appointed by the AAA in accordance with the list procedure described in
Paragraph 13 of the Rules, except that the AAA will transmit the list within
ten (10) Business Days of the filing of the demand for arbitration, and the
parties thereto will have five (5) Business Days to return the list to the
AAA with their objections and preferences. Discovery will be limited to no
more than seven (7) depositions by each side and written document requests,
requesting the production of specific documents. The parties to the dispute
will voluntarily produce any and all documents that they intend to use at the
hearing before the close of discovery, subject to supplementation for
purposes of rebuttal or good cause shown. The period for taking discovery
will be sixty (60) Business Days, commencing upon the day that the answer is
due under the Rules. The arbitrator will hold a pre-hearing conference
within three (3) Business Days of the close of discovery and will schedule
the hearing within thirty (30) Business Days of the close of discovery.
After the arbitrator
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is selected, the arbitrator will have sole jurisdiction to hear such
applications, except that any measure ordered by the arbitrator may be
immediately and specifically enforced by a court otherwise having
jurisdiction over the parties. All fees and costs will be allocated to the
parties to the arbitration as determined by the arbitrator. Each party will
pay its own fees and costs associated with the arbitration and each party
will pay one-half the estimated arbitrator's fees up front and if either
party fails to do so a default will be entered against such party solely with
respect to such fees. Any determination of the arbitrator shall be final and
binding on the parties hereto. Nothing in this Agreement will prevent a
party hereto from applying to a court that would otherwise have jurisdiction
for provisional or interim injunctive or other equitable measures.
SECTION 9.12. WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. To the maximum extent permitted by
applicable Law, (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one party, in
whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving notice or demand
to take further action without notice or demand as provided in this Agreement
or the documents referred to in this Agreement. All rights and remedies
existing under this Agreement are in addition to, and not exclusive of, any
rights or remedies otherwise available.
SECTION 9.13. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date first written above by their respective
officer thereunto duly authorized.
INTERNATIONAL HEALTH CARE SYSTEMS, INC.
By: /s/ Vincent K. Roach
------------------------------
Vincent K. Roach, President
STOCKHOLDERS OF INTERNATIONAL HEALTH
CARE SYSTEMS, INC.
/s/ Vincent K. Roach
----------------------------------
Vincent K. Roach, 100 shares
/s/ Vincent K. Roach
----------------------------------
Vincent K. Roach, Limited
Guardian over the Estate of Dov Sloman
(7 shares), Jonathan Sloman (7 shares)
and Adin Samuel Sloman (7 shares) on
behalf of each of them
/s/ Vincent K. Roach
----------------------------------
Vincent K. Roach, Authorized by Court
Order dated June 11, 1998 to sign on
behalf of each of Abel E. Herrera, Jr.
(7 shares) and Lisa Mendizabal (7
shares)
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
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DAOU SYSTEMS, INC.
By: /s/ Daniel J. Daou
----------------------------
Daniel J. Daou, President
DAOU-TMI, INC.
By: /s/ Daniel J. Daou
----------------------------
Daniel J. Daou, President
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
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