SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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):
May 27, 1999
GHS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-15586 52-1373960
(State or other (Commission (I.R.S.Employer
jurisdiction) File Number) Identification No.)
704 Broadway, Second Floor, New York, New York 10003
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 358-4028
2400 Research Boulevard, Suite 325, Rockville, Maryland 20850 (Former name and
former address, if changed since last report)
<PAGE>
Item 1 Changes in Control of Registrant
and
Item 2. Acquisition of Disposition of Assets
On May 27, 1999, GHS, Inc. ("GHS" or the "Company") acquired all of
the membership interests of Change Your Life.com, LLC, a Delaware limited
liability company ("CYL"), pursuant to a Contribution and Exchange Agreement
(the "Exchange Agreement") dated as of May 20, 1999 by and among the Company,
CYL, Anthony J. Robbins ("Robbins"), Robbins Research International Inc., a
corporation controlled by Robbins ("RRI"), and CYL Development Holdings, LLC
("Development Holdings"). CYL was founded by Robbins and is engaged in the
development of an online network for personal and professional improvement.
Pursuant to the Exchange Agreement, GHS issued an aggregate of 99,059.338 shares
of a newly-designated Series A Preferred Stock to the members of CYL in exchange
for all of the membership interests in CYL. The shares of Series A Preferred
Stock issued in connection with the Exchange are convertible into an aggregate
of 30,708,395 shares of the Company's Common Stock (the "Common Stock") and vote
on an as converted basis with the Common Stock. The Series A Preferred Stock is
automatically converted on the later of (i) the next business day following the
date of filing of a certificate of an amendment to the Company's Certificate of
Incorporation that increases the number of authorized shares of Common Stock to
a number sufficient to permit the conversion of all of the then outstanding
shares of Series A Preferred Stock into shares of the Common Stock or (ii) the
next business day following the record date for the spin-off dividend of the
Company's U.S. NeuroSurgical subsidiary (the "USN Spin-Off"). The Company plans
to spin-off its USN subsidiary to the holders of the Common Stock in the near
future, and to take such actions as are required in order to increase the
authorized shares of Common Stock.
Robbins is internationally recognized as a leader in peak
performance results coaching. He is an international best selling author of
five books and his "Personal Power" audio program is the number-one personal and
professional coaching system of all time with more than 30 million tapes bein
used to transform lives worldwide. RRI, known as The Anthony Robbins
Companies, conducts training and coaching programs worldwide. Pursuant to a
Content Provider Agreement and License ("Content Provider Agreement") effectiv
as of April 23, 1999 between CYL, Robbins and RRI, CYL has exclusive rights to
be the online source for Robbins' training courses, content and publications.
As part of the transactions contemplated by the Exchange Agreement,
the Board of Directors of the Company amended and restated the By-Laws of the
Company (the "Restated By-Laws"). The Restated By-Laws provide that the Board of
Directors shall consist of eight members and the initial members of the Board of
Directors following the Company's acquisition of CYL shall be elected within 45
days of the CYL closing date, provided that the three-person Board of Directors
existing prior to the closing date shall continue to exist until such time as
all actions are taken which are required by applicable law to effect such
provisions. With respect to such initial directors and at each subsequent
election of Directors and for so long as Anthony J. Robbins or any of his
affiliates shall hold in the aggregate at least 10% of the outstanding shares of
Common Stock or Common Stock equivalents, (i) Robbins or such affiliates shall
have the right to nominate three persons as Directors of the Company (the "
Robbins Directors"), and (ii) a Nominating Committee consisting of the Directors
(other than the Robbins Directors and the Company's Chief Executive Officer) and
their respective successors shall have the right to nominate four persons as
Directors of the Company and (iii) the eighth Director shall be the Company's
Chief Executive Officer. If any Director is unable to serve or, once having
commenced to serve, is removed or withdraws from the Board of Directors of the
Company, the replacement of such Director on the Board of Directors of the
Company will be nominated in accordance with the above-described procedures. In
addition, the Restated By-Laws provide that during the term of the Content
Provider Agreement referred to above, Robbins will have the right to approve of
the selection of the Chief Executive Officer of the Company by the Board of
Directors, provided that said right will expire if the entire interest in the
Company (or successor thereto) obtained by Robbins and RRI in connection with
the Exchange Agreement is transferred to any other party on an involuntary
basis, e.g. through bankruptcy proceedings or pursuant to a court order.
After giving effect to the issuance of the Series A Preferred Stock
in connection with the Exchange Agreement and the Series B Preferred Stock and
Series C Preferred Stock issued in connection with the private placement
described below (See Item 5) and the Concept Development and The Learning Annex
transactions, respectively, the Company will have outstanding 7,047,828 shares
of Common Stock and shares of preferred stock which are convertible into
33,051,708 shares of Common Stock and which vote on an as converted basis with
the Common Stock. As a result of such issuances by the Company, Robbins and his
affiliates, will own approximately 57.4% of the voting power of the Company and
Development Holdings will own approximately 19.1% of the voting power of the
Company.
On May 27, 1999, the Company acquired all of the outstanding capital
stock of Concept Development, Inc. ("Concept Development") through a reverse
triangular merger (the "Merger") pursuant to an Agreement and Plan of
Reorganization dated as of May 27, 1999 among the Company, Concept Development,
Concept Acquisition Corporation, a wholly-owned subsidiary of the Company,
William Zanker ("Zanker") and Debbie Dworkin ("Dworkin"). Concept Development
was formed in September 1996 to provide on-line general-interest continuing
education courses on the Internet. In connection with the Merger, the Company
issued an aggregate of 50,000 shares of a newly-designated Series C Preferred
Stock to Dworkin, the sole stockholder of Concept Development (the "Merger
Shares"), in exchange for all of the outstanding capital stock of Concept
Development. The shares of Series C Preferred Stock issued in the Merger are
convertible into an aggregate of 500,000 shares of the Common Stock and vote on
an as converted basis with the Common Stock. Each share of Series C Preferred
Stock is automatically convertible into ten shares of Common Stock on the day
following the record date for the USN Spin-Off.
On May 27, 1999, in connection with the Merger, the Company entered
into a Repurchase Agreement with Dworkin (the "Repurchase Agreement"), the sole
stockholder of Concept Development prior to the Merger. Pursuant to the
Repurchase Agreement, the Company has the right to repurchase the Merger Shares
(the "Repurchase Option") issued to Dworkin in connection with the Merger if
Zanker ceases to be employed by the Company, unless due to a Termination Without
Cause (as defined in the Employment Agreement dated as of May 27, 1999 between
the Company and Zanker) or in connection with a change in control of the Company
after the change in control described herein. Commencing August 31, 1999, the
number of Merger Shares subject to the Repurchase Option will be reduced, in
equal quarterly increments ending in the quarter ending May 31, 2002, ultimately
to zero.
Item 5. Other Events
On May 27, 1999, GHS completed a private placement of 178,582 shares
(the "Shares") of a newly designated class of Series B Preferred Stock at a
purchase price of $90 per share, resulting in net proceeds of approximately
$15.1 million to the Company. Each share of Series B Preferred Stock is
automatically convertible into 10 shares of Common Stock on the day following
the record date for the USN Spin-Off.
The Company plans to use the proceeds from the private placement to
finance ongoing operations and for general corporate purposes. The Company has
agreed to file a registration statement under the Securities Act of 1933 as
promptly as practicable following the closing of the private placement covering
the shares of common stock underlying the Series B Preferred Stock. The Shares
were sold pursuant to an exemption from the registration requirements of the
Securities Act of 1933.
On May 27, 1999, the Company entered into an Option Agreement (the
"Option Agreement") with The Learning Annex (as defined below) pursuant to
which, among other things, the Company obtained the option to acquire The
Learning Annex (the "Option"). The Learning Annex is a leading provider of
continuing education courses in five cities in the United States and Canada. The
Option is exercisable, on the terms and subject to the conditions in the Option
Agreement, at any time from May 27, 1999 through May 27, 2004 at an exercise
price based on a pre-negotiated price structure. The Company paid $75,000 on May
27, 1999 for the first year of the Option and is required to pay $125,000,
$200,000, $500,000 and $750,000, respectively, to maintain the Option in each of
the subsequent four years. In addition, the Company entered into an exclusive
license agreement with The Learning Annex for the use of its intellectual
property and the exclusive sale of certain of its merchandise. As consideration
for the license, the Company paid cash and issued certain equity securities of
the Company to The Learning Annex. "The Learning Annex" consists of Seligman
Greer Communication Resources, Inc., a California corporation (d/b/a The
Learning Annex of San Francisco), SGS Communication Resources, Inc., a
California corporation (d/b/a The Learning Annex of Los Angeles), Seligman Greer
Sandberg Enterprises, Inc., a California corporation (d/b/a The Learning Annex
of San Diego), SGC Communication Resources LLC, a Delaware limited liability
company (d/b/a The Learning Annex of New York), and Learning Annex Interactive
LLC, a Delaware limited liability company (collectively "The Learning Annex").
On May 27, 1999, the Board of Directors elected Beth Polish as
President and Chief Operating Officer of the Company. Previously, from August
1998 through May 26, 1999, Ms. Polish, age 38, was a consultant to CYL. Prior to
joining CYL, Ms. Polish was managing director of KPMG's new media consulting
practice. From August 1995 through 1996, Ms. Polish was founding Chief Financial
Officer and Senior Vice President Corporate Development for iVillage, Inc, a
leading online women's network. For the three years prior, Ms. Polish was a Vice
President at Bannon & Co., an investment bank specializing in media,
entertainment and communications industries. Ms. Polish received an M.B.A. from
Harvard Business School and an A.B. from Franklin & Marshall College.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
Any financial statements required by this item shall be filed by an
amendment to this Form 8-K not later than 60 days after that this Form 8-K was
required to be filed.
(b) Pro Forma Financial Information
Any pro forma financial information required by this item shall be
filed by an amendment to this Form 8-K not later than 60 days after that this
Form 8-K was required to be filed.
(c) Exhibits**
Ex. No. Description
2(a) Contribution and Exchange Agreement dated as of May 20, 1999 among
the Company, Change Your Life.com, LLC, Anthony J. Robbins, Robbins Research
International Inc. and CYL Development Holdings, LLC
2(b) Agreement and Plan of Reorganization dated as of May 27, 1999 among
the Company, Concept Acquisition Corporation, Concept Development, Inc., William
Zanker and Debbie Dworkin*
2(c) Agreement of Merger dated as of May 27, 1999 between Concept
Acquisition Corporation and Concept Development, Inc.*
3(a) Certificate of Designations for Series A Preferred
Stock
3(b) Certificate of Designations for Series B Preferred
Stock
3(c) Certificate of Designations for Series C Preferred
Stock
3(d) Amended and Restated By-Laws
10(a) Content Provider Agreement and License effective as of April 23,
1999 between Change Your Life.com, LLC, Anthony J. Robbins and Robbins Research
International Inc.*
10(b) Escrow Agreement dated as of May 27, 1999 among the Company, Debbie
Dworkin and State Street Bank and Trust Company*
10(c) Repurchase Agreement dated as of May 27, 1999 between the Company
and Debbie Dworkin*
10(d) Employment Agreement dated as of May 27, 1999 between the Company
and William Zanker
10(e) Exclusive License and Marketing Agreement dated as of May 27, 1999
among the Company, Seligman Greer Communication Resources, Inc. ("Seligman"),
SGS Communication Resources, Inc., Seligman Greer Sandberg Enterprises, Inc.,
SGC Communication Resources LLC and Learning Annex Interactive LLC*
10(f) Option Agreement dated as of May 27, 1999 among the Company,
Seligman Greer Communication Resources, Inc., SGS Communication Resources,
Inc., Seligman Greer Sandberg Enterprises, Inc., SGC Communication Resources
LLC and Learning Annex Interactive LLC and certain shareholders and members, as
applicable, of such entities other than the Company listed therein*
10(g) Registration Rights Agreement dated as of May 27, 1999 among the
Company, Anthony J. Robbins, Robbins Research International Inc. and CYL
Development Holdings, LLC
10(h) Stockholders Agreement dated as of May 27, 1999 among the Company,
Anthony J. Robbins, Robbins Research International Inc. and CYL Development
Holdings, LLC
99(a) Press Release issued May 28, 1999
- --------------------------------------------------------------------
* Confidential treatment has been requested for certain portions of this
exhibit. Omitted portions have been filed separately with the Commission.
** Except for Exhibits 2(a),(b) and (c) filed hereby, all other exhibits to
this Form 8-K will be filed by amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GHS, INC.
By: /s/ Beth Polish
--------------------
Name: Beth Polish
Title: President
Dated: June 10, 1999
258984
<PAGE>
EXECUTION COPY
EXHIBIT 2(a)
CONTRIBUTION AND EXCHANGE AGREEMENT
BY AND AMONG
GHS, INC.,
CHANGE YOUR LIFE.COM, LLC ("CYL")
AND THE CYL MEMBERS
May 20, 1999
<PAGE>
CONTRIBUTION AND EXCHANGE AGREEMENT dated as of May 20, 1999 (the
"Agreement"), by and among GHS, INC., a Delaware corporation ("GHS"), CHANGE
YOUR LIFE.COM, LLC, a Delaware limited liability company ("CYL"), and Anthony J.
Robbins ("Robbins"), Robbins Research International Inc., a Nevada corporation
("RRI" and together with Robbins, the "Robbins Group"), and CYL Development
Holdings, LLC ("Development Holdings" and collectively, with the Robbins Group,
the "CYL Members").
WHEREAS, CYL intends to harness the emotional and motivational
power of leaders in the personal and professional improvement industry and serve
as the hub and consistent interface for these personalities' online presence in
order to launch the world's first and leading site of personal and professional
improvement (the "Change Your Life Site");
WHEREAS, CYL has had discussions with GHS with a view towards
concluding an agreement by which CYL, through an exchange by it members of units
in CYL for securities in GHS, would become a wholly-owned subsidiary of GHS;
WHEREAS, the parties hereto desire to reduce said arrangements to
written form;
WHEREAS, the respective Boards of Directors of GHS and CYL have each
determined that it is advisable and for the benefit and in the best interests of
their companies and their respective securityholders that CYL be acquired by GHS
by means of an exchange of CYL's membership units (the "Membership Units") for
shares of GHS's Series A Preferred Stock (the "GHS Preferred Stock"), par value
$.01 per share, having the terms for the Series A Preferred Stock described in
Exhibit 1.1 hereto (the " Preferred Stock Terms") and, subject to Section 2.1,
warrants (the "GHS Warrants") to acquire shares of GHS common stock, par value
$.01 per share (the "GHS Common Stock"), of like tenor (including cashless
exercise) with GHS's presently outstanding warrants, on the terms and conditions
hereinafter set forth (the "Exchange");
WHEREAS, GHS has entered into a letter of intent with Concept
Development, Inc. ("Concept") for the acquisition of Concept in exchange for
cash and GHS Common Stock;
WHEREAS, GHS shall sell certain of it voting equity securities to
private investors (the "Private Investors") in a private placement which
transaction will close at or prior to the closing of the Exchange;
WHEREAS, GHS, the CYL Members, Concept and the Private Investors
together have negotiated the terms of the resulting ownership of GHS and have
determined the rights of each party with respect to such ownership;
<PAGE>
WHEREAS, for federal income tax purposes, it is intended that the
Exchange and the related private placement and acquisition of Concept be treated
as an integrated transaction which qualifies as a tax-free transaction under the
provisions of Section 351 of the United States Internal Revenue Code of 1986, as
amended ("the "Code");
NOW, THEREFORE, in consideration of the premises, the mutual
covenants, representations and warranties herein contained, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto intending to be bound hereby agree as follows:
ARTICLE 1.
THE CONTRIBUTION AND EXCHANGE
SECTION 1.1. The Contribution and Exchange. Subject to the
terms and conditions hereof, on the Effective Date (as defined in Section 1.3),
the outstanding Membership Units shall be exchanged for shares of GHS Preferred
Stock and, subject to Section 2.1, into GHS Warrants in accordance with the
applicable provisions of this Agreement and the laws of the State of Delaware
("Delaware Law"). Following the Effective Date, CYL shall continue its limited
liability company existence under Delaware Law as a wholly-owned subsidiary of
GHS.
SECTION 1.2. Board of Directors and Members Meeting.
(a) CYL and the CYL Members. CYL and the CYL Members
shall,
as soon as practicable, take all action necessary in accordance with applicable
law and its Certificate of Formation and Operating Agreement to approve the
Exchange and the transactions contemplated hereby.
(b)GHS. GHS shall, as soon as practicable, take all
action
necessary in accordance with applicable law and its Certificate of
Incorporation
and By-laws to approve the Exchange and the transactions contemplated hereby.
SECTION 1.3. Consummation of the Exchange; Effective Date.
The Exchange shall become effective at such time (the "Effective Time") as the
Closing shall have occurred in accordance with Section 2.3 (the date on which
the Effective Time occurs, the "Effective Date").
<PAGE>
ARTICLE 2.
EXCHANGE AND CANCELLATION
OF SECURITIES
SECTION 2.1. Conversion of Membership Units. As of the Effective
Date, the CYL Members shall exchange all Membership Units issued and outstanding
immediately prior to the Effective Date for shares of GHS Preferred Stock and
GHS Warrants in such amounts as determined below. The GHS Preferred Stock issued
to the CYL Members hereby shall be convertible into shares of GHS Common Stock
in an aggregate amount which would represent 80% of the shares of GHS Common
Stock outstanding as of the Effective Date after giving effect to the Exchange
in a manner as shall be mutually acceptable to GHS and the CYL Members. The GHS
Warrants issued to the CYL Members hereby shall be exercisable for shares of GHS
Common Stock in an aggregate amount which would represent 80% of the shares of
GHS Common Stock issuable upon the exercise of warrants and options of GHS
outstanding as of the Effective Date after giving effect to the Exchange in a
manner as shall be mutually acceptable to GHS and the CYL Members; provided,
however, that, at their discretion, the CYL Members may elect to receive on the
Effective Date in lieu of such GHS Warrants a number of shares of GHS Preferred
Stock which is convertible into the number of shares of Common Stock for which
the GHS Warrants would have been exercisable on a cashless basis. The
calculations in the preceding two sentences shall exclude all securities issued
in connection with the New Financing referred to in Section 9.1(c) and the
Concept Transactions referred to in Section 8.4. As a result of the Exchange,
GHS will become the sole holder of Membership Units of CYL. The GHS Preferred
Stock and any GHS Warrants issuable hereunder are sometimes collectively
referred to hereinafter as the "Exchange Consideration." Each Membership Unit so
exchanged shall be entitled to receive its pro rata portion (the "Pro Rata
Portion") of the Exchange Consideration.
SECTION 2.2. Payment. As of the Effective Date, each
holder of Membership Units issued and outstanding on the Effective Date shall
receive the Pro Rata Portion of the Exchange Consideration for each Membership
Unit as provided in Section 2.1 hereof. In connection with such payment, any
certificate representing a Membership Unit shall be surrendered by each CYL
Member.
SECTION 2.3. Closing. Subject to the satisfaction or waiver of all
of the conditions to closing contained in Article 9 hereof, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place,
unless the parties shall otherwise agree, at 10:00 a.m., New York City time, on
a date to be specified by the parties, which shall be no later than the business
day after the satisfaction or waiver of the conditions to Closing contained in
Article 9 (other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the fulfillment or waiver of those conditions) at
the offices of Heller Ehrman White & McAuliffe, 711 Fifth Avenue, New York, New
York 10022, unless another date or place is mutually agreed to by the parties
(the "Closing Date").
<PAGE>
ARTICLE 3.
ORGANIZATIONAL DOCUMENTS
SECTION 3.1. Certificate of Formation and Operating
Agreement of CYL. As of the Effective Date, the Certificate of Formation and
Operating Agreement of CYL shall be in the forms attached hereto as Exhibit 3.1.
SECTION 3.2. Certificate of Incorporation and By-laws of
GHS. As of the Effective Date, the Certificate of Incorporation and By-laws of
GHS shall be in the forms attached hereto as Exhibit 3.2.
SECTION 3.3. Board of Directors; Corporate Governance.
In connection with the execution of this Agreement, certain parties will enter
into a Stockholders Agreement in substantially the form of Exhibit 3.3 hereto
(the "Stockholders Agreement"). The parties shall take such reasonable actions
as are necessary to effect the agreements set forth in the Stockholders
Agreement and this Section 3.3 as soon as practicable following the Closing,
including the appointment of a new Board of Directors of the Company as provided
in the Stockholders Agreement.
ARTICLE 4.
CERTAIN PROVISIONS RELATING TO SHARES
SECTION 4.1. Fractional Shares. Fractional shares of
GHS Preferred Stock may be issued by GHS in the Exchange. The GHS Warrants
shall not be exercisable for fractional shares of GHS Common Stock but shall be
rounded to the nearest whole share. Each CYL Member's Pro Rata Portion of the
Exchange Consideration is set forth on Schedule 4.1 hereto.
SECTION 4.2. Taking of Necessary Action; Further Action.
GHS, CYL and the CYL Members shall each take all such action as may be
necessary or appropriate in order to effectuate the Exchange as promptly as
possible, subject to all of the terms and conditions hereof. If, at any time
after the Effective Date, any further action is necessary or desirable to carry
out the purposes of this Agreement GHS, CYL and the CYL Members agree to take,
and shall take, all such action.
<PAGE>
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF CYL AND THE CYL MEMBERS
Except as set forth in the Disclosure Schedule delivered by CYL to
GHS prior to the execution of this Agreement and attached hereto (the "CYL
Disclosure Schedule"), which shall identify exceptions by specific Section
references, CYL hereby represents and warrants to GHS that:
SECTION 5.1. Organization and Qualification; No Subsidiaries. CYL is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware, 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 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, other than where the failure to be so duly organized, validly
existing and in good standing, or to have such power and authority, or to be
duly qualified and in good standing, as the case may be, would not have a CYL
Material Adverse Effect. The term "CYL Material Adverse Effect" as used in this
Agreement shall mean any event, change or effect that, individually or when
taken together with all other such events, changes or effects, would be
materially adverse to the condition (financial or otherwise), prospects,
business, properties, assets, or operations of CYL. Except as disclosed in
Section 5.1 of the CYL Disclosure Schedule, CYL has no subsidiaries. Except as
disclosed in Section 5.1 of CYL Disclosure Schedule, there are no corporations,
partnerships or joint venture arrangements or other business entities in which
CYL owns an equity interest.
SECTION 5.2. Certificate of Formation and Operating Agreement.
CYL is not in violation of any of the provisions of its Certificate of
Formation or Operating Agreement.
SECTION 5.3 Capitalization.
There are 100 Membership Units issued and outstanding,
all of which are duly subscribed for and fully paid. Except as described in
this Section 5.3 or in Section 5.3 of CYL Disclosure Schedule, as of the date
of this Agreement, no Membership Units are reserved for any other purpose.
Except as set forth in Section 5.3 of the CYL Disclosure Schedule, CYL has not
granted any options in, or any other rights to purchase, Membership Units and
there are no such options or rights
outstanding. Each CYL Member is the owner of record and beneficially of the
number of Membership Units set forth in Schedule 4.1, which total amount equal
all outstanding Membership Units. Set forth in Section 5.3 of the CYL
Disclosure Schedule is a schedule showing in sufficient detail the amounts
expended to date by Development Holdings in the organization of CYL, including
a description of the uses of such expended amounts, which schedule shall also
be updated through and delivered at the Closing.
<PAGE>
Except as set forth in Section 5.3(a) above or otherwise
contemplated hereby, as of the date of this Agreement, there are no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which CYL is a party relating to
the issued or unissued Membership Units or other securities of CYL, or
obligating CYL to grant, issue or sell any Membership Units or other securities
of CYL, by sale, lease, license or otherwise.
There are no obligations, contingent or otherwise, of CYL to (x) repurchase,
redeem or otherwise acquire any Membership Units; or (y) provide funds to, or
make any investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the obligations of CYL or
any other person. As of the date of this Agreement, CYL neither owns nor has
agreed to purchase or otherwise acquire, any capital stock of, or any interest
convertible into or exchangeable or exercisable for, any capital stock of any
corporation, partnership, joint venture or other business association or entity.
Except as set forth in Section 5.3 of CYL Disclosure Schedule, there are no
agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any person is or may be entitled to receive any
payment based on the revenues or earnings, or calculated in accordance
therewith, of CYL. There are no voting trusts, proxies or other agreements or
understandings to which CYL is a party or relating to CYL with respect to the
voting of Membership Units.
SECTION 5.4. Authority. CYL has all requisite power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. Each CYL Member has the legal
right and capacity to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by CYL and the CYL Members and the consummation
by CYL of the transactions contemplated hereby have been duly authorized by all
necessary action and no other proceedings on the part of CYL are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
The holders of Membership Units have approved and adopted this Agreement and
have approved the Exchange. This Agreement has been duly executed and delivered
by CYL and the CYL Members and, assuming the due authorization, execution and
delivery thereof by GHS, constitutes the legal, valid and binding obligation of
CYL and the CYL Members, enforceable against CYL and the CYL Members in
accordance with its terms.
SECTION 5.5. No Conflict; Business Relationships; Required
Filings and Consents.
The execution and delivery of this Agreement by CYL does
not, and the performance of this Agreement by CYL and the CYL Members will not
(i) conflict with or violate the Certificate of Formation or Operating
Agreement, in each case as amended or restated, of CYL, (ii) conflict with or
violate any federal, state, foreign or local law, statute, ordinance, rule,
regulation, order, judgment, arbitration award or decree (collectively, "Laws")
or CYL Permit (as hereinafter defined) in
effect as of the date of this Agreement and applicable to CYL or any CYL Member
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
<PAGE>
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
CYL or any CYL Member pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, order, decree, franchise or other
instrument or obligation to which CYL or any CYL Member is a party or by which
CYL or any CYL Member or any of their respective properties is bound or is
subject.
No supplier, dealer or creditor of CYL (the "Business
Relationships") has notified CYL, either orally or in writing, that such
Business Relationships may take action which is reasonably likely to materially
and adversely affect the condition (financial or otherwise), business,
properties, assets, or operations, including sales, of CYL.
The execution and delivery of this Agreement by CYL and
each CYL Member does not, and the performance of this Agreement by CYL and each
CYL Member will not require CYL or any CYL Member to obtain any consent,
approval, authorization or permit of, or to make any filing with or notification
to, any governmental or regulatory authority ("Governmental Entities").
SECTION 5.6. Permits; Compliance. CYL is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders required to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "CYL Permits"), and, to the knowledge of CYL, there
is no action, proceeding or investigation pending or threatened regarding
suspension or cancellation of any CYL Permits, except where the failure to
possess, or the suspension or cancellation of, such CYL Permits would not have a
CYL Material Adverse Effect. CYL is not in conflict with, or in default or
violation of (a) any Law, including but not limited to, Laws pertaining to the
environment, occupational safety, employment matters and licensing or (b) any of
CYL Permits, except for any such conflicts, defaults or violations which would
not have a CYL Material Adverse Effect. CYL has not received from any
Governmental Entity any written notification that CYL is in conflict with, or
has defaulted or violated any Law or CYL Permit. For purposes of Section 5.6, an
event or state of facts which would require CYL to pay for any purpose or incur
as an obligation $25,000 (or $100,000 in the aggregate) is deemed to result in a
"CYL Material Adverse Effect."
SECTION 5.7. Financial Statements. CYL and its subsidiaries
have not prepared any financial statements.
SECTION 5.8. Absence of Certain Changes or Events. Except as
set forth in Section 5.8 of the CYL Disclosure Schedule, during the period
commencing April 21, 1999 and ending on the date of this Agreement, CYL and its
subsidiaries have conducted their respective businesses only in the ordinary
course and in a manner consistent with past practice and there has not been:
(i) any material damage, destruction or loss (not covered by insurance)
------------------------------------
<PAGE>
with respect to any material assets of CYL; (ii) any declaration, setting aside
or payment of any dividends or distributions in respect of Membership Units or
any redemption, purchase or other acquisition of, or issuance or sale of, any of
CYL's securities; (iii) any increase in the benefits under, or the establishment
or amendment of, any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase or other
employee benefit plan, or any increases in the compensation payable or to become
payable to directors, officers, employees or consultants of CYL (including the
payment of any bonuses), except for increases in salaries or wages payable or to
become payable in the ordinary course of business and consistent with past
practice; (iv) sale, assignment or transfer of any material portion of its
assets, except in the ordinary course of business, or cancellation of any
material debts or claims, (v) incurring of any capital expenditures or any
commitment therefor binding upon CYL which would cause the aggregate amount of
all actual expenditures for CYL to exceed $100,000; or (vi) a CYL Material
Adverse Effect.
SECTION 5.9. Absence of Litigation. Except as disclosed in Section
5.9 of the CYL Disclosure Schedule, there is no claim, action, suit, litigation,
proceeding, arbitration or, to the knowledge of CYL, investigation of any kind,
at law or in equity (including actions or proceedings seeking injunctive
relief), pending or, to the knowledge of CYL, threatened in writing against CYL
or any properties or rights of CYL (except for claims, actions, suits,
litigations, proceedings, arbitrations, or investigations which, individually or
in the aggregate, would not reasonably be expected to have a CYL Material
Adverse Effect) nor, to the knowledge of CYL, does there exist any basis
therefor, and CYL is not subject to any continuing order of, consent decree,
settlement agreement or other similar written continuing investigation by, or
any judgment, order, writ, injunction, decree or award of, any Governmental
Entity, court or arbitrator, including, without limitation, cease-and-desist or
other orders, except for matters which, individually or in the aggregate, would
not have a CYL Material Adverse Effect. For purposes of this Section 5.9, "CYL
Material Adverse Effect" is deemed to include any claim, action, suit,
litigation, proceeding, arbitration or investigation which if decided against
CYL would require the payment of $25,000 individually and $100,000 in the
aggregate.
SECTION 5.10. Employee Matters.
Except as set forth in Section 5.10 of the CYL
Disclosure Schedule, CYL is not a party to any collective bargaining agreement,
employment agreement, retirement plans (whether qualified or non-qualified),
deferred compensation or severance (except to the extent that accrued vacation
and accrued sick days may be deemed to be severance under applicable law)
agreement, consulting or advisory agreement, confidentiality agreement or
covenant not to compete (except as set forth in this
Agreement) relating to its employees or otherwise relating to its business.
<PAGE>
CYL has complied in all material respects with all
applicable laws, rules and regulations affecting the employment of labor,
including, but not limited to, those relating to wages, hours, discrimination
and the payment of social security, withholding and similar taxes, and is not
liable for any arrears of wages or any penalties for failure to comply with any
of the foregoing. There are no controversies pending or threatened between CYL
and any of its employees, or any labor unions
or collective bargaining unit representing or purporting to represent any of its
employees.
SECTION 5.11. Taxes. CYL has accurately prepared and timely filed
all Returns (as defined in Section 12.3) which are required to be filed, except
where the time to file has been extended and has paid, or made provision for the
payment of, all Taxes (as defined in Section 12.3) which have become due
pursuant to said Returns or pursuant to any assessment which has been received
by it and except where the failure to do so would not have a CYL Material
Adverse Effect. All such Returns are true and correct in all material respects.
No Tax deficiency is outstanding against CYL.
SECTION 5.12. Tax Matters. Neither CYL nor, to the knowledge
of CYL, any of its affiliates has taken or agreed to take any action that would
prevent the Exchange from qualifying under the provisions of Section 351 of the
Code.
SECTION 5.13. No Undisclosed Liabilities. Except as set forth
in Section 5.13 of the CYL Disclosure Schedule, neither CYL nor any of its
subsidiaries has any obligation or liability (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due) involving
in excess of $25,000 in the aggregate, except liabilities under contracts or
commitments described in Section 5.15 of the CYL Disclosure Schedule (but not
liabilities for breaches thereof involving in
excess of $25,000 in the aggregate).
SECTION 5.14. Brokers. No broker, finder or investment banker
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 CYL.
SECTION 5.15. Material Contract and Absence of Defaults. Except
as listed in Section 5.15 of the CYL Disclosure Schedule
"Material Contracts"), CYL does not have outstanding:
Any single contract providing for an expenditure by CYL
in excess of $10,000 for the purchase of any real property, machinery, equipment
or other items which are in the nature of capital investment or for the purchase
of raw materials, supplies, component parts or other items which are in the
nature of inventory;
<PAGE>
Any contract, bid or offer to sell products or to
provide services to third parties which (A) is pursuant to terms or conditions
that CYL does not reasonably expect to satisfy or fulfill in its entirety, or
(B) which involves more than $10,000, or which, together with all other
contracts, bids or offers to or with the same party or any affiliates parties
involves more than $25,000;
Any lease of any personal property under which CYL is
lessor requiring aggregate annual payments in excess of $10,000;
Any revocable or irrevocable power of attorney to any
person, firm or corporation for any purpose whatsoever;
Any loan agreement, indenture, promissory note,
conditional sales agreement, guarantee or other similar type of agreement that
involves $10,000 or more; or
Any other material contract or commitment which is not
cancelable on thirty (30) or less days' notice without further obligation on the
part of CYL.
CYL has provided to GHS true, correct and complete copies of all
Material Contracts. CYL is not, nor has it received any notice that it is, or
has any knowledge that any other party is, in default in any respect under any
such Material Contract; and there has not occurred any event that with the lapse
of time or the giving of notice or both would constitute such a default. CYL's
Material Contracts comply with all applicable Laws.
SECTION 5.16. Corporate and Members Approval. The Board of
Directors of CYL, at a meeting duly called and held, has by unanimous vote of
those directors present (who constituted 100% of the Directors then in office)
or by unanimous written consent thereof, and the CYL Members, have approved the
terms of this Agreement and the transactions contemplated hereby, including the
Exchange.
SECTION 5.17. Books and Records. The books of account and other
financial records of CYL are in all material respects complete and correct, are
maintained in accordance with good business practices and all Laws applicable
to CYL. The minute books of CYL contain accurate records of all meetings, and
accurately reflect all other corporate action of the shareholders and directors
of CYL.
SECTION 5.18. Properties. Except as disclosed in Section 5.18
of the CYL Disclosure Schedule, CYL (i) has good, clear and marketable title to
all of its properties and assets which are, individually or in the aggregate,
material to CYL's business (except properties sold or otherwise disposed of
since the date thereof in the ordinary course of business), free and clear of
all liens except statutory liens securing payments of Taxes or other liens as
do not
<PAGE>
materially affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties and (ii) is the lessee of all leasehold estates reflected in Section
5.18 of the CYL Disclosure Schedule or acquired after the date thereof which are
material to its business on a consolidated basis and is in possession of the
properties purported to be leased thereunder, and each such lease is valid
without default thereunder by the lessee or, to CYL's knowledge, the lessor and
no event has occurred or fact exists which permit a lessor, now or with the
passage of time, notice or an opportunity to cure, to seek a remedy under a
lease and CYL is entitled to quiet enjoyment to its premises. CYL does not own
any real property.
SECTION 5.19 Environmental Matters. There has been no (a) release or
threatened release of any hazardous substance, pollutant or contaminant as each
such term presently is defined by the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, resulting from any activity by or on
behalf of CYL, including but not limited to, the generation, handling, storage,
treatment, transportation or disposal of any hazardous substance, pollutant or
contaminant from any location operated by CYL; (b) to the knowledge of CYL, past
or future action taken or to be taken by any federal, state or local entity or
by any private party under any federal, state or local statute, rule, regulation
or guideline concerning the release of any hazardous substance, pollutant or
contaminant into the soil, air, surface or subsurface waters or the environment
in general from any location operated by CYL; and (c) claims or actions brought
or which may be brought by any third party for damages occurring at or outside
of any location operated by CYL resulting from the alleged release or threatened
release of any hazardous substance, pollutant or contaminant by CYL or any
predecessor in interest, including but not limited to, claims for health effects
to persons, property damage and/or damage to natural resources; nor does CYL
have any knowledge of any basis for any of the foregoing.
SECTION 5.20. Intellectual Property. Except as disclosed in Section
5.20 of the CYL Disclosure Schedule, CYL has sufficient title and ownership or
other rights to all patents, trademarks, trade names, service marks, copyrights,
trade secrets and other proprietary rights ("Intellectual Property Rights")
necessary for or used in the conduct of its business as it is presently
conducted and as proposed to be conducted without any conflict with or
infringement of the rights of others. CYL has not received any communication
alleging that the Company has violated Intellectual Property Rights of any other
person or entity. CYL and each CYL Member has no knowledge of any conflicting
use of any of such Intellectual Property Rights.
SECTION 5.21. Dealings with Affiliates. Section 5.21 of the CYL
Disclosure Schedule sets forth a complete list, including the parties of all
oral or written agreements and arrangements to which CYL is, will be or has been
a party, at any time prior to the Effective Time, and to which any affiliate is
also a party ("Related Party Transaction"). All Related Party Transactions are
on terms no less favorable to CYL than what CYL could obtain on an arms' length
basis from an unrelated party.
<PAGE>
SECTION 5.22. Insurance. Through the Closing Date, CYL will
have adequate insurance contracts or policies in full force and effect which
provide for coverages that are usual and customary as to the amount and scope
in the business of CYL, except where failure to have such insurance policies or
contracts would not have a CYL Material Adverse Effect.
SECTION 5.23. Disclosure. No representation or warranty of CYL
in this Agreement or any document, certificate or statement issued in
connection herewith contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements contained
herein and therein, in the light of the circumstances in which they were made,
not misleading.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF GHS
Except as set forth in the Disclosure Schedule delivered by GHS to
CYL prior to the execution of this Agreement and attached hereto (the "GHS
Disclosure Schedule"), which shall identify exceptions by specific Section
references, GHS hereby represents and warrants to CYL that:
SECTION 6.1. Organization and Qualification; Subsidiaries. Each of
GHS and its subsidiaries is a corporation duly incorporated, 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 GHS
and each subsidiary 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, other
than where the failure to be so duly organized, validly existing and in good
standing, or to have such power and authority, or to be duly qualified and in
good standing, as the case may be, would not have an GHS Material Adverse
Effect. The term "GHS Material Adverse Effect" as used in this Agreement shall
mean any event, change or effect that, individually or when taken together with
all other such events, changes or effects, would be materially adverse to the
condition (financial or otherwise), prospects, business, properties, assets or
operations of GHS and its subsidiaries, taken as a whole. Disclosed in Section
6.1 of GHS Disclosure Schedule are all corporations, partnerships or joint
venture arrangements or other business entities in which GHS owns an equity
interest.
SECTION 6.2. Certificate of Incorporation and By-Laws. GHS has
heretofore furnished to CYL complete and correct copies of the Certificate of
Incorporation and By-Laws, as amended or restated, of GHS. GHS is not in
violation of any of the provisions of its Certificate of Incorporation or
By-Laws.
<PAGE>
SECTION 6.3. Capitalization. As of the date of this Agreement, the
authorized capital stock of GHS consists of (a) 25,000,000 shares of GHS Common
Stock and (b) 1,000,000 shares of preferred stock, par value $.01 per share
("GHS Preferred Shares"). As of date hereof: (i) 6,979,160 shares of GHS 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, GHS's Certificate of Incorporation or By-Laws or any
agreement to which GHS is a party or is bound; (ii) no shares of GHS Common
Stock were held in treasury and (iii) 659,000 shares of GHS Common Stock were
reserved for future issuance pursuant to outstanding stock options and warrants
issued to certain officers, employees, directors and other persons. Except as
set forth in Section 6.3 of the GHS Disclosure Schedule, as of the date of this
Agreement, there are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any character
to which GHS is a party relating to the issued or unissued capital stock or
other securities of GHS, or obligating GHS to grant, issue or sell any capital
stock or other securities of GHS, by sale, lease, license or otherwise. As of
the date of this Agreement, no GHS Preferred Shares were issued and outstanding.
Each of the outstanding shares of capital stock of, or other equity interests
in, each of GHS's subsidiaries is duly authorized and validly issued and, if
applicable, fully paid and nonassessable. The shares of GHS Preferred Stock to
be issued pursuant to the Exchange have been duly authorized and, when issued in
accordance with the Exchange, will be validly issued, fully paid and
nonassessable, provided that GHS and CYL are aware that GHS does not have
sufficient number of authorized unissued shares of GHS Common Stock for issuance
upon the conversion of all of the GHS Preferred Stock. The GHS Warrants to be
issued pursuant to the Exchange will, prior to the Closing, have been duly
authorized and, when the GHS Warrants are exercised in accordance with the terms
thereof, the shares of Common Stock issuable upon exercise thereof will be
validly issued, fully paid and nonassessable.
SECTION 6.4. Authority. GHS 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 by GHS and the consummation by GHS of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no other corporate proceedings on the part of GHS are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by GHS
and, assuming the due authorization, execution and delivery thereof by CYL,
constitutes a legal, valid and binding obligation of GHS enforceable against GHS
in accordance with its terms.
SECTION 6.5. No Conflict; Required Filings and Consents.
The execution and delivery of this Agreement by GHS does
not, and the performance of this Agreement by GHS and the consummation of the
transactions contemplated hereby will not (i) conflict with or violate the
Certificate of Incorporation or By-Laws, or the equivalent organizational
documents, in each case as amended or restated, of GHS
<PAGE>
or any of GHS's subsidiaries, (ii) conflict with or violate any Laws or GHS
Permits (as hereafter defined) applicable to GHS or any of GHS's subsidiaries 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 result in the
creation of a lien or encumbrance on any of the properties or assets of GHS or
any of GHS's subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, order, decree, franchise or other
instrument or obligation to which GHS, or any of GHS's subsidiaries is a party
or by which GHS or any of GHS's subsidiaries or any of their respective
properties is bound or subject to, except for any such conflicts or violations
described in clause (ii) or breaches, defaults, events, rights of termination,
amendment, acceleration or cancellation or liens or encumbrances described in
clause (iii) that would not have an GHS Material Adverse Effect.
The execution and delivery of this Agreement by GHS and
the consummation by GHS of the transactions contemplated hereby do not, and the
performance of this Agreement by GHS will not require GHS to obtain any consent,
approval, authorization or permit of, or to make any filing with or notification
to, any Governmental Entities, except, with respect to the USN Spin-off
contemplated by Section 7.3(c) and the change in the members of the Board of
Directors pursuant to Section 3.3, for
applicable requirements, if any, of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), state securities or blue sky laws ("Blue Sky Laws").
SECTION 6.6. Permits; Compliance. Each of GHS and its subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, identification
numbers, approvals and orders (collectively, the "GHS Permits") necessary to
own, lease and operate its properties and to carry on its business as it is now
being conducted, and there is no action, proceeding or investigation pending or,
to the knowledge of GHS, threatened regarding suspension or cancellation of any
of the GHS Permits, except where the failure to possess, or the suspension or
cancellation of, such GHS Permits would not have an GHS Material Adverse Effect.
Neither GHS nor any of its subsidiaries is, or has been since January 1, 1996,
in conflict with, or in default or violation of (a) any Law by which any of them
or any of their respective properties is bound or subject to or (b) any of the
GHS Permits, except for any such conflicts, defaults or violations which would
not have an GHS Material Adverse Effect.
SECTION 6.7. GHS Reports; Financial Statements.
Since January 1, 1996, GHS and its subsidiaries have
timely filed (i) all forms, reports, statements and other documents required to
be filed with (A) the SEC, including, without limitation (1) all Annual Reports
on Form 10-K, (2) all Quarterly Reports on Form 10-Q, (3) all proxy statements
relating to meetings of stockholders (whether annual or special), (4) all
Current Reports on Form 8-K, (5) all other reports or registration
<PAGE>
statements and (6) all amendments and supplements to all such reports and
registration statements (collectively, the "GHS SEC Reports") and (B) any other
applicable state securities authorities and (ii) all forms, reports, statements
and other documents required to be filed with any other applicable federal or
state regulatory authorities, except where the failure to file any such forms,
reports, statements or other documents would not have an GHS Material Adverse
Effect (all such forms, reports, statements and other documents in clauses (i)
and (ii) of this Section 6.7(a) being referred to herein, collectively, as the
"GHS Reports"). The GHS Reports, including all GHS Reports filed after the date
of this Agreement and prior to the Effective Date (x) were or will be prepared
in all material respects in accordance with the requirements of applicable Law
(including, with respect to the GHS SEC Reports, the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations of the
Securities and Exchange Commission ("SEC") thereunder applicable to such GHS SEC
Reports) and (y) did not at the time they were filed, or will not at the time
they are filed, contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the GHS SEC
Reports filed prior to, on or after the date of this Agreement (i) have been or
will be prepared in accordance with the published rules and regulations of the
SEC and generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except, with respect to GHS SEC Reports filed
prior to the date of this Agreement, as may
be indicated in the notes thereto) and (ii) fairly present or will fairly
present the consolidated financial position of GHS and its subsidiaries as of
the respective dates thereof and the consolidated results of operations and 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.
Except as disclosed in the GHS SEC Reports filed prior
to the date of this Agreement, as contemplated by this Agreement and as
disclosed in Section 6.8 of the GHS Disclosure Schedule, since December 31,
1998, GHS and its subsidiaries have conducted their respective businesses only
in the ordinary course and in a manner consistent with past practice and there
has not been: (i) any material damage, destruction or loss (not covered by
insurance) with respect to any material assets of
GHS or any subsidiary; (ii) any declaration, setting aside or payment of any
dividends or distributions in respect of GHS Common Stock or any redemption,
purchase or other acquisition of, or issuance or sale of, any of GHS's
securities; (iii) any increase in the benefits under, or the establishment or
amendment of, any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option, stock purchase or other employee
benefit plan, or any increases in the compensation payable or to become payable
to directors, officers, employees or consultants of GHS (including the
<PAGE>
payment of any bonuses), except for increases in salaries or wages payable or to
become payable in the ordinary course of business and consistent with past
practice; (iv) sale, assignment or transfer of any material portion of its
assets, except in the ordinary course of business, or cancellation of any
material debts or claims; or (v) a GHS Material Adverse Effect
SECTION 6.8. Absence of Litigation. Except as disclosed in the GHS
SEC Reports filed prior to the date of this Agreement, there is no claim,
action, suit, litigation, proceeding, arbitration or, to the knowledge of GHS,
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the knowledge of GHS, threatened in
writing against GHS or any of its subsidiaries or any properties or rights of
GHS or any of its subsidiaries (except for claims, actions, suits, litigations,
proceedings, arbitrations or investigations which, individually or in the
aggregate, would not reasonably be expected to have an GHS Material Adverse
Effect), and neither GHS nor any of its subsidiaries is subject to any
continuing order of, consent decree, or, to the knowledge of GHS, continuing
investigation by, or any judgment, order, writ, injunction, decree or award of,
any Governmental Entity, court or arbitrator, including, without limitation,
cease-and-desist or other orders, except for such matters which would not
reasonably be expected to have an GHS Material Adverse Effect.
SECTION 6.9. Tax Matters. To the knowledge of GHS,
neither GHS nor any of its affiliates has taken or agreed to take any action
that would prevent the Exchange from constituting a tax free transaction
qualifying under the provisions of Section 351 of the Code.
----------
SECTION 6.10. Taxes. Except for such matters that would not have an
GHS Material Adverse Effect and except as disclosed in Section 6.10 of the GHS
Disclosure Schedule, (a) GHS and its subsidiaries have timely filed or will
timely file all Returns or reports required to be filed by any of them with any
taxing authority with respect to Taxes for any period ending on or before the
Effective Date, taking into account any extension of time to file, granted to or
obtained on behalf of GHS or its subsidiaries, (b) such Returns and reports are
true and correct, (c) all Taxes shown to be payable on such Returns or reports
and all other Taxes of GHS or any of its subsidiaries that are due prior to the
Effective Date have been paid or will be paid when due, (d) as of the date
hereof, no deficiency for any Tax of a material amount has been asserted or
assessed by a taxing authority against GHS or its subsidiaries, (e) all
liability for Taxes of GHS or its subsidiaries that are or will become due or
payable with respect to periods or partial periods covered by the financial
statements referred to in Section 6.7(b) hereof have been timely paid or are
being contested in good faith and are adequately reserved for on such financial
statements and (f) no Tax Return or reports of GHS or any of its subsidiaries
have been or are under current or pending examination and neither GHS nor any of
its subsidiaries has received notice of any threatened examination. GHS has been
with its subsidiaries a member of a group filing consolidated or combined
Returns. Neither GHS nor any subsidiary has any liability for Taxes of any other
person under Treasury regulations section 1.1502-6, as a transferee or
successor, by contract or otherwise.
<PAGE>
SECTION 6.11. Brokers. Except as set forth in Section 6.11
of the GHS Disclosure Schedule, no broker, finder or investment banker 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 GHS.
-------
SECTION 6.12. Books and Records. The books of account and
other financial records of GHS and its subsidiaries are in all material
respects complete and correct, are maintained in accordance with good
business practices and all Laws applicable to GHS, and are accurately
reflected in the consolidated financial statements of GHS contained in the
GHS SEC Reports. The minute books of GHS contain accurate records of all
meetings, and accurately reflect all other corporate action of the
-----------------
shareholders and directors of GHS.
SECTION 6.13. No Undisclosed Liabilities. To the knowledge of
GHS, there are no liabilities of GHS or any of its subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinabl
or otherwise, other than:
--------------------------
Liabilities disclosed or provided for in the
consolidated financial statements contained in the GHS SEC Reports; and
Liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1998.
SECTION 6.14. Related Party Transactions. Except as disclosed
in the GHS SEC Reports filed prior to the date of this Agreement, since January
1, 1996 there have been no oral or written agreements, arrangements or
transactions between GHS or any of its subsidiaries on the one hand, and
any affiliate of GHS or any of its subsidiaries on the other hand ("GHS
Related Party Transactions"). All GHS Related Party Transactions are on
terms no less favorable to GHS than what GHS could obtain on
--------------------------
an arms' length basis from an unrelated party
SECTION 6.15. Disclosure. To the knowledge of GHS, no
representation or warranty of GHS in this Agreement or in any document,
certificate or statement issued in connection herewith contains any untrue
statement of a material fact, or omits to state any material fact necessary
in order to make the statements contained herein and therein in light of the
circumstances in which they were made, not misleading.
----------
<PAGE>
ARTICLE 7.
COVENANTS
SECTION 7.1. Affirmative Covenants of CYL.
CYL hereby covenants and agrees that, during the period
commencing on the date hereof and continuing until the Effective Time unless
otherwise expressly contemplated by this Agreement or consented to in writing by
GHS, it will:
operate its business only in the usual and ordinary
course consistent with past practices;
use its best efforts to preserve substantially intact its
business organizations, maintain its rights and franchises, retain the services
of its respective officers and key employees and maintain its relationships with
its respective customers and suppliers, and otherwise operate its business in a
manner that breaches no Material Contract (as defined);
use its best efforts to maintain and keep its business
relationships intact and unimpaired, and its properties and assets in as good
repair and condition as at present, ordinary wear and tear excepted;
use its best efforts to keep in full force and effect
insurance comparable in amount and scope of coverage that is usual and
customary for businesses of the type in which CYL is engaged, except where
failure to have such insurance would not have a CYL Material Adverse
Effect; provided, however, that in the event CYL deems it necessary to
take certain actions that would otherwise be proscribed by clauses (i) -
(iv) of this Section 7.1, CYL shall consult with GHS which shall consider
in good faith CYL's request to take such action and not unreasonably
withhold its consent for such action; and
promptly advise GHS of the commencement or threat (to the
extent that such threat comes to its knowledge) of any claim, action, suit,
proceeding or investigation against, relating to or involving it or any of its
directors, officers, employees, agents or consultants in connection with its
business or the transactions contemplated hereby.
CYL will make its membership records and lists available
to the extent reasonably necessary to effectuate the intent of this Agreement.
<PAGE>
SECTION 7.2. Negative Covenants of CYL. Except as
expressly contemplated by this Agreement, or otherwise consented to in writing
by GHS, from the date of this Agreement until the Effective Date, CYL will no
do any of the following:
-------------------------
(i) Increase the compensation payable to or to become
payable to any director or officer (by making a bonus payment or otherwise),
(ii) grant any severance or termination pay (other than pursuant to the normal
severance policy of CYL or its subsidiaries as in effect on the date of this
Agreement and disclosed in writing to GHS) to, or enter into any employment or
severance agreement with, any director, officer or employee (other than on a
case by case basis with a limited number of
employees who are not directors or officers and in no event with employees
generally and other than employment agreements entered into with the consent of
GHS, which consent shall not be unreasonably withheld); or (iii) establish,
adopt, enter into or amend any employee benefit plan or arrangement except as
may be required by applicable Law;
Declare or pay any distribution in respect of
outstanding Membership Units;
(i) Redeem, purchase or otherwise acquire any Membership
Units or any securities or obligations convertible into or exchangeable for any
Membership Units, or any options, warrants or conversion or other rights to
acquire any Membership Units or any such securities or obligations; (ii) effect
any reorganization or recapitalization; or (iii) split, combine or reclassify
any of its or its respective subsidiaries' securities or issue or authorize or
propose the issuance of any other
securities in respect of, in lieu of or in substitution for, its securities;
(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 Membership Units or other securities, any
securities convertible into or exercisable or exchangeable for any such shares,
or any rights, warrants or options to acquire, any such Membership Units; or
(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;
acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or 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 and consistent with
past practice);
<PAGE>
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 other than in the ordinary
course of business;
propose or adopt any amendments to its Certificate o
Formation or, as to its Operating Agreement, any amendments except as
contemplated hereby;
change any of its methods of accounting in effect, or
make or rescind any express or deemed 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 $25,000);
incur any obligation for borrowed money or purchase
money indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except in the ordinary course of business consistent with
past practice, provided that CYL informs GHS promptly of any increases in
borrowings;
enter into any material arrangement, agreement or
contract with any third party (other than customers in the ordinary course of
business) which provides for an exclusive arrangement with that third party or
is substantially more restrictive on CYL or substantially less advantageous to
CYL than arrangements, agreements or contracts existing on the date hereof; or
agree in writing or otherwise to do any of the foregoing.
SECTION 7.3. Affirmative Covenants of GHS.
GHS hereby covenants and agrees that, during the period
commencing on the date hereof and continuing until the Effective Time unless
otherwise expressly contemplated by this Agreement or consented to in writing by
CYL, it will:
operate its business and otherwise take any actions only
in the usual and ordinary course consistent with past practices;
use its best efforts to preserve substantially intact its
business organizations, maintain its rights and franchises, retain the services
of its respective officers and key employees and maintain its relationships with
its respective customers and suppliers, and otherwise operate its business in a
manner that breaches no Material Contract (as defined);
<PAGE>
use its best efforts to maintain and keep its business
relationships intact and unimpaired, and its properties and assets in as good
repair and condition as at present, ordinary wear and tear excepted;
use its best efforts to keep in full force and effect
insurance comparable in amount and scope of coverage to that currently
maintained; provided, however, that in the event GHS deems it necessary to take
certain actions that would otherwise be proscribed by clauses (i) - (iv) of this
Section 7.3, GHS shall consult with CYL which shall consider in good faith GHS's
request to take such action and not unreasonably withhold its consent for such
action; and
promptly advise CYL of the commencement or threat (to the
extent that such threat comes to its knowledge) of any claim, action, suit,
proceeding or investigation against, relating to or involving it or any of its
directors, officers, employees, agents or consultants in connection with its
business or the transactions contemplated hereby.
GHS will make its stock transfer records and stockholder
lists available to the extent reasonably necessary to effectuate the intent of
this Agreement.
GHS will effect the spin-off to its stockholders of the
assets and liabilities of its gamma-knife stereotactic radiosurgery business
presently conducted by its wholly-owned subsidiary, U.S. NeuroSurgical, Inc.
("USN", and such spin-off, the "USN Spin-off"). GHS expects that the USN
Spin-off will be effected with a record date prior to the Effective Time.
The USN Spin-off will be effected in the form of a dividend of GHS's shares
in USN or shares of another wholly owned subsidiary
of GHS into which USN will be transferred (the "USN Spin-off Shares"). As
promptly as practicable after the execution of this Agreement, GHS shall prepare
and file with the SEC a Registration Statement relating to the USN Spin-off
registering the issuance of the USN Spin-off Shares under the Securities Act
(or, if permitted under applicable law, an Information Statement and Form 10
under the Exchange Act) and such other documents required pursuant to the
Securities Act, the Exchange Act and the rules and regulations thereunder to
effect the USN Spin-off (collectively, the "Spin-off SEC Filings"). GHS (i)
shall cause the Spin-off SEC Filings to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange Act
and the rules and regulations thereunder, (ii) shall use commercially reasonable
efforts to have the USN Spin-off effected as promptly as practicable, and (iii)
shall take all or any action required under any applicable federal or state
securities laws in connection with the USN Spin-off. GHS, CYL and the CYL
Members shall furnish to the other all information concerning GHS, CYL and the
CYL Members as may be reasonably required in connection with the preparation of
the documents referred to herein.
In connection with the USN Spin-off and prior to the
Effective Time, GHS will obtain the release of GHS from the corporate guaranties
(the "Guaranties") delivered by GHS (and any security interest thereby created)
in favor of DVI Financial Services, Inc. originally issued in connection with
equipment financings by USN.
<PAGE>
SECTION 7.4. Negative Covenants of GHS. Except as disclosed
in Section 7.4 of the GHS Disclosure Schedule, expressly contemplated by this
Agreement or otherwise consented to in writing by CYL, from the date of this
Agreement until the Effective Time, GHS will not do, and will not permit any
of its subsidiaries to do, any of the following:
-------------------------
(i) Increase the compensation payable to or to become
payable to any director or officer (by making a bonus payment or otherwise),
(ii) grant any severance or termination pay (other than pursuant to the normal
severance policy of GHS or its subsidiaries as in effect on the date of this
Agreement and disclosed in writing to CYL) to, or enter into any employment or
severance agreement with, any director, officer or employee (other than on a
case by case basis with a limited number of
employees who are not directors or officers and in no event with employees
generally and other than employment agreements entered into with the consent of
CYL, which consent shall not be unreasonably withheld); or (iii) establish,
adopt, enter into or amend any employee benefit plan or arrangement except as
may be required by applicable Law;
amend any of the material terms or provisions of the
GHS Preferred Stock;
declare or pay any cash dividend on outstanding shares
of its capital stock;
(i) Redeem, purchase or otherwise acquire any shares of
its capital stock or equity interest or any securities or obligations
convertible into or exchangeable for any shares of its capital stock or equity
interest, or any options, warrants or conversion or other rights to acquire any
shares of its capital stock or any such securities or obligations; (ii) effect
any reorganization or recapitalization; or (iii) split, combine or reclassify
any of its or its respective 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
capital stock;
(i) issue, deliver, award, grant or sell, or authorize
or propose the issuance, delivery, award, grant or sale (including the grant of
any security interests, liens, claims, pledges, limitations in voting rights,
charges or other encumbrances) of, any shares of any class of its capital stock
or other securities (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any such shares, or any
rights, warrants or options to acquire, any
such shares, except for issuance pursuant to options, warrants or other
commitments outstanding on the date hereof; or (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;
<PAGE>
acquire or agree to acquire or be acquired, by merging
or consolidating with, by purchasing an equity interest in or a portion of the
assets of, or by any other manner, any business or 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
and consistent with past practice and
other than the Concept Transactions described in Section 8.4 hereof);
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 other than in the ordinary
course of business and in connection with the USN Spin-off;
propose or adopt any amendments to its Certificate of
Incorporation or, as to its By-Laws, any amendments except as contemplated
hereby;
change any of its methods of accounting in effect, or
make or rescind any express or deemed 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 $25,000) ;
incur any obligation for borrowed money or purchase
money indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except in the ordinary course of business consistent with
past practice, provided that GHS informs CYL promptly of any increases in
borrowings;
enter into any material arrangement, agreement or
contract with any third party (other than customers in the ordinary course of
business) which provides for an exclusive arrangement with that third party or
is substantially more restrictive on GHS or substantially less advantageous to
GHS than arrangements, agreements or contracts existing on the date hereof; or
agree in writing or otherwise to do any of the foregoing.
SECTION 7.5. Access and Information. Each of CYL and GHS shall: (i)
afford to other party and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively, the
"Representatives") access upon reasonable prior notice to its officers,
employees, agents, properties, offices and other facilities and its subsidiaries
and to the books and records thereof; and (ii) furnish promptly to the other
party and its Representatives such information concerning the business,
properties, contracts, records and personnel of it and its subsidiaries
(including, without limitation, financial, operating and other data and
information) as may be requested, from time to time, by the other party.
<PAGE>
SECTION 7.6 Confidentiality.
Except as may be necessary to carry out this Agreement and
the transactions contemplated hereby, each of GHS and CYL shall, and shall
require their respective officers, directors, employees and authorized
representatives to, hold in confidence prior to the Effective Time and for two
years from any termination of this Agreement all data and information obtained
by them from the other party (unless required to disclose such information by
judicial or administrative process, as
otherwise required by Law, or unless such information (i) is or becomes
generally available to the public other than as a result of a disclosure by such
party, any subsidiary of such party or any of their authorized representatives,
(ii) is independently acquired or developed by such party, any subsidiary of
such party or any of their representatives, or (iii) is or becomes available to
such party, any subsidiary of such party or any of their authorized
representatives from a source other than the other party, provided that such
source is not known to be bound by a confidentiality agreement with the other
party or by any other legal, contractual or fiduciary duty not to disclose such
information) and shall not, and shall use reasonable efforts to cause such
officers, directors, employees and authorized representatives not to, disclose
such information to others without the prior written consent of the other party.
If this Agreement is terminated, each of GHS and CYL
shall, if so requested by the other party, promptly return every document
furnished to them or their affiliates in connection with the transactions
contemplated hereby and any copies of such documents that may have been made and
shall use reasonable efforts to cause the representatives to whom such documents
were furnished promptly to return such documents and any copies of such
documents, other than documents filed with the SEC
or otherwise publicly available.
ARTICLE 8.
ADDITIONAL AGREEMENTS
SECTION 8.1. Appropriate Action; Consents; Filings.
CYL and GHS shall each use their 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 as
promptly as practicable, (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by GHS or CYL
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 Exchange, (iii) make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Exchange (including the USN Spin-off required by Section
7.3(c)) required under (A) the Securities Act and the Exchange Act and the rules
and regulations thereunder, and
<PAGE>
any other applicable federal or state securities laws, (B) the Hart-Scott-Rodino
Act ("HSR Act") and (C) any other applicable Law; provided that GHS and CYL
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, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
CYL and GHS 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.
Each of CYL and GHS agree to cooperate and use their
best efforts vigorously to contest and resist any action, including
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (an "Order") that is in effect and that restricts,
prevents or prohibits the consummation of the Exchange or any other transactions
contemplated by this Agreement, including, without
limitation, by vigorously pursuing all available avenues of administrative and
judicial appeal; provided, however, that in no event shall either party take, or
be required to take, any action that would have a CYL or an GHS Material Adverse
Effect.
Each of CYL and GHS shall give (or shall cause their
respective subsidiaries to give) any notices to third parties, and use, and
cause their respective subsidiaries to use, its best efforts to obtain any
third party consents: (i) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement; (ii) disclosed or required to
be disclosed in the CYL Disclosure Schedule or the GHS Disclosure Schedule,
as the case may be; (iii) otherwise required under any
contracts, licenses, leases or other agreements in connection with
the
consummation of the transactions contemplated herein; or (iv) required to
prevent a CYL Material Adverse Effect from occurring prior to or after the
Effective Time or an GHS Material Adverse Effect from occurring prior to or
after the Effective Time.
In the event that either party shall fail to obtain any
third party consent described in subsection (c) 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 CYL and GHS, their respective
subsidiaries, and their respective businesses resulting, or which could
reasonably be expected to result, after the Effective Date, from the failure to
obtain such consent.
SECTION 8.2. Stockholders; Tax Treatment. CYL will advise its
members of the resale restrictions imposed by federal securities laws on the
shares of GHS Preferred Stock and any GHS Warrants received by them pursuant to
the Exchange, and the shares of GHS Common Stock issuable upon conversion of the
GHS Preferred Stock or exercise of the GHS Warrants. Each party hereto shall use
its best efforts to cause the Exchange to qualify, and will not take any actions
which could prevent the Exchange from qualifying under the provisions of Section
351 of the Code.
<PAGE>
SECTION 8.3. Public Announcements. Unless otherwise
required by applicable Law or stock exchange requirements (and in that event
only if time does not permit), GHS and CYL shall consult with each other before
issuing any press release or otherwise making any public statements with
respect to the Exchange and the transactions contemplated thereby and
shall not issue any such press release or make any such public statement
prior to such consultation.
--------------------
SECTION 8.4. Transactions with Concept Development, etc.
GHS and CYL acknowledge that GHS had entered into two Letters of Intent
(the "LOI's") each dated April 13, 1999 with Concept and with Seligman/Greer
Communication Resources, Inc. each attached as Exhibit 8.4 hereto relating,
among other things, to the proposed acquisition by GHS of Concept on the terms
and conditions set forth therein. Notwithstanding anything contained in this
Agreement, GHS shall be permitted to consummate
------------------------------------------
the transactions contemplated in the LOI's on substantially the terms described
in the LOI's (the "Concept Transactions") without the consent of CYL. The
consummation of the Concept Transactions shall not be deemed to result in a
GHS Material Adverse Effect.
SECTION 8.5. Robbins' Approval Rights. Following the
Effective Time, the parties agree to the following:
------------------------
(a) During the term of the Content Provider Agreement
and License referred to in Section 9.1(f) and notwithstanding the terms thereof,
Robbins will have the right to approve the general look, feel and functionality
of the Change Your Life Site and any substantial modifications thereto; provided
that such approval is timely given in accordance with the production policies
and schedules reasonably established by CYL. CYL will submit to Robbins a
request in writing for approval of
the initial general look, feel and functionality of the Change Your Life Site
and any modifications thereto. Said decision shall be communicated directly
by Robbins in writing, and not through his intermediaries, to CYL's Chief
Executive Officer, Chief Operating Officer or their designee. If Robbins
elects not to approve said request, then Robbins will indicate in writing
the specific reasons why said approval is denied. If Robbins is unable to
respond to approval requests presented to him under this
Section 8.5 in accordance with the production policies and schedules
reasonably established by CYL, the CYL Chief Executive Officer, Chief
Operating Officer or their designee may proceed with such look, feel and
functionality of the Change Your Life Site and any modifications thereto.
(b) (i) Prior to offering or soliciting any offers, or
accepting any unsolicited offers, with respect to any new or any extensions of
existing non-Internet marketing or distribution agreements or arrangements
(other than the existing arrangements with Guthy-Renker and successors thereto
with respect to infomercials and the QVC channel) for Robbins Group Content or
Robbins Group Products, as those terms are defined in the Content Provider
Agreement and License Agreement referred in
Section 9.1(f) ("Distribution Rights") which agreements or arrangements can
reasonably be anticipated by the Robbins Group to generate
<PAGE>
annual gross revenues of at least $1,500,000, the Robbins Group shall give prior
written notice of such offers to CYL, together with such additional information
as is necessary, or reasonably requested by CYL, to evaluate such proposed
offers (the "Offer Notice"). The Offer Notice shall constitute an invitation to
CYL to submit a proposal to obtain the Distribution Rights that are the subject
of the Offer Notice.
(ii) Upon receipt of an Offer Notice pursuant to Section
6(a) above, CYL shall have a period of 10 business days (the "Offer Period")
within which to submit a proposal (each, a "Proposal") to the Robbins Group to
acquire the Distribution Rights that are the subject of such Offer Notice. The
Robbins Group shall give due consideration to evaluate the Proposal in light of
its economic terms and conditions and the ability of CYL to perform the tasks
envisioned and respond promptly to
the Proposal.
(iii) If the Robbins Group accepts the Proposal, the
Robbins Group and CYL shall each use commercially reasonable efforts to
consummate the transaction in accordance with such Proposal as promptly as
practicable.
(iv) If the Robbins Group in its sole discretion rejects
the Proposal or if CYL fails to submit a Proposal during the Offer Period, the
Robbins Group shall be free to enter into an agreement for the Distribution
Rights that are the subject of the Offer Notice in any manner and with any
Person.
SECTION 8.6. GHS Charter Amendment. Promptly following the Effective
Time, GHS shall take such action as is necessary to amend its Certificate of
Incorporation in order to increase the number of authorized shares of GHS Common
Stock to allow the conversion of all of the issued GHS Preferred Stock and
exercise of all of the GHS Warrants. The parties acknowledge that there is
currently an insufficient number of authorized unissued shares of GHS Common
Stock to allow such conversion and exercise and that such amendment to the GHS
Certificate of Incorporation is not a condition to Closing.
SECTION 8.7. GHS Board of Directors. Promptly
following the Effective Time, GHS shall take all actions that are necessary
to reconfigure the GHS Board of Directors in accordance with the provisions
of the By-laws attached hereto as Exhibit 3.2 and in accordance with the
Stockholders Agreement as provided in Section 3.3 and, in connection therewith,
shall take all actions required to be taken pursuant to Rule 14f-1 of the
Exchange Act.
----------------------
<PAGE>
ARTICLE 9.
CLOSING CONDITIONS
SECTION 9.1. Conditions to Obligations of Each Party
Under This Agreement. The respective obligations of each party to effect the
Exchange 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.
<PAGE>
Registration Rights Agreement. GHS and the CYL Members
will have entered into a Registration Rights Agreement in the form attached
hereto as Exhibit 9.1(i).
SECTION 9.2. Additional Conditions to Obligations of GHS.
The obligations of GHS to effect the Exchange and the other transactions
contemplated herein are also subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions (any of which may be waived
by GHS in its sole discretion):
-------------------------------------------
Representations and Warranties. Each of the
representations and warranties of CYL contained in this Agreement shall be
true and correct as of the Effective Date (without regard to any materiality,
CYL Material Adverse Effect or similar qualifications thereto), as though mad
on and as of the Effective 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, provided that if the aggregate effect of
breaches of such representations and warranties of CYL does
not result in a CYL Material Adverse Effect or materially adversely affect the
transactions contemplated hereby, this condition shall be deemed satisfied.
Agreements and Covenants. CYL shall have performed or
complied with all agreements and covenants required by this Agreement to be
performed or complied with by it, in all material respects, on or prior to
the Effective Date.
------------------------
No Liabilities of CYL. A the Effective Time, there shall
be no liabilities at CYL, other than its obligations under the Content Provider
Agreement or for Expenses which shall be borne by Development Holdings pursuant
to Section 10.5(a) and except as otherwise agreed to by GHS.
Certificates. GHS shall have received such certificates
from officers and representatives of CYL as it shall have reasonably requested.
SECTION 9.3. Additional Conditions to Obligations of CYL
The obligations of CYL to effect the Exchange and the other transactions
contemplated in this Agreement are also subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions (any of which
may be waived by CYL in its sole discretion):
---------------------------------------
- ----
Representations and Warranties. Each of the
representations and warranties of GHS contained in this Agreement shall
be true and correct as of the Effective Date (without regard to any
materiality, GHS Material Adverse Effect or similar qualifications thereto),
as though made on and as of the Effective 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, provided
that if the aggregate effect of breaches of such
<PAGE>
representations and warranties of GHS does not result in a GHS Material Adverse
Effect or materially adversely affect the transactions contemplated hereby, this
condition shall be deemed satisfied.
Agreements and Covenants. GHS shall have performed or
complied with all agreements and covenants required by this Agreement to be
performed or complied with by it, in all material respects, on or prior to th
Effective Date.
------------------------
Releases from Guaranties. GHS shall have been released
from the Guaranties and all security interests or other liens therefor.
GHS Working Capital. At the Effective Time, GHS shall
have at least $3,000,000 in cash or cash equivalents in its bank or other
accounts (less amounts advanced relating to CYL's operations, including amounts
paid relating to a new New York City rental property, and less the expenses,
including legal fees, and consideration payable in connection with the
acquisition and funding contemplated by the Concept Transactions), free and
clear of all liens or encumbrances, provided that such
$3,000,000 amount, as the same may be reduced, shall be exclusive of the net
proceeds to the Company from the New Financing.
USN Spin-off. GHS shall have authorized the USN
Spin-off in accordance with the provisions of Section 7.3(c). In addition,
all operating assets and all liabilities of any type of GHS and it
subsidiaries (other than USN) shall have been transferred to USN in
anticipation of the USN Spin-off, and at the Effective Time there shall
be no other liabilities at GHS or its subsidiaries (other than USN) except
liabilities contemplated by this Agreement, including any fees and expenses
- ------------------------------------
payable by GHS in consummating the transactions contemplated by this Agreement,
liabilities resulting from Concept Transactions and as otherwise agreed to by
the CYL Members. GHS and USN shall have entered into such agreements concerning
the allocation of assets and liabilities between them, indemnification and such
other matters as shall be reasonably acceptable to GHS and the CYL Members.
Tax Matters. The CYL Members shall be satisfied, in
their reasonable judgment, that the transactions contemplated hereby in their
entirety would qualify as a tax-free transaction under Section 351 or other
relevant sections of the Code.
Amendment to GHS's By-Laws. GHS shall take such actions
as are necessary to amend and restate its By-Laws in the form referred to in
Section 3.2.
--------------------------
Certificates. CYL shall have received such certificates
from officers and representatives of GHS as it shall have reasonably requested.
<PAGE>
ARTICLE 10.
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1. Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval of this
Agreement and the Exchange by the stockholders of each of GHS and members of
CYL:
-----------
by mutual consent of GHS and the CYL Members;
by GHS, upon a breach of any representation, warranty,
covenant or agreement on the part of CYL or the CYL Members set forth in this
Agreement, or if any representation or warranty of CYL or the CYL Members shall
have become untrue, in either case such that the conditions set forth in Section
9.2(a) or Section 9.2(b) would not be satisfied;
by the CYL Members, upon breach of any representation,
warranty, covenant or agreement on the part of GHS set forth in this Agreement,
or if any representation or warranty of GHS shall have become untrue, in either
case such that the conditions set forth in Section 9.3(a) or Section 9.3(b)
would not be satisfied;
by either GHS or the CYL Members, if there shall be any
Order which is final and nonappealable preventing the consummation of the
Exchange, except if the party relying on such Order has not complied with its
obligations under Section 8.1(b);
by either GHS or the CYL Members, if the Exchange shall
not have been consummated before May 31, 1999; and
by GHS or the CYL Members at any time prior to the
Effective Date if (i) in the case of termination by GHS, any of the conditions
specified in Section 9.2 shall not have been met in all material respects or
waived prior to such time as such condition can no longer be satisfied or (ii)
in the case of termination by the CYL Members, any of the conditions specified
in Section 9.3 shall not have been met in all material respects or waived prior
to such time as such condition can no
longer be satisfied.
The right of any party hereto to terminate this Agreement pursuant
to this Section 10.1 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 10.2. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 10.1, this Agreement shall
forthwith become void, there shall be no liability on the part of GHS or CYL
<PAGE>
that nothing herein shall relieve any party of liability for any willful breach
of any representation or warranty or failure to perform or comply with any
obligation under this Agreement prior to the termination hereof and except that
Section 7.6, 10.2, 10.5 and Articles 12 shall survive such termination.
SECTION 10.3. Amendment. This Agreement may be amended by the
parties hereto, in the case of GHS or CYL by action taken by or on behalf of
their respective Boards of Directors at any time prior to the Effective Time.
This Agreement may not be amended except by an instrument in writing signed
by the parties hereto.
---------
SECTION 10.4. Waiver. At any time prior to the Effective
Time, any party hereto may: (i) extend the time for the performance of any of
the obligations or other acts of the other party hereto; (ii) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto; and (iii)
waive compliance by the other party with any of the agreements or conditions
contained herein. Any such extension or waiver shall be
------
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
SECTION 10.5. Fees, Expenses and Other Payments.
Except as provided in Section 10.5(c), all Expenses (as
defined in paragraph (b) of this Section 10.5) incurred by the parties hereto
shall be borne solely and entirely by the party which has incurred such
Expenses, provided that the Expenses borne by CYL through the Closing shall be
borne solely by Development Holdings.
"Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, and all other matters related to
the closing of the transactions
contemplated herein.
If this Agreement shall be terminated by the CYL Members
pursuant to Section 10.1(c) or by GHS pursuant to Section 10.1(b) (in each case,
the "Non-Breaching Party"), then the other party shall pay to the Non-Breaching
Party, in consideration of the time, effort and resources expended in connection
herewith, all of the Non-Breaching Party's Expenses. This shall be in addition
to any other rights the Non-Breaching Party shall have.
Any payment required to be made pursuant to Section
10.5(c) shall be made to the Non-Breaching Party entitled to receive such
payment not later than two business days after delivery to the other party of
notice of demand for payment and an itemization setting forth in reasonable
detail all Expenses of the Non-Breaching Party, if any, and
<PAGE>
shall be made by wire transfer of immediately available funds to an account
designated by the Non-Breaching Party in the notice of demand for payment
delivered pursuant to this Section 10.5(d).
ARTICLE 11.
INTENTIONALLY LEFT BLANK
ARTICLE 12.
GENERAL PROVISIONS
SECTION 12.1. Effectiveness of Representations and Warranties.
The representations and warranties of CYL and GHS in this Agreement shall
expire at the Effective Time.
SECTION 12.2. 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 telecopier
number specified below:
If to GHS:
GHS, Inc.
2400 Research Boulevard
Rockville, Maryland 20850
Attention: Mr. Alan Gold
Telecopier No.: (301) 308-3254
with a copy to:
Heller Ehrman White & McAuliffe
711 Fifth Avenue
New York, NY 10022
Attention: Peter DiIorio, Esq.
Telecopier No.: (212) 832-3353
<PAGE>
If to CYL:
Change Your Life.com, LLC
704 Broadway
New York, New York 10003
Attention: Beth Polish, Chief Operating Officer
Telecopier No.(212) 358-4066
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attention: Frank E. Morgan II, Esq.
Telecopier No.: (212) 259-6333
If to the Robbins Group:
Robbins Research International Inc.
9191 Town Center Drive, Suite 600
San Diego, California 92122
Attention: Sam Georges
Telecopier No.: (619) 535-6300
with a copy to:
Loeb & Loeb, LLP
Suite 1800, 1000 Wilshire Blvd.
Los Angeles, CA 90017-2475
Attention: David L. Ficksman, Esq.
Telecopier No.: (213) 688-3460
SECTION 12.3. Certain Definitions. For purposes of this
Agreement, the term:
"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 and shall be deemed to include
directors and executive officers of a person;
"business day" means any day other than a day on which
banks in the State of New York are authorized or obligated to be closed;
<PAGE>
"control" (including the terms "controlled", "controlled
by" and "under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause the
direction of the management or policies of a person, whether through the
ownership of stock or as trustee or executor, by contract or credit arrangement
or otherwise;
"knowledge" shall mean, with respect to any matter in
question, with respect to CYL, if an executive officer of CYL or a CYL Member
or, with respect to GHS, if an executive officer of GHS, as the case may be, has
actual knowledge of such matter, after due inquiry;
"person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act);
"Returns" mean all tax returns, statements, reports,
forms (including estimated tax or information returns and reports, or filing
extensions with respect thereto) required to be filed with any taxing authority
in connection with the determination or administration of any tax;
"subsidiary" or "subsidiaries" of CYL, GHS or any other
person, means any corporation, partnership, joint venture or other legal entity
of which CYL, GHS or such other person, as the case may be (either alone or
through or together with any other subsidiary), controls or owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such
corporation or other legal entity or, which by contract or agreement, has the
power to control such corporation or other legal entity, or which otherwise
constitutes a "subsidiary" as defined in Regulation S-X ss. 210.1-02(w).
"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 gains taxes, (ii)
customs duties, imposts, charges, levies or other similar assessments of any
kind, and (iii) interest, penalties and additions to tax imposed with respect
thereto.
SECTION 12.4. Headings. 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.
--------
<PAGE>
SECTION 12.5. Severability. If any term or other provision
of this Agreement is 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 as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 12.6. Entire Agreement. This Agreement (together with
the Exhibits and Schedules hereto) constitute the entire agreement of the
parties and supersede all prior agreements and undertakings, both written and
oral, between the parties, or any of them, with respect to the subject matte
hereof.
----------------
SECTION 12.7. Assignment. This Agreement shall not be assigned
by operation of law or otherwise.
SECTION 12.8. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothin
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 12.9. Failure or Indulgence Not 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. All rights and
remedies existing under this Agreement are
-------------------------------------------
- ----------
cumulative to, and not exclusive of, any rights or remedies otherwise available.
SECTION 12.10. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law.
-------------
SECTION 12.11. Dispute Resolution. (a) In the event of any dispute,
controversy or claim arising out of or relating to this Agreement,
representatives of the parties shall meet in New York, NY, San Diego, CA or such
other city as may be mutually agreeable to the parties involved as soon as
reasonably possible (but not later than ten (10) days after written notice from
one party to the other of such dispute) and shall enter into good faith
negotiations aimed at resolving the dispute. If they are unable to resolve the
dispute in a mutually satisfactory manner within thirty (30) days from the date
of such notice, the matter may be submitted by any involved party to arbitration
as provided for below.
<PAGE>
(b) Any dispute, controversy or claim between or among any of the
parties arising out of or relating to this Agreement or the breach, termination
or invalidity thereof, including any dispute as to whether any dispute is
subject to arbitration, which has not been resolved after good faith
negotiations pursuant to Section 12.11(a) hereof shall be settled by binding
arbitration administered by the American Arbitration Association in accordance
with its then current Commercial Arbitration Rules except as provided herein.
(c) Any arbitration shall be conducted by a three person arbitration
panel. The three person arbitration panel shall consist of one party arbitrator
selected by CYL, one party arbitrator selected by GHS, each of whom shall be
named within ten (10) days of the demand for arbitration, and one neutral
arbitrator selected by the first two arbitrators. If the two party appointed
arbitrators cannot agree on the neutral arbitrator within ten (10) days of the
selection of the last party appointed arbitrator, the American Arbitration
Association shall appoint the neutral arbitrator, who shall act as chairperson.
In the event of a vacancy with respect to an arbitrator, the vacancy shall be
filled within ten (10) days of notice of the vacancy in the same manner and
subject to the same requirements as are provided for in the original appointment
to that position. If the vacancy is not filled within ten (10) days, the
American Arbitration Association shall make the appointment. Unless otherwise
mutually agreed, the place of arbitration shall be New York, NY or San Diego,
CA, as selected by the party receiving the request for arbitration.
(d) The law applicable to the validity of the arbitration clause,
the conduct of the arbitration, including the resort to a court for interim
relief, enforcement of the award or any other question of arbitration law or
procedure shall be the United States' Federal Arbitration Act, 9 U.S.C. ss. 1 et
seq. The involved parties shall be entitled to engage in reasonable discovery
including requests for the production of all relevant documents and a reasonable
number of depositions. The arbitration panel shall have the sole discretion to
determine the reasonableness of any requested document production or deposition.
It is the intent of the parties that a substantive hearing be held within sixty
(60) days of the appointment of the neutral arbitrator or the rejection of a
challenge thereto, whichever shall occur later. A stenographic record of every
hearing shall be made. The presentation of evidence shall be governed by the
federal Rules of Evidence.
(e) Any award, including any interim award, made shall be made
by a majority of the arbitrators applying the substantive law of New York and
shall (i) be in writing and state the arbitration panel's findings of fact and
conclusions of law; (ii) be made promptly, and in any event within sixty (60)
days after the conclusion of the arbitration hearing; and (iii) be binding
against the parties involved and may be entered for enforcement in any court
of competent jurisdiction.
(f) The costs of any arbitration proceeding (e.g., arbitrators,
court reporter and room rental fees) shall be equally divided between CYL and
GHS. However, each party shall pay its own expense, including attorneys' an
other professionals' fees and disbursements.
<PAGE>
(g) The arbitration provision set forth in this Section 12.11
shall be a complete defense to any suit, action or proceeding instituted in
any court with respect to any matter arbitrable under this Agreement, except
that judicial intervention may be sought in accordance with Section 12.12
hereof.
SECTION 12.12. Specific Performance. The parties acknowledge that
the failure of any party or its affiliates to substantially perform its
material
obligations and covenants under this Agreement may result in a significant
frustration of the respective business objectives of the parties and that
remedies at law may be inadequate to protect the rights and interests of the
other party. Accordingly, the parties, in addition to the remedies provided in
this Agreement or otherwise available for the enforcement of this Agreement,
expressly consent to an order for specific performance of such obligations
and covenants of a party or its affiliates or an order granting other
substantially equivalent remedies calculated to require performance of any such
obligations or covenants.
SECTION 12.13. 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.
<PAGE>
IN WITNESS WHEREOF, GHS, CYL and the CYL Members have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
GHS, INC. CHANGE YOUR LIFE.COM, LLC
By: ___________________________ By:___________________________
Name: Alan Gold Name:
Title: President Title:
CYL MEMBERS:
------------------------------
Anthony J. Robbins
ROBBINS RESEARCH
INTERNATIONAL INC.
By:___________________________
Name:
Title:
CYL DEVELOPMENT
HOLDINGS, LLC
By:___________________________
Name:
Title:
257090
<PAGE>
LIST OF EXHIBITS AND SCHEDULES TO
CONTRIBUTION AND EXCHANGE AGREEMENT
List of Exhibits
1.1 GHS Preferred Stock Terms
3.1 CYL Certificate of Formation and Operating Agreement
3.2 GHS Certificate of Incorporation and By-Laws
3.3 Stockholders Agreement
8.4 Concept Development and Seligman/Greer Letters of Intent
9.1(d) Settlement Agreement
9.1(f) CYL Content Provider Agreement and License
9.1(i) Registration Rights Agreement
List of Schedules
4.1 CYL Members and Pro Rata Portion
CYL Disclosure Schedule
GHS Disclosure Schedule
<PAGE>
*Confidential treatment has been requested for certain portions of this exhibit.
Omitted portions have been filed separately with the Commission.
EXHIBIT 2(b)
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
MAY 27, 1999
AMONG
GHS, INC.
CONCEPT ACQUISITION CORPORATION
CONCEPT DEVELOPMENT, INC.
AND
THE SOLE STOCKHOLDER OF CONCEPT DEVELOPMENT, INC.
<PAGE>
SCHEDULES
Schedule 2.2(b) Escrow Shares
Schedule 3.1(ee) Officers and Directors
Schedule 9.5 Stockholder Address
EXHIBITS
Exhibit A Form of Agreement of Merger
Exhibit B Form of Escrow Agreement
Exhibit C Form of Employment Agreement
Exhibit D Form of Repurchase Agreement
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
dated as of May 27, 1999 among GHS, INC., a Delaware corporation ("Parent"),
CONCEPT ACQUISITION CORPORATION, a Delaware corporation and a direct,
wholly-owned subsidiary of Parent ("Acquisition Sub") and CONCEPT DEVELOPMENT,
INC., a Delaware corporation (the "Company"), William Zanker and Debbie Dworkin
(the "Founders") and Debbie Dworkin (the "Stockholder").
The Boards of Directors of Parent, Acquisition Sub and the Company
have each duly approved and adopted this Agreement, the Agreement of Merger in
substantially the form of Exhibit A attached hereto (the "Agreement of Merger")
and the proposed merger of Acquisition Sub with and into the Company in
accordance with this Agreement, the Agreement of Merger and the Delaware General
Corporation Law (the "Delaware Statute"), whereby, among other things, the
issued and outstanding shares of common stock, no par value, of the Company (the
"Company Common Stock"), will be exchanged and converted into the right to
receive cash and shares of Series C preferred tock, $.01 par value, of Parent
(the "Parent Preferred Stock") in the manner set forth in Article II hereof and
in the Agreement of Merger, upon the terms and subject to the conditions set
forth in this Agreement and the Agreement of Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Agreement of Merger and the representations,
warranties, covenants, agreements, conditions and promises contained herein and
therein, the parties hereby agree as follows:
ARTICLE 1
GENERAL
1.1 The Merger. In accordance with the provisions of this
Agreement, the Agreement of Merger and the Delaware Statute, Acquisition Sub
shall be merged with and into the Company (the "Merger"), which at and after
the Effective Time shall be, and is sometimes herein referred to as, the
"Surviving Corporation". Acquisition Sub and the Company are sometimes referred
to as the "Constituent Corporations".
----------
1.2 The Effective Time of the Merger. Subject to the provisions of
this Agreement, the Agreement of Merger shall be executed and delivered to and
filed with the Secretary of State of the State of Delaware by each of the
Constituent Corporations on the Closing Date in the manner provided under
Section 251 of the Delaware Statute. The Merger shall become effective (the
"Effective Time") upon the filing of the Agreement of Merger with the Secretary
of State of the State of Delaware and the issuance of a certificate of merger by
the Secretary of State of the State of Delaware.
1.3 Effect of Merger. At the Effective Time the separate existence
of Acquisition Sub shall cease and Acquisition Sub shall be merged with and
into
the Surviving Corporation, and the Surviving Corporation shall possess all of
the rights, privileges, powers and franchises of a public as well as of a
private nature, and be subject to all the restrictions, disabilities and duties
of each of the Constituent Corporations as provided in Section 251 of the
Delaware Statute.
----------------
1.4 Charter and By-Laws of Surviving Corporation. From and after the
Effective Time and pursuant to the Agreement of Merger: (i) the Charter of
Acquisition Sub shall be the Charter of the Surviving Corporation, unless and
until altered, amended or repealed as provided in the Delaware Statute or the
Charter, (ii) the by-laws of Acquisition Sub shall be the by-laws of the
Surviving Corporation, unless and until altered, amended or repealed as provided
in the Delaware Statute, the Charter or such by-laws, (iii) the directors of
Acquisition Sub shall be the directors of the Surviving Corporation, unless and
until removed, or until their respective terms of office shall have expired, in
accordance with the Delaware Statute, the Charter and the by-laws of the
Surviving Corporation, as applicable and (iv) the officers of Acquisition Sub
shall be the officers of the Surviving Corporation, unless and until removed, or
until their terms of office shall have expired, in accordance with the Delaware
Statute, the Charter and the by-laws of the Surviving Corporation, as
applicable.
1.5 Taking of Necessary Action. Prior to the Effective Time, the
parties hereto shall do or cause to be done all such acts and things
as may be necessary or appropriate in order to effectuate the Merger
as expeditiously as reasonably practicable, in accordance with this
Agreement, the Agreement of Merger and the Delaware Statute. 1.6
Tax-Free Reorganizations. For Federal income tax purposes, the parties
intend that the merger be treated as a tax-free reorganization within
the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "Code"), by reason of Section 368(a)(2)(E) of
the Code.
1.7 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the provisions
of Article VIII, and subject to the provisions of Article V, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. (Eastern Standard Time) on
a date (the "Closing Date") to be mutually agreed upon by the parties, which
date shall be not later than the third Business Day after all the conditions set
forth in Article V shall have been satisfied (or waived in accordance with
Section 10.10, to the extent the same may be waived), unless another date is
agreed to in writing by the parties. The Closing shall take place at the offices
of Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York
10103, unless another place is agreed to in writing by the parties. As used
herein, the term "Business Day" shall mean any day other than a Saturday, Sunday
or day on which banks are permitted to close in the State of New York.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Total Consideration; Effect on Capital Stock. The entire
consideration payable by Parent with respect to all outstanding shares of
capital stock of the Company and for all options, warrants, rights, calls,
commitments, agreements or arrangements of any character to which the Company is
a party or by which it is bound calling for the issuance of shares of capital
stock of the Company or any securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or otherwise receive,
directly or indirectly, any such capital stock, or other arrangement to acquire,
at any time or under any circumstance, capital stock of the Company or any such
other securities (hereinafter collectively referred to as the "Fully Diluted
Company Shares,") other than any capital stock of the Company owned or held by
Parent or any Affiliate of Parent, shall be an aggregate of [*] (the "Aggregate
Cash Consideration") in cash (the Aggregate Cash Consideration, together with
the Total Parent Share Amount, being sometimes hereinafter collectively referred
to as the "Aggregate Purchase Price"). For purposes of the calculation of the
exchange ratio for Parent Preferred Stock under Section 2.1(c)(i) hereof, it is
assumed that the number of Fully Diluted Company Shares is one (1) (the "Fully
Diluted Company Share Amount"). At the Effective Time, subject and pursuant to
the terms and conditions of this Agreement and the Agreement of Merger, by
virtue of the Merger and without any action on the part of the Constituent
Corporations or the holders of the capital stock or options to purchase capital
stock of the Constituent Corporations:
(a) Capital Stock of Acquisition Sub. Each issued and
outstanding share of common stock, par value $.01 per share, of
Acquisition Sub shall be converted into one share of common
stock, par value $.01 per share, of the Surviving Corporation.
(b) Cancellation of Certain Shares of Company Common Stock. Each
share of capital stock of the Company that is authorized but
unissued shall cease to exist and no Parent Preferred Stock or
other consideration shall be delivered in exchange therefor. (c)
Exchange of Company Common Stock. Subject to Section 2.2, each
share of Company Common Stock issued and outstanding at the
Effective Time, including all accrued and unpaid dividends
thereon, shall be exchanged and converted into the right to
receive: (i) [*]; and (ii) [*].
For convenience of reference, the shares of Parent Preferred Stock to be issued
upon the exchange and conversion of Company Common Stock in accordance with
this Section 2.1(c) are sometimes hereinafter collectively referred to as the
"Merger Shares". All calculations under Section 2.1 shall be rounded to the
nearest one billionth (.000000001).
(d) Shares for Dissenting Stockholders. Each issued and
outstanding share of Company Common Stock held by a Dissenting
Stockholder, if any, shall not be exchanged and converted as described in
Section 2.1(c) but shall become the right to receive such consideration as
may be determined to be due to such Dissenting Stockholder pursuant to the
Delaware Statute; provided, however, that each share of Company Common
Stock issued and outstanding at the Effective Time and held by a
Dissenting Stockholder who or which shall, after the Effective Time,
withdraw his or its demand for appraisal or lose or fail to perfect his or
its right of appraisal as provided in the Delaware Statute shall be
deemed, as of the Effective Time, to be exchanged and converted into
Parent Preferred Stock as provided in Section 2.1(c), without interest.
After the Effective Time, as provided in Section 262 of the Delaware
Statute, no Dissenting Stockholder will be entitled to vote the shares of
Company Common Stock subject to such Dissenting Stockholder's demand for
appraisal for any purpose or be entitled to the payment of dividends or
other distributions on such shares. The Company shall give Parent prompt
notice of any demands received by the Company for fair value of such
Company Common Stock, and Parent shall have the right to participate in
all the negotiations and proceedings with respect to such demands. The
Company shall not, except with the prior written consent of Parent, make
any payment (except to the extent that any such payment is pursuant to a
court order) with respect to, or settle or offer to settle, any such
demands
2.2 Escrow Deposit; Exchange of Certificates.
(a) Escrow Agreement. Reference is made to the Escrow
Agreement to be dated as of the Effective Time among the Stockholder, Parent
and a mutually agreeable escrow agent (the "Escrow Agent") in the form of
Exhibit B hereto (the "Escrow Agreement"). The Escrow Agreement is to be
entered into for the purpose of securing the indemnification obligations of
the Stockholders under Article VII.
(b) Escrow Deposit. At the Effective Time, Parent shall
cause to be deposited with the Escrow Agent (i) [*] ("Escrow Shares"), and (ii)
three stock power duly endorsed in blank for transfer on behalf of the
Stockholder, and the Stockholder by her execution and delivery of this
Agreement, hereby authorizes and directs Parent to make such deposit on her
behalf.
(c) Procedure for Exchange. Immediately following the
Effective Time, Parent shall deliver to the Stockholder, other than Parent or
any subsidiary of Parent, of a certificate or certificates which immediately
prior to the Effective Time represented issued and outstanding shares of Company
Common Stock (each, an "Old Certificate") a certificate (a "New Certificate")
representing that number of Merger Shares (other than the Escrow Shares) which
such holder has the right to receive
----------------------
pursuant to Section 2.1(c)(i) with respect to such Old Certificate against
receipt by Parent of (i) such Old Certificate for cancellation and (ii) an
executed letter of transmittal, and the Old Certificate so surrendered
shall forthwith be canceled (the certificates representing the Escrow
Shares having therefore been deposited on behalf of the Stockholder into
escrow as contemplated by Section 2.2(b) hereof). In the event of a
transfer of ownership of shares of Company Common Stock which is not
registered on the transfer records of the Company, a New Certificate
representing the proper number of shares of Parent Preferred Stock may be
issued to a transferee if the Old Certificate representing such Company
Common Stock is presented to Parent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable
stock or other transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Old Certificate shall be deemed, on
and after the Effective Time, to represent only the right to receive upon
such surrender, New Certificates representing Merger Shares (other than
the Escrow Shares) as contemplated by Section 2.1(c)(i), without interest.
All Escrow Shares shall be held by, and distributed in accordance with,
the terms and provisions of the Escrow Agreement.
(d) No Further Ownership Rights in Company Common Stock.
All shares of Parent Preferred Stock issued upon the surrender or exchange of
shares of Company Common Stock in accordance with the terms of this Article II
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock. If, after the Effective
Time, any Old Certificate is presented to the Surviving Corporation for any
reason, such Old Certificate shall be canceled and
---------------------------------------------------
exchanged as provided in this Article II.
(e) No Liability. None of Parent, Acquisition Sub or the Company
shall be liable to any holder of shares of Company Common Stock or Parent
Preferred Stock, as the case may be, for shares (or dividends or
distributions with respect thereto) of Parent Preferred Stock to be issued
in exchange for Company Common Stock pursuant to this Section 2.2, if, on
or after the expiration of six months following the Effective Time, such
shares are delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Lost, Stolen or Destroyed Company Certificates. In the event
any Old Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit to that effect by the person claiming such Old
Certificate to be lost, stolen or destroyed and, if required by Parent,
the posting by such person of a bond in such amount as Parent may
reasonably direct as indemnity against any claim that may be made against
it with respect to such Old Certificate, Parent will issue in exchange for
such lost, stolen or destroyed Old Certificate the Merger Shares and cash
in lieu of fractional shares deliverable in respect thereof pursuant to
this Agreement.
(g) Authorization of the Merger, this Agreement, the Agreement
of Merger, the Escrow Agreement and the Escrow Agent. In the event the
Merger shall be approved by the stockholders of the Company, as required
by the Delaware Statute and as contemplated by this Agreement, such
approval shall constitute approval and ratification by the stockholders of
the Company of the (i) Merger, as required by the Delaware Statute, (ii)
provisions of this Agreement and the Agreement of Merger and (iii)
designation of the Escrow Agent and the approval and ratification by the
stockholders of the Company of the terms and provisions of the Escrow
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company and the
Stockholder jointly and severally represent and warrant to Parent and
Acquisition Sub that, except as disclosed in the disclosure schedule dated the
date hereof, certified by the Chief Executive Officer of the Company and
delivered by the Company to Parent and Acquisition Sub simultaneously herewith
(which disclosure schedule shall contain specific references to the
representations and warranties to which the disclosures contained therein
relate) (the "Company Disclosure Schedule"):
(a) Organization; Good Standing; Qualification and Power. The
Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, (ii) has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted, and as
proposed to be conducted, to enter into this Agreement, the Agreement of
Merger and the Related Agreements (as defined below) to which the Company
is a party, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby and (iii) is
duly qualified and in good standing to do business in those jurisdictions
listed in Section 3.1(a) of the Company Disclosure Schedule and in all
other jurisdictions in which the failure to be so qualified and in good
standing could reasonably be expected to have a material adverse effect on
the Company or its business, properties, condition (financial or
otherwise), assets, Liabilities, operations, results of operations,
prospects or affairs of the Company (a "Company Material Adverse Effect").
The Company has delivered to Parent true and complete copies of the
Charter and by-laws of the Company, in each case as amended to the date
hereof. As used herein, "Charter" shall mean, with respect to any
corporation, those instruments that at the time constitute its corporate
charter as filed or recorded under the general corporation law of the
jurisdiction of its incorporation, including the articles or certificate
of incorporation or organization, and any amendments thereto, as the same
may have been restated, and any amendments thereto (including any articles
or certificates of merger or consolidation, certificate of correction or
certificates of designation or similar instruments which effect any such
amendment) which became effective after the most recent such restatement.
(b) Equity Investments. The Company has never had, nor does it
currently have, any subsidiaries, nor has it ever owned, nor does it
currently own, any capital stock or other proprietary interest, directly
or indirectly, in any corporation, association, trust, partnership, joint
venture or other entity. There are no options, warrants, rights, calls,
commitments or agreements of any character to which the Company is a party
or by which it is bound calling for the issuance of shares of capital
stock of the Company or any securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or otherwise
receive, any such capital stock, or other arrangement to acquire, at any
time or under any circumstance, capital stock of the Company or any such
other securities. As used herein, a "subsidiary" of any corporation means
another corporation an amount of whose voting securities sufficient to
elect at least a majority of its Board of Directors is owned directly or
indirectly by such corporation.
(c) Capital Stock; Securities. The authorized capital
stock of the Company consists of (i) 1,500 shares of Company Common Stock,
of which one (1) share is outstanding. The outstanding share of Company
Common Stock is validly issued and outstanding, fully paid and non-assessable
and not subject to preemptive rights. There are no voting trusts, voting
agreements, proxies, first refusal rights, first offer rights, co-sale rights,
options, transfer restrictions or other agreements,
-------------------------
instruments or understandings (whether written or oral, formal or
informal) with respect to the voting, transfer or disposition of Company
Common Stock to which the Company is a party or by which it is bound, or,
to the best knowledge of the Company and the Stockholders, among or between
any persons other than the Company.
(d) Authority; No Consents. The execution, delivery and
performance by the Company of this Agreement, the Agreement of Merger and
the Related Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Company;
and this Agreement and the Related Agreements to which it is a party have
been, and the Agreement of Merger when executed and delivered by the
Company will be, duly and validly executed and delivered by the Company;
and this Agreement and the Related Agreements to which it is a party are
the valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms and the Agreement of
Merger when executed and delivered by the Company will be, enforceable
against the Company in accordance with its terms. Neither the execution,
delivery and performance of this Agreement, the Related Agreements to
which it is a party or the Agreement of Merger nor the consummation by the
Company of the transactions contemplated hereby or thereby nor compliance
by the Company with any provision hereof or thereof will in any material
respect (A) conflict with, (B) result in any violations of, (C) cause a
default under (with or without due notice, lapse of time or both), (D)
give rise to any right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any material
benefit under or (E) result in the creation of any Encumbrance on or
against any assets, rights or property of the Company under any term,
condition or provision of (x) any instrument, contract or agreement to
which the Company is a party, or by which the Company or any of its
properties, assets or rights may be bound, (y) any law, statute, rule,
regulation, order, writ, injunction, decree, permit, concession, license
or franchise of any Governmental Authority applicable to the Company or
any of its properties, assets or rights or (z) the Company's Charter or
by-laws. Except as set forth on Section 3.1(d) of the Company Disclosure
Schedule, no permit, authorization, consent or approval of or by, or any
notification of or filing with, any Governmental Authority or other person
is required in connection with the execution, delivery and performance by
the Company of this Agreement, the Agreement of Merger or the Related
Agreements or the consummation by the Company of the transactions
contemplated hereby or thereby, except for (i) the distribution of the
Stockholders' Materials with respect to the adoption by the Stockholders
of this Agreement, the Merger and the transactions contemplated hereby,
(ii) the filing of the Agreement of Merger with the Secretary of State of
the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do
business and (iii) such other consents, waivers, authorizations, filings,
approvals and registrations which if not obtained or made would not have a
Company Material Adverse Effect or materially impair the ability of the
Company and the Stockholders to consummate the transactions contemplated
by this Agreement or the Agreement of Merger, including, without
limitation, the Merger (each of which actions reflected in clauses (i) and
(ii) above is to be taken by the Company on a timely basis).
(e) Financial Information.
(i) The Company has previously delivered to Parent
the Company Returns (as defined below); and
(ii) The Company Returns (A) are in accordance with
the books and records of the Company, (B) fairly present the financial
condition of the Company as at the respective dates indicated and the
results of operations of the Company for the respective periods indicated.
(f) Absence of Undisclosed Liabilities. Except as set
forth on Schedule 3.1(f) of the Company Disclosure Schedule, on the date hereof
the Company has no liability or obligation of any nature (whether known or
unknown, matured or unmatured, fixed or contingent, secured or unsecured,
accrued, absolute or otherwise ("Liability")). There were no material loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting
----------------------------------
Standards Board in March, 1975 ("FAS No. 5")).
(g) Absence of Changes. Since the Company's inception the
Company has been operated in the ordinary course, consistent with past
practice, and there has not been any material adverse change in the business,
assets, properties, Liabilities, operations, results of operations, condition
(financial or otherwise), prospects or affairs (a "Material Adverse Change")
of the Company;
------------------
(h) Tax Matters. The Company and each other corporation (if any)
included in any consolidated or combined tax return in which the Company
has been included (i) have filed and will file, in a timely and proper
manner, consistent with applicable laws, all Federal, state and local Tax
returns and Tax reports required to be filed by them through the Closing
Date (the "Company Returns") with the appropriate governmental agencies in
all jurisdictions in which Company Returns are required to be filed and
have timely paid or will timely pay all amounts shown thereon to be due;
(ii) have paid and shall timely pay all Taxes of the Company (or such
other corporation) required to have been paid by the Company (or such
other corporation) on or before the Closing Date; and (iii) currently are
not the beneficiary of an extension of time within which to file any Tax
return or Tax report. All such Company Returns were and will be correct
and complete at the time of filing. All Taxes of the Company attributable
to periods up to and including the Closing Date, to the extent not
required to have been previously paid, have been adequately provided for
on and disclosed on Schedule 3.1(h). The Company has not been notified by
the Internal Revenue Service or any state, local or foreign taxing
authority that any issues have been raised (and are currently pending) in
connection with any Company Return, and no waivers of statutes of
limitations have been given with respect to the Company that are still in
effect. Except as contested in good faith and disclosed in Section 3.1(h)
of the Company Disclosure Schedule, any deficiencies asserted or
assessments (including interest and penalties) made as a result of any
examination by the Internal Revenue Service or by any other taxing
authorities of any Company Return have been fully paid and the Company has
received no notification that any proposed additional Taxes have been
asserted. The Company (i) has not made an election to be treated as a
"consenting corporation" under Section 341(f) of the Code and (ii) is not
a "personal holding company" within the meaning of Section 542 of the
Code. The Company has not agreed to, nor is it required to, make any
adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise. The Company will not incur a Tax Liability
resulting from the Company ceasing to be a member of a consolidated or
combined group that had previously filed consolidated, combined or unitary
Tax returns. The Company is not a party to any agreement or contract with
any "disqualified individual" (as defined in Section 280G(c) of the Code)
that, by reason of the transactions contemplated hereby and occurring on
or prior to the Closing Date or taking into account any other agreements
or contracts currently in effect between the Company and such disqualified
individual, will result in the disallowance of any deduction for any
payment under such agreement or contract as an "excess parachute payment"
(as defined in Section 280G(b)(1) of the Code).
As used in this Agreement, "Tax" means any of the Taxes and "Taxes" means,
with respect to any entity, (A) all income taxes (including any tax on or based
upon net income, gross income, income as specially defined, earnings, profits or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes, customs duties and other taxes,
fees, assessments or charges of any kind whatsoever, together with all interest
and penalties, additions to tax and other additional amounts imposed by any
taxing authority (domestic or foreign) on such entity and (B) any liability for
the payment of any amount of the type described in the immediately preceding
clause (A) as a result of being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another entity or a member of
an affiliated or combined group.
(i) Title to Assets, Properties and Rights and Related Matters.
Except as set forth on Schedule 3.1(i) of the Company Disclosure Schedule,
the Company has good and valid title to all of its assets, properties and
interests in properties, real, personal or mixed, all of which is
described on Schedule 3.1(i) of the Company Disclosure Schedule (except
(A) inventory or other property sold or otherwise disposed of since the
Company Reviewed Balance Sheet Date in the ordinary course of business and
(B) accounts receivable and notes receivable paid in full subsequent to
the Company Reviewed Balance Sheet Date), or not so reflected therein but
used or useful in the conduct or operation of the Company's business, free
and clear of all Encumbrances, of any kind or character, except for (i)
those Encumbrances set forth in Section 3.1(i) of the Company Disclosure
Schedule, (ii) liens for current taxes not yet due and payable and (iii)
statutory mechanics and materialmen's liens. The assets, properties and
interests in properties of the Company are in good operating condition and
repair in all material respects (ordinary wear and tear excepted). The
assets, properties and interests in properties of the Company to be owned,
leased or licensed by the Surviving Corporation at the Effective Time
shall include all assets, properties and interests in properties (real,
personal and mixed, tangible and intangible) and all rights, leases,
licenses and other agreements necessary to enable the Surviving
Corporation to carry on the business of the Company as presently conducted
by the Company or as proposed to be conducted. The Company does not own or
lease any personal and/or mixed property. As used herein, the term
"Encumbrances" shall mean and include security interests, mortgages,
liens, pledges, guarantees, charges, easements, reservations,
restrictions, clouds, equities, rights of way, options, rights of first
refusal and all other encumbrances, whether or not relating to the
extension of credit or the borrowing of money.
(j) Real Property-Owned or Leased. The Company does not
currently own or lease, nor has it or any of its predecessors ever owned or
leased, any real property.
(k) Intellectual Property.
(i) The Company has good and valid title to, and owns free and
clear of all Encumbrances, has the right to use, sell, transfer, license
(or sublicense), transmit, broadcast, deliver (electronically or
otherwise) and dispose of, and has the right to bring actions for the
infringement of, all Intellectual Property Rights necessary or required
for the conduct of its business as currently conducted and as proposed to
be conducted (collectively, the "Company Rights"). The Company has not
granted any rights to third parties with respect to its Intellectual
Property Rights and no third party holds any rights in or to the current
business plan of the Company.
(ii) The execution, delivery and performance of this Agreement
and the Related Agreements and the consummation of the Merger and the
consummation of the other transactions contemplated hereby, will not
breach, violate or conflict with any instrument or agreement governing any
Company Rights, will not cause the forfeiture or termination or give rise
to a right of forfeiture or termination of any Company Right or in any way
impair the right of the Company or the Surviving Corporation to use, sell,
license (or sublicense), transmit, broadcast, deliver (electronically or
otherwise) or dispose of, or to bring any action for the infringement of,
any Company Right or portion thereof.
(iii) There are no royalties, honoraria, fees or other
payments payable by the Company to any person by reason of the ownership, use,
license (or sublicense), transmission, broadcast, delivery (electronically or
otherwise), sale, or disposition of the Company Rights, other than sales
commissions paid in the ordinary course of business.
(iv) The Company does not manufacture, market, licens
(or sublicense), sell, transmit, deliver (electronically or otherwise), or use
any product or service nor does it have any product or service under
development.
(v) All current and past officers, employees and consultants of
or to the Company have, or will have at Closing, executed and delivered to
and in favor of the Company an agreement regarding the protection of
confidential and proprietary information and the assignment to the Company
of all Intellectual Property Rights arising from the services performed
for the Company by such persons (collectively, the "Confidentiality
Agreements", the form of which is attached to Section 3.1(k)(iv) of the
Company Disclosure Schedule). The Company has taken and will continue
through the Effective Time to take all steps necessary, appropriate or
desirable to safeguard and maintain the secrecy and confidentiality of,
and its proprietary rights in, all Company Rights.
(vi) All works that were created, prepared or delivered by
consultants, independent contractors or other third parties for or on
behalf of Company (including any materials and elements created, prepared
or delivered by such parties in connection therewith) (A) are and shall
constitute "works made for hire" specially ordered or commissioned by the
Company within the meaning of United States' copyright law, or (B) all
right, title and interest therein (including any materials and elements
created, prepared or delivered by such parties in connection therewith)
have been assigned to the Company.
(vii) No licenses or rights have been granted by the Company, or
by any employee, consultant, officer, director, agent or affiliate of the
Company or by anyone other than the foregoing, to distribute the source
code of, or to use source code to create Derivative Works, of, any product
currently marketed by, commercially available from or under development by
the Company for which the Company possesses the source code. As used
herein, "Derivative Work" shall mean a work that is based upon one or more
preexisting works, such as a revision, enhancement, modification,
abridgment, condensation, expansion or any other form in which such
preexisting works may be recast, transformed or adapted, and which, if
prepared without authorization of the owner of the copyright in such
preexisting work, would constitute a copyright infringement. For purposes
herein, a "Derivative Work" shall also include any compilation that
incorporates such a preexisting work as well as translations from one type
of code to another.
(viii) No person has any marketing rights to any of the
Intellectual Property Rights of the Company (excluding Intellectual Property
Rights licensed to the Company by third parties).
(ix) Section 3.1(k)(ix) of the Company Disclosure Schedule
contains a true and complete list of all (A) of the Company's patents,
patent applications, trademarks, trademark applications, trade names,
service marks, service mark applications, copyrights, copyright
registrations and copyright applications and Internet domain names and
applications therefor and (B) other filings and formal actions made or
taken pursuant to Federal, state, local and foreign laws by the Company to
perfect or protect its interest therein.
(x) Section 3.1(k)(x) of the Company Disclosure
Schedule contains a true and complete list of all options, licenses or other
agreements of any kind by which Intellectual Property Rights have been granted
to the Company from, or granted by the Company to, any other person (except for
those licenses identified in Section 3.1(l)(i) of the Company Disclosure
Schedule).
(xi) As used herein, the term "Intellectual Property Rights"
shall mean all industrial and intellectual property rights, including,
without limitation, patents, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks, service
mark applications, copyrights, copyright registrations, copyright
applications, franchises, licenses, databases, "URL's" and Internet domain
names and applications therefor (and all interest therein), computer
programs and other computer software (including, but not limited to, the
Software), user interfaces, know-how, trade secrets, customer lists,
proprietary technology, processes and formulae, source code, object code,
algorithms, architecture, structure, display screens, layouts, development
tools, instructions, templates, marketing materials, inventions, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing.
(l) Company Software. The Company has not designed or
developed, nor does the Company have under development by employees of the
Company or by consultants on the Company's behalf, any software programs,
systems or applications, nor has the Company licensed any such software from
any third party.
----------------
(m) Agreements, Etc. Schedule 3.1(m) to the Company
Disclosure Schedule sets forth a true and complete list of all written and oral
contracts, agreements, instruments, understandings or arrangements to which
the Corporation is a party or by which it is bound.
----------------
(n) No Defaults. The Company has in all material respects
performed all the obligations required to be performed by it to date and
is not in default or alleged to be in default under (i) its Charter or
by-laws or (ii) any material agreement, lease, license, contract,
commitment, instrument or obligation to which the Company is a party or by
which any of its properties, assets or rights are or may be bound or
affected, and there exists no event, condition or occurrence which, with
or without due notice or lapse of time, or both, would constitute such a
default by it of any of the foregoing.
(o) Litigation, Etc. Except as set forth on Schedule 3.1(n) of
the Company Disclosure Schedule, there are no (i) actions, suits, claims,
investigations or legal or administrative or arbitration proceedings
(collectively, "Actions") pending, or to the best knowledge of the Company
and the Stockholders, threatened against the Company nor, to the best
knowledge of the Company and the Stockholders , any basis therefor,
whether at law or in equity, or before or by any Federal, state, local,
municipal, foreign or other governmental court, department, commission,
board, bureau, agency or instrumentality ("Governmental Authority"), (ii)
judgments, decrees, injunctions or orders of any Governmental Authority or
arbitrator against the Company or (iii) disputes with customers or
vendors. There are no Actions pending or, to the best knowledge of the
Company and the Stockholders, threatened, nor, to the best knowledge of
the Company and the Stockholders, any basis therefor, with respect to (A)
the current employment by, or association with, the Company, or future
employment by, or association with, Parent or the Surviving Corporation,
of any of the present officers or employees of or consultants to the
Company (collectively, the "Designated Persons") or (B) the use, in
connection with any business presently conducted or proposed to be
conducted by the Company or the Surviving Corporation, of any information,
techniques or processes presently utilized or proposed to be utilized by
the Company, Parent, the Surviving Corporation or any of the Designated
Persons, that the Company, Parent, the Surviving Corporation or any of the
Designated Persons are or would be prohibited from using as the result of
a violation or breach of, or conflict with any agreements or arrangements
between any Designated Person and any other person, or any legal
considerations applicable to unfair competition, trade secrets or
confidential or proprietary information. The Company has delivered to
Parent all material documents and correspondence relating to such matters
referred to in Section 3.1(o) of the Company Disclosure Schedule
(including, in the case of clause (iii) of the first sentence of this
Section 3.1(o), any correspondence evidencing material customer
dissatisfaction with the Company or its products or services).
(p) Accounts and Notes Receivable. There are no accounts
receivable or notes receivable owing to the Company as of the date hereof.
(q) Accounts and Notes Payable. There are no accounts
payable or notes payable by the Company to third parties as of the date hereof.
As of the Closing, all accounts payable and notes payable by the Company to
third parties will have arisen in the ordinary course of business, and,
except as set forth in Section 3.1(q) of the Company Disclosure Schedule,
there is no such account payable or note payable delinquent in its payment,
except those contested in good faith and already
--------------------------
disclosed in Section 3.1(q) of the Company Disclosure Schedule.
(r) Compliance; Governmental Authorizations. The Company has
complied and is presently in compliance in all material respects with all
Federal, state, local or foreign laws, ordinances, regulations and orders
applicable to it or its business (including, without limitation, laws,
ordinances, regulations and orders applicable to labor, employment and
employment practices, terms and conditions of employment and wages and
hours). The Company has all Federal, state, local and foreign governmental
authorizations, consents, approvals, licenses and permits necessary in the
conduct of its business as presently conducted or as proposed to be
conducted, such authorizations, consents, approvals, licenses and permits
are in full force and effect, no violations are or have been recorded in
respect of any thereof and no proceeding is pending or, to the best
knowledge of the Company and the Stockholders, threatened to revoke or
limit any thereof. Section 3.1(r) of the Company Disclosure Schedule
contains a true and complete list of all such governmental licenses,
authorizations, consents, approvals, permits, orders, decrees and other
compliance agreements under which the Company is operating or bound, the
Company is not in default or alleged to be in default under any thereof
and the Company has furnished to Parent true and complete copies thereof.
None of such authorizations, consents, approvals, licenses and permits
shall be affected in any material respect by the Merger or the
transactions contemplated hereby.
(s) Environmental Matters. The Company currently is and at
all times has been in material compliance with all Federal, state and local
laws, ordinances, regulations and orders relating to the protection of the
environment applicable to its properties, facilities or operations.
---------------------
(t) Labor Relations; Employees.
(i) Except for the Founders, there are currently no,
and since the Company's inception there have not been any, employees of the
Company.
(u) Employee Benefit Plans and Contracts.
(i) There are no "employee benefit plans", as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any other written or formal plans or agreements involving
direct or indirect compensation (including any employment agreements
entered into between the Company and any Employee, but excluding workers'
compensation, unemployment compensation, other government-mandated
programs and the Company's salary and wage arrangements) currently or
previously maintained, contributed to or entered into by the Company or
any ERISA Affiliate thereof for the benefit of any Employee or former
Employee under which the Company or any ERISA Affiliate thereof has any
present or future material obligation or liability (the "Employee Plans").
For purposes of the preceding sentence, "ERISA Affiliate" shall mean any
entity which is a member of (A) a "controlled group of corporations", as
defined in Section 414(b) of the Code, (B) a group of entities under
"common control", as defined in Section 414(c) of the Code or (C) an
"affiliated service group", as defined in Section 414(m) of the Code or
treasury regulations promulgated under Section 414(o) of the Code, any of
which includes the Company. For purposes of Section 3.1(u), "Employee"
means any common law employee, consultant or director of the Company.
(ii) There are no employment, severance or other similar
contracts, arrangements or policies or plans or arrangements (written or
oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits entered into, maintained or
contributed to, as the case may be, by the Company on behalf of any
Employee or covering any Employee or former Employee or under which the
Company or any ERISA Affiliate has any present or future obligation or
liability.
(v) Insurance. The Company does not and has not since its
inception maintained or held any policies of liability, theft, fidelity, fire,
product liability, errors and omissions, workmen's compensation, indemnification
of directors and officers or other similar forms of insurance.
---------
(w) Bank Accounts; Powers of Attorney. Section 3.1(w) of
the Company Disclosure Schedule sets forth a true and complete list of (i) all
bank accounts and safe deposit boxes of the Company and all persons who are
signatories thereunder or who have access thereto and (ii) the names of all
persons, firms, associations, corporations or business organizations holding
general or special powers of attorney from the Company and a summary of the
terms thereof.
---------------------------------
(x) Brokers. The Company has not, nor have any of its
officers, directors, securityholders or employees, employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders
fees in connection with the transactions contemplated hereby.
-------
(y) Related Transactions. Except as set forth on Schedule 3.1(x)
of the Company Disclosure Schedule, no current or former director, officer
or securityholder of the Company that is an affiliate of the Company or
any associate (as defined in the rules promulgated under the Exchange Act)
thereof, is now, or has been since the inception of the Company, a party
to any transaction with the Company (including, but not limited to, any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or borrowing
money from, or otherwise requiring payments to, any such director, officer
or affiliated stockholder of the Company or associate thereof), or the
direct or indirect owner of an interest in any corporation, firm,
association or business organization which is a present or potential
competitor, supplier or customer of the Company (other than non-affiliated
holdings in publicly-held companies), nor does any such person receive
income from any source other than the Company which relates to the
business of, or should properly accrue to, the Company.
(z) Customers. Since its inception, the Company has not had any
customers.
(aa) Minute Books. The minute books of the Company provided
to Parent for review contain a complete summary of all meetings of and actions
by directors and stockholders of the Company from the time of its incorporation
to the date of such review and reflect all actions referred to in such minutes
accurately in all material respects.
------------
(bb) Business Generally. There have been no events or
transactions, or information which has come to the attention of the Company or
any officer, director, incorporator or key employee thereof that could
reasonably be expected to have a Company Material Adverse Effect, and the
Company is not obligated under any contractor agreement or subject to any
Charter or other corporate restriction which could have a Company Material
Adverse Effect.
------------------
(cc) Board Approval. The Board of Directors of the Company has
unanimously (i) approved this Agreement, the Merger and each of the
Related Agreements to which the Company is a party and the transactions
contemplated hereby and thereby, (ii) determined that the Merger is in the
best interests of the stockholders of the Company and is on terms that are
fair to such stockholders of the Company and (iii) recommended that the
stockholders of the Company approve the Merger in accordance with the
Agreement of Merger and the Delaware Statute.
(dd) Business Plan. Attached hereto as Schedule 3.1(dd) is a
copy of the current business plan of the Company (the "Business Plan").
-------------
(ee) Vote Required. The affirmative vote of at least a
majority of the outstanding shares of Company Common Stock approving this
Agreement, the Merger and the Agreement of Merger is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve this Agreement, the Merger and the Agreement of Merger and the
transactions contemplated hereby and thereby.
-------------
(ff) Information Supplied. None of the information supplied or
to be supplied by the Company or the Stockholder for inclusion or
incorporation by reference in the Stockholders' Materials will, at the
dates mailed to the Stockholder and at the effective date of the
Stockholder Action, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Stockholders' Materials will comply as
to form in all material respects with the provisions of all applicable
laws, rules and regulations of all Governmental Authorities.
(gg) Disclosure. Neither Section 3.1 of this Agreement
(including the Company Disclosure Schedule) nor any document, written
information, statement, financial statement, certificate or exhibit
furnished or to be furnished to Parent or Acquisition Sub by or on behalf
of the Company or any securityholder pursuant hereto or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements or facts contained herein
and therein not misleading in light of the circumstances under which they
were made.
(hh) Knowledge Definition. As used in this Article III, the term
"best knowledge" and like phrases shall mean and include (i) actual
knowledge and (ii) that knowledge which a prudent business person
(including the officers, directors, and key employee) could have obtained
in the management of his or her business affairs after making due inquiry
and exercising due diligence with respect thereto. In connection
therewith, the knowledge (both actual and constructive) of any officer,
director, or key employee of the Company shall be imputed to be the
knowledge of the Company.
3.2 Several Representations and Warranties of the Stockholders.
The Stockholder represents and warrants to Parent, Acquisition Sub and the
Company with respect to herself as follows:
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(a) Title; Absence of Certain Agreements. The Stockholder is the
lawful and record and beneficial owner of, and has good and marketable
title to all of the shares of Company Common Stock, with the full power
and authority to vote such Company Common Stock and transfer and otherwise
dispose of such Company Common Stock, and any and all rights and benefits
incident to the ownership thereof free and clear of all Encumbrances, and
there are no agreements or understandings between the Stockholder and the
Company and/or any other person with respect to the voting, sale or other
disposition of Company Common Stock or any other matter relating to
Company Common Stock.
(b) Authority - General. The Stockholder has full and absolute
power and authority to enter into this Agreement and, if applicable, each
Related Agreement being executed and delivered by the Stockholder
simultaneously herewith and this Agreement and each Related Agreement to
which the Stockholder is a party; and this Agreement and each Related
Agreement to which the Stockholder is a party has been duly executed and
delivered by the Stockholder, and is the valid and binding obligation of
the Stockholder, enforceable against the Stockholder in accordance with
its terms. Neither the execution, delivery and performance of this
Agreement and each Related Agreement to which the Stockholder is a party,
nor the consummation of the transactions contemplated hereby or thereby
nor compliance by the Stockholder with any of the provisions hereof or
thereof will (i) (A) conflict with, (B) result in any violations of, (C)
cause a default under (with or without due notice, lapse of time or both),
(D) give rise to any right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any material
benefit under or (E) result in the creation of any Encumbrance upon or
against any assets, rights or property of the Company (or against any
Company Common Stock, Parent capital stock or common stock of the
Surviving Corporation), under any term, condition or provision of (x) any
agreement or instrument to which the Stockholder is a party, or by which
the Stockholder or any of his or its properties, assets or rights may be
bound or (y) any law, statute, rule, regulation, order, writ, injunction,
decree, permit, concession, license or franchise of any Governmental
Authority applicable to the Stockholder or any of his or its properties,
assets or rights, which conflict, breach, default or violation or other
event would prevent the consummation of the transactions contemplated by
this Agreement, the Agreement of Merger or any Related Agreement to which
the Stockholder is a party. Except as set forth in Section 3.2(c) of the
Company Disclosure Schedule (which, if so disclosed shall have been
effectively made or obtained (as the case may be) on or prior to the
Closing, unless otherwise waived by Parent) no permit, authorization,
consent or approval of or by, or any notification of or filing with, any
Governmental Authority or other person is required in connection with the
execution, delivery and performance by the Stockholder of this Agreement,
each Related Agreement to which the Stockholder is a party or the
consummation by the Stockholder of the transactions contemplated hereby or
thereby.
(c) Investment Representations. The Stockholder:
(i) is acquiring the Merger Shares being issued to the
Stockholder for investment and for the Stockholder's own account and not as a
nominee or agent for any other person and with no present intention of
distributing or reselling such shares or any part thereof in any transactions
that would be in violation of the Securities Act or any state securities or
"blue-sky" laws;
(ii) understands (A) that the Merger Shares to be issued to her
have not been registered for sale under the Securities Act or any state
securities or "blue-sky" laws in reliance upon exemptions therefrom, which
exemptions depend upon, among other things, the bona fide nature of the
investment intent of such Stockholder as expressed herein, (B) that such
Merger Shares must be held indefinitely and not sold until such shares are
registered under the Securities Act and any applicable state securities or
"blue-sky" laws, unless an exemption from such registration is available,
(C) that Parent is under no obligation to so register such Merger Shares
and (D) that the certificates evidencing such Merger Shares will be
imprinted with a legend in the form set forth in Section 7.2(b) that
prohibits the transfer of such shares, except as provided in Section 7.2;
(iii) has been furnished with, and has read and reviewed, the
Parent SEC Documents;
(iv) has had an opportunity to ask questions of and has
received satisfactory answers from the officers of Parent or persons acting on
Parent's behalf concerning Parent and the terms and conditions of an investment
in Parent Preferred Stock or Parent Common Stock issuable upon conversion
thereof;
(v) is aware of Parent's business affairs and
financial condition and has acquired sufficient information about Parent to
reach an informed and knowledgeable decision to acquire the Merger Shares to be
issued to her;
(vi) can afford to suffer a complete loss of her
investment in such Merger Shares;
(vii) is familiar with the provisions of Rule 144 promulgated
under the Securities Act which, in substance, permits limited public
resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof, in a non-public offering subject to the satisfaction
of certain circumstances which require among other things: (A) the
availability of certain public information about the issuer, (B) the
resale occurring not less than one year after the party has purchased, and
made full payment for, within the meaning of Rule 144, the securities to
be sold; and, in the case of an affiliate, or of a non-affiliate who has
held the securities less than two years, the amount of securities being
sold during any three month period not exceeding the specified limitations
stated therein, if applicable and (C) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Exchange Act);
(viii) understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule
144 is not exclusive, the staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons
and their respective brokers who participate in such transactions do so at
their own risk;
(ix) has either alone or together with the Stockholder's
"Purchaser Representative" (as such term is defined in Rule 501(h), as
promulgated under the Securities Act) as to each such Purchaser, a
"Purchaser Representative"), such knowledge and experience in financial
and business matters that she is capable of evaluating the merits and risk
of acquiring and holding shares of Parent Preferred Stock or Parent Common
Stock issuable upon conversion thereof; and (x) the Stockholder is an
"accredited investor" within the meaning of Rule 501(a) under the
Securities Act or if the Stockholder has identified that such Stockholde
is being advised by a Purchaser Representative in connection with the
transactions contemplated hereby.
(d) Brokers. No Stockholder has, nor have any of their officers,
directors, securityholders or employees (if any) employed any
broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the
transactions contemplated hereby. (e) Absence of Claims. The
Stockholder hereby represents and warrants that in her capacity
as a stockholder she has no knowledge of any claims that she may
have against the Released Parties (as defined in Section 5.2
hereof). (f) Accuracy of Representations and Warranties of the
Company. To the best knowledge of the Stockholder, the
representations and warranties of the Company set forth in
Section 3.1 are true, correct and complete in all material
respects and the Company is not in breach or violation thereof.
(g) Representation by Legal Counsel. The Stockholder has been
advised by legal counsel in connection with the negotiation,
execution and delivery of this Agreement and the Related
Agreements and the performance of the transactions contemplated
hereby an thereby.
3.3 Several Representations and Warranties of the Founders. Each of the
Founders severally (and not jointly) represents and warrants to Parent,
Acquisition Sub and the Company, with respect to himself or herself, as follows:
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(a) Accuracy of Representations and Warranties of the Company. Such Founder
has carefully read and reviewed this Agreement and the Schedules and Exhibits
hereto and to the best knowledge of such Founder, all representations and
warranties of the Company set forth in Section 3.1 hereof are true, correct and
complete in all material respects and the Company is not in breach or violation
thereof.
(b) Employment of Founders. Neither the (i) current employment by, or
association with, the Company, or future employment by, or association with,
Parent or the Surviving Corporation of such Founder, or (ii) use, in connection
with any business presently conducted or proposed to be conducted by the
Company, Parent or the Surviving Corporation, of any information or techniques
presently utilized or proposed to be utilized by the Company, Parent, the
Surviving Corporation or such Founders, violates, conflicts with, breaches or is
prohibited under, or would violate, conflict with, breach or be prohibited
under, any agreements or arrangements between such Founder and any other person
obtained on a confidential basis from third parties, trade secrets or
confidential or proprietary information.
3.4 Representations and Warranties of Parent and Acquisition Sub. Parent
and Acquisition Sub represent and warrant to the Company as follows:
------------------------------------------------------------
(a) Organization; Good Standing; Qualification and Power. Each
of Parent and Acquisition Sub (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
(ii) has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as now
being conducted, to enter into this Agreement and each of the Related
Agreements to which it is a party, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. Parent has delivered to the Company true and complete copies of
the Charter and by-laws of each of Parent and Acquisition Sub.
(b) Capital Stock. Parent's Quarterly Report on Form 10-Q filed
with the SEC with respect to the fiscal quarter ended March 31, 1999 (the
"Form 10-Q"), sets forth a true and complete description of the authorized
and outstanding shares of capital stock of Parent as of such date. Parent
has duly authorized and reserved for issuance the Merger Shares, and, when
issued in accordance with the terms of Article II, the Merger Shares will
be validly issued, fully paid and nonassessable and free of preemptive
rights (other than any Parent Rights which may be issued). Parent owns all
the outstanding shares of capital stock of Acquisition Sub, and all of
such shares are validly issued, fully paid and nonassessable and not
subject to preemptive rights.
(c) Authority. The execution, delivery and performance by Parent
of this Agreement and each of the Related Agreements to which it is a
party and the execution, delivery and performance of this Agreement and
the Agreement of Merger by Acquisition Sub and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Parent and Acquisition Sub,
respectively. This Agreement and each of the Related Agreements to which
Parent is a party are valid and binding obligations of Parent, enforceable
against Parent in accordance with their respective terms; and this
Agreement and the Agreement of Merger are the valid and binding
obligations of Acquisition Sub, enforceable against Acquisition Sub in
accordance with their respective terms. Neither the execution, delivery
and performance by Parent of this Agreement and the Related Agreements to
which Parent is a party, the execution, delivery and
performance of this Agreement and the Agreement of Merger by Acquisition
Sub, nor the consummation of the transactions contemplated hereby or
thereby, will in any material respect (A) conflict with, (B) result in any
material violations of, (C) cause a material default under (with or
without due notice, lapse of time or both), (D) give rise to any material
right of termination, amendment, cancellation or acceleration of any
obligation contained in or the loss of any material benefit under, (E)
result in the creation of any material Encumbrance on or against any
assets, rights or property of Parent or Acquisition Sub, as the case may
be, under any term, condition or provision of (x) any material instrument
or agreement to which Parent or Acquisition Sub is a party, or by which
Parent or Acquisition Sub or any of their respective properties, assets or
rights may be bound, (y) any material law, statute, rule, regulation,
order, writ, injunction, decree, permit, concession, license or franchise
of any Governmental Authority applicable to Parent or Acquisition Sub or
any of their respective properties, assets or rights or (z) Parent's or
Acquisition Sub's Charter or by-laws, as amended through the date hereof,
respectively, in each case, which conflict, breach, default or violation
or other event would prevent the consummation of the transactions
contemplated by this Agreement, the Agreement of Merger or any Related
Agreement to which Parent or Acquisition Sub is a party. Except as
contemplated by this Agreement, no permit, authorization, consent or
approval of or by, or any notification of or filing with, any Governmental
Authority or other person is required in connection with the execution,
delivery and performance by Parent or Acquisition Sub of this Agreement,
the Agreement of Merger (in the case of Acquisition Sub) or the Related
Agreements to which they are a party or the consummation of the
transactions contemplated hereby or thereby, other than (i) the filing
with the SEC of such reports and information under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated by the SEC thereunder, as may be required in
connection with this Agreement and the transactions contemplated hereby,
(ii) the filing of such documents with, and the obtaining of such orders
from, various state securities and blue-sky authorities as are required in
connection with the transactions contemplated hereby, (iii) the filing of
the Agreement of Merger with the Secretary of State of the State of
Delaware and (iv) such other consents, waivers, authorizations, filings,
approvals and registrations which if not obtained or made would materially
impair the ability of Parent or Acquisition Sub to consummate the
transactions contemplated by this Agreement, including, without
limitation, the Merger (each of the actions reflected in clauses (i), (ii)
and (iii) to be taken by Parent).
(d) SEC Documents.
(i) Parent has furnished or made available to the Company a
correct and complete copy of the Form 10-Q, Parent's Annual Report on Form
8-K for the year ended December 31, 1998 and each report, schedule,
registration statement and definitive proxy statement filed by Parent with
the SEC on or after the date of filing of the Form 10-Q which are all the
documents (other than preliminary material) that Parent was required to
file (or otherwise did file) with the SEC in accordance with Sections 13,
14 and 15(d) of the Exchange Act on or after the date of filing with the
SEC of the Form 10-Q (collectively, the "Parent SEC Documents"). As of
their respective filing dates, or in the case of registration statements,
their respective effective dates, none of the Parent SEC Documents
(including all exhibits and schedules thereto and documents incorporated
by reference therein) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Parent
SEC Documents complied when filed, or in the case of registration
statements, as of their respective effective dates, in all material
respects with the then applicable requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations
promulgated by the SEC thereunder.
(ii) The financial statements (including the notes thereto) of
Parent included in the Form 10-Q for the fiscal quarter then ended,
complied as to form in all material respects with the then applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with GAAP during the
periods involved (except as may have been indicated in the notes thereto)
and fairly present the financial position of Parent as at the dates
thereof and the results of their operations, stockholders' equity and cash
flows for the period then ended.
(e) Brokers. Neither Parent, Acquisition Sub, nor any of
their respective officers, directors or employees have employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby.
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ARTICLE 4
RELATED AGREEMENTS
4.1 Related Agreements. Simultaneously with the execution and
delivery of this Agreement, the following agreements (such
agreements, being herein collectively referred to as the
"Related Agreements") are being executed and delivered by the
respective parties thereto: (a) Escrow Agreement. Each of
Parent, the Stockholder and the Escrow Agent are entering into
the Escrow Agreement. (b) Employment Agreement. The Company is
entering into an Employment Agreement with William Zanker in the
form of Exhibit C attached hereto,, pursuant to which, among
other things, William Zanker will become an employee of Parent
or the Surviving Corporation. (c) Repurchase Agreement. The
Company is entering into a Repurchase Agreement with the
Stockholder in the form of Exhibit D attached hereto,, pursuant
to which, among other things, the Company will have the option
to repurchase the Merger Shares under circumstances set forth
therein.
ARTICLE 5
STOCKHOLDER AND FOUNDER AGREEMENTS
5.1 Affiliate Agreement.
(a) The Stockholder may be deemed to be an "affiliate" of the
Company within the meaning of Rule 145 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), and Accounting Series
Release No. 130, as amended, Accounting Series Release No. 135 and Staff
Accounting Bulletin No. 76 of the Securities and Exchange Commission (the
"SEC"), although nothing contained herein should be construed as an
admission thereof. If the Stockholder were to be deemed an "affiliate" of
the Company, the Stockholder's ability to sell, exchange, transfer, pledge
or otherwise dispose of Merger Shares may be restricted unless such
transaction is registered under the Securities Act or an exemption from
such registration is available. The Stockholder understands that such
exemptions are limited and has obtained advice of counsel as to the nature
and conditions of such exemptions, including information with respect to
the applicability to the transfer of such securities of Rules 144 and
145(d) promulgated under the Securities Act.
(b) The Stockholder hereby covenants and agrees that the
Stockholder shall not offer, sell, exchange, transfer, pledge or otherwise
dispose of any Merger Shares, or any securities that may be paid as a
dividend or otherwise distributed thereon or with respect thereto or
issued or delivered in exchange or substitution therefor (all such shares
and other securities of Parent being herein sometimes collectively
referred to as "Restricted Securities"), or any option, right or other
interest with respect to any Restricted Securities unless at such time
either:
(i) such transaction shall be permitted pursuant to
the provisions of Rule 144 or Rule 145, as applicable, promulgated under
the Securities Act;
(ii) counsel representing the Stockholder, reasonably
satisfactory to Parent, shall have advised Parent in a
written opinion letter reasonably satisfactory to Parent,
that no registration under the Securities Act is required
in connection with the proposed transaction;
(iii) a registration statement under the Securities Act
covering the Merger Shares proposed to be sold, exchanged,
transferred or otherwise disposed of, describing the
manner and terms of the proposed sale, transfer, exchange
or other disposition, and containing a current prospectus,
shall have been filed with the SEC and become effective
under the Securities Act; or
(iv) an authorized representative of the SEC shall have
rendered written advice to the Stockholder (sought in writing by
the Stockholder or counsel to the Stockholder, with copies
thereof and of all other related communications delivered to
Parent) to the effect that the SEC would take no action, or that
the staff of the SEC would not recommend that the SEC take
action, with respect to the proposed sale, transfer or other
disposition of such Merger Shares if consummated. (c) The
Stockholder also understands and agrees that Parent, at its
discretion, may cause stop transfer orders to be placed with its
transfer agent with respect to certificates for Merger Shares
owned by the Stockholder but not as to certificates for such
Merger Shares as to which the legend set forth in Section 7 is
no longer required. (d) The Stockholder shall observe and comply
with the Securities Act and the rules and regulations
promulgated by the SEC thereunder as now in effect or hereafter
enacted or promulgated, and as from time to time amended, in
connection with any offer, sale, exchange, transfer, pledge or
other disposition of Merger Shares beneficially owned by the
Stockholder. (e) From and after the Effective Time and for so
long as necessary in order to permit the Stockholder to sell
Merger Shares pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Securities Act, Parent shall use
reasonable efforts to file on a timely basis all reports
required to be filed by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, referred to in
paragraph (c)(1) of Rule 144 promulgated by the SEC under the
Securities Act (or, if
applicable, Parent shall use reasonable efforts to make publicly available
the information regarding itself referred to in paragraph (c)(2) of Rule 144),
in order to permit the Stockholder to sell, pursuant to the terms and conditions
of Rule 145 and the applicable provisions of Rule 144, Merger Shares
beneficially owned by the Stockholder.
5.2 Stockholder Release. Effective as of the Effective Time and for
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Stockholder (the "Releasor") on her behalf and on behalf of
her (i) heirs, executors, administrators, agents, successors and assigns,
attorneys, employees, (the "Releasor Persons"), as applicable, hereby releases,
waives and discharges the Company, Parent and Acquisition Sub and their
respective officers, directors, stockholders, agents, successors and assigns
(collectively, the "Released Parties"), from any and all actions, causes of
action, suits, debts, dues, sums of money, accounts, bonds, bills, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, executions, claims and demands whatsoever, known or unknown, in law
or equity (each a "Claim" and collectively, the "Claims") arising from the
Releasor's relationship with the Company prior to and including the date hereof
or the Releasor's status as a stockholder, director, officer or employee of the
Company prior to and including the date hereof; provided, however, that the
Releasor does not release the Released Parties from any claims in connection
with any breach by the Released Parties of this Agreement or the Related
Agreements. ARTICLE 6
CLOSING ACTIONS; DELIVERABLES
6.1 Actions Being Taken At Or Prior to Closing. The following
actions are being taken at or prior to the Closing:
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(a) Stockholder Approval; Agreement of Merger. This
Agreement and the Merger shall have been duly and validly approved and
adopted by the stockholders of the Company in accordance with the Delaware
Statute and the Company's Charter and By-laws, and the Agreement of Merger
shall have been executed and delivered by Acquisition Sub and the Company
and filed with and accepted by the Secretary of State of the State of Delaware.
-----------------------------------------
(b) Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with or expiration of waiting periods
imposed by any Governmental Authority necessary for the consummation of the
transactions contemplated hereby shall have been obtained or made or shall
have occurred.
---------
(c) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of the Merger shall have been issued by any Federal
or state court or other Governmental Authority and remain in
effect. (d) Legislation. No Federal, state, local or foreign
statute, rule or regulation shall have been enacted which
prohibits, restricts or delays the consummation of the
transactions contemplated by this Agreement.
6.2 Deliverables to Parent and Acquisition Sub. The following
documents and other items are being delivered to Parent and
Acquisition Sub at the Closing: (a) Delivery of Certificates.
The Old Certificates, in the manner and otherwise in accordance
with Section 2.2 hereof, are being delivered to Parent.
(b) Opinion of the Company's Counsel. A favorable opinion dated
the Closing Date is being delivered by Swidler, Berlin, Shereff
Freidman LLP, counsel to the Company, in favor of Parent and
Acquisition Sub, in form and substance reasonably satisfactory
to Parent and Acquisition Sub. (c) Consents and Approvals. Duly
executed copies of all consents and approvals contemplated by
this Agreement or the Company Disclosure Schedule, in form and
substance satisfactory to Parent and Acquisition Sub, are being
delivered by the Company.
(d) Government Consents, Authorizations, Etc. Copies of all
consents, authorizations, orders or approvals of, and filings or
registrations with, any Governmental Authority which are
required for or in connection with the execution and delivery by
the Company and the Stockholders of this Agreement, the
Agreement of Merger and the Related Agreements and the
consummation by the Company and the Stockholder of the
transactions contemplated hereby, are being delivered by the
Company. (e) Company Expenses. A true, correct and complete
schedule (the "Schedule of Expenses") of all Company Expenses
paid or incurred by or on behalf of the Company through the
Closing Date, accompanied by a certificate signed by the Chief
Financial Officer of the Company certifying the accuracy and
completeness thereof, is being delivered by the Company; and the
Company is furnishing evidence satisfactory to Parent and
Acquisition Sub that the Company has paid the amount of Company
Expenses.
(f) Company Expenses Release. A written instrument in form and
substance reasonably satisfactory to Parent and Acquisition Sub is being
delivered by each third party identified on the Schedule of Expenses (i)
acknowledging that upon receipt by each such party in the ordinary course
following the Effective Time after presentation of detailed statements
thereof of the respective amounts set forth therein (each, a "Stated
Amount"), such payment will constitute full payment of all fees and
expenses of such party constituting Company Expenses and (ii) releasing
Parent, Acquisition Sub, the Surviving Corporation and their Affiliates
from any liabilities or obligations in respect of the payment of any fees
and expenses that are or may be characterized as Company Expenses other
than the Stated Amounts (and concurrently with the payment of the Stated
Amounts all liability with respect thereto shall be deemed so released).
(g) Resignation of Directors. Resignations are being delivered
by each of the directors and officers of the Company immediately
prior to the Effective Time, effective as of the Effective Time.
(h) Officer's Certificates. Certain officers' certificates are
being delivered by the Company.
6.3 Deliverables to Company. The following documents and other
items are being delivered to the Company at the Closing:
-----------------------
(a) Government Consents, Authorizations, Etc. Copies of
all consents, authorizations, orders or approvals of, and filings or
registrations with, any Governmental Authority which are required for or in
connection with the execution and delivery by Parent and Acquisition Sub of
this Agreement, the Agreement of Merger and the Related Agreements and the
consummation by Parent and Acquisition Sub of the transactions contemplated
hereby or thereby, are being delivered by Parent.
-----------------------------------------
(b) Purchase Price. The delivery of the New Certificates
(representing the Merger Shares (other than the Escrow Shares)) and the cash
consideration deliverable at the Effective Time in the manner and otherwise in
accordance with Article II hereof (and concurrent delivery of Escrow Shares to
the Escrow Agent in accordance with Section 2.2 hereof), are being made by
Parent.
--------------
(c) Related Agreements. Each of the Related Agreements
is being delivered by Parent to the extent that it is required or contemplated
by the parties hereto to be a party to any Related Agreement.
------------------
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Restriction on Transfer.
(a) The shares of Parent Preferred Stock to be issued to
each Stockholder at the Effective Time pursuant to the Merger and any shares
of capital stock or other securities received with respect thereto
(collectively, the "Restricted Securities") shall not be sold, transferred,
assigned, pledged, encumbered or otherwise disposed of (each, a "Transfer")
except upon the conditions specified in this Section 7.1, which conditions are
intended to insure compliance with the provisions of the
Securities Act. Each Stockholder shall observe and comply with the
Securities Act and the rules and regulations promulgated by the SEC thereunder
as now in effect or hereafter enacted or promulgated, and as from time to time
amended, in connection with any Transfer of Restricted Securities beneficially
owned by the Stockholder.
(b) Each certificate representing Restricted Securities
issued to a Stockholder and each certificate for such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 7.1(c) and 7.1(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR "BLUE-SKY" LAWS. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO
THE CONDITIONS SPECIFIED IN SECTIONS 5.1 AND 7.2 OF THE AGREEMENT AND PLAN
OF REORGANIZATION AMONG GHS, INC., CONCEPT ACQUISITION CORPORATION AND
CONCEPT DEVELOPMENT, INC. AND THE OTHER SIGNATORIES THERETO AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH
CONDITIONS, GHS HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW
CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED
HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF GHS, INC."
(c) Each Stockholder agrees, prior to any Transfer of Restricted
Securities, to give written notice to Parent of such Stockholder's
intention to effect such Transfer and to comply in all other respects with
the provisions of this Section 7.2. Each such notice shall describe the
manner and circumstances of the proposed Transfer and shall be accompanied
by the written opinion, addressed to Parent, of counsel for the holder of
such Restricted Securities, stating that in the opinion of such counsel
(which opinion and counsel (if other than Swidler, Berlin, Shereff
Friedman LLP) shall be reasonably satisfactory to Parent) such proposed
transfer does not involve a transaction requiring registration or
qualification of such Restricted Securities under the Securities Act. The
holder thereof shall thereupon, with the written consent of Parent, be
entitled to Transfer such Restricted Securities in accordance with the
terms of the notice delivered by it to Parent. Each certificate or other
instrument evidencing the securities issued upon the Transfer of any such
Restricted Securities (and each certificate or other instrument evidencing
any untransferred balance of such Restricted Securities) shall bear the
legend set forth in Section 7.1(b) unless (x) in such opinion of counsel
of Parent registration of any future Transfer is not required by the
applicable provisions of the Securities Act or (y) Parent shall have
waived the requirement of such legends. No Stockholder shall Transfer any
Restricted Securities until such opinion of counsel has been given (unless
waived by Parent or unless such opinion is not required in accordance with
the provisions of this Section 7.1(c)).
(d) Notwithstanding the foregoing provisions of this Section
7.1, the restrictions imposed by this Section 7.1 upon the transferability
of Restricted Securities shall cease and terminate when (i) any such
shares are sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act or as otherwise
contemplated by Section 7.1(c) and, pursuant to Section 7.1(c), the
securities so transferred are not required to bear the legend set forth in
Section 7.1(c) or (ii) the holder of such Restricted Securities has met
the requirements for Transfer of such Restricted Securities pursuant to
Rule 144 or Rule 145, as applicable. Whenever the restrictions imposed by
this Section 7.1 shall terminate, as herein provided, the holder of
Restricted Securities as to which such restrictions have terminated shall
be entitled to receive from Parent, without expense, a new certificate not
bearing the restrictive legend set forth in Section 7.1(b) and not
containing any other reference to the restrictions imposed by this Section
7.1.
(e) Each Stockholder understands and agrees that Parent, at its
discretion, may cause stop transfer orders to be placed with its
transfer agent with respect to certificates for Restricted Securities
owned by such Stockholder but not as to certificates for such shares
of Parent Preferred Stock as to which the legend set forth in
paragraph (b) of this Section 7.1 is no longer required because one or
more of the conditions set forth in Section 7.1(d) shall have been
satisfied. 7.2 Disclosure of Information; Non-Competition. Each of the
Founders and the Stockholder acknowledges and recognizes that the
Subject Business has been conducted or is currently planned to be
conducted by the Company throughout the world, and further
acknowledges and recognizes the highly competitive nature of the
industry in which the Subject Business is involved and that,
accordingly, in consideration of the premises contained herein, the
consideration to be received hereunder and the
direct and indirect benefits to each of the Founders and the Stockholder of the
transactions contemplated hereby, and in consideration of and as an inducement
to Parent and Acquisition Sub to enter into to this Agreement and to consummate
the transactions contemplated hereby:
(a) From and after the date hereof, no Founder or Stockholder
shall use or disclose to any Person, except as required by law or judicial
process, any Confidential Information (as defined below), for any reason
or purpose whatsoever, nor shall he or she make use of any of the
Confidential Information for his or her own purposes or for the benefit of
any Person except Parent and the Surviving Corporation. For purposes of
this Agreement, "Confidential Information" shall mean Intellectual
Property Rights of the Company, the Surviving Corporation or Parent or its
Affiliates or the Subject Business and the terms and provisions of this
Agreement (other than information that is in the public domain at the time
of receipt thereof by such Stockholder, or otherwise becomes public other
than as a result of the breach by such Stockholder of his or her agreement
hereunder or is rightfully received from a third party without any
obligation of confidentiality to Parent or the Company or is independently
developed by such Stockholder). As used herein, the term "Subject
Business" shall mean any business conducted anywhere in the world of the
type and character of business engaged in by Parent or the Surviving
Corporation.
(b) Each of the Founders and the Stockholder shall not during
the three-year period commencing at the Effective Time within the United
States or any other country in which Parent or a licensee of Parent is
then operating or preparing to operate, directly or indirectly, own,
manage, operate, join, control, be employed by, perform consulting
services for, or participate in the ownership, management, operation or
control of, or be connected in any manner with, any business or operation
(other than by way of working for an affiliate of any such business or
operation which is not itself involved in any such business or operation)
of the type, character and content engaged in by the Company.
ARTICLE 8
INDEMNIFICATION
8.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Affiliate" as to any person means any entity, directly or
indirectly, through one or more intermediaries, controlling,
controlled by or under common control with such person. (b)
"Event of Indemnification" shall mean the following:
(i) the untruth, inaccuracy or breach of any
representation or warranty of the Company, the Stockholder or the Founders
(including the fact and circumstances underlying such untruth, inaccuracy or
breach) contained in Sections 3.1, 3.2 and 3.3 of this Agreement, or in the
Company Disclosure Schedule, any Exhibit or Schedule hereto or any document
delivered in connection herewith;
(ii) the breach of any agreement or covenant of the
Company or the Stockholders contained in this Agreement, the Related Agreements
or in the Company Disclosure Schedule, any Exhibit hereto or any document
delivered in connection herewith;
(iii) any claim, demand, liability or obligation of any
e
Company arising after the Closing Date under contracts and agreements entered
into prior to the Closing Date that are disclosed on the Company Disclosure
Schedule; or
(iv) any claim, demand, liability or obligation sustained or
suffered by the Company, Parent or the Surviving Corporation, or any of
them, arising from or in connection with (A) the action of the
Stockholders required to approve the transactions contemplated by this
Agreement, the Agreement and the Related Agreements, or (B) any assertion
of impropriety by any Stockholder against the Company, Parent or the
Surviving Corporation, or any of them, with respect to any actions or
transactions of or involving the Company prior to or at the Effective Time
(including, without limitation, the actions and transactions contemplated
by this Agreement, the Agreement of Merger and the Related Agreements).
(c) "Indemnified Persons" shall mean and include Parent,
Acquisition Sub and the Surviving Corporation and their respective Affiliates,
successors and assigns, and the respective officers and directors of each of the
foregoing.
-------------------
(d) "Indemnifying Persons" shall mean and include (A) prior to
Closing, the Company and each of the Stockholders and its or his
respective successors, assigns, heirs and legal representatives
and estates, as the case may be and (B) on and after the
Closing, each of the Stockholders and its or his respective
successors, assigns, heirs and legal representatives and
estates, as the case may be. (e) "Losses" shall mean any and all
losses, claims, shortages, damages, liabilities, expenses
(including reasonable attorneys' and accountants' fees),
assessments, Taxes (including interest or penalties thereon)
sustained, suffered or incurred by any Indemnified Person
arising from or in connection with any such matter that is the
subject of indemnification under Section 8.2 hereof.
8.2 Indemnification Generally. The Indemnifying Persons shall
severally indemnify the Indemnified Persons from and against any and all Losses
arising from or in connection with any Event of Indemnification.
-------------------------
8.3 Assertion of Claims. No claim shall be brought under Section 8.2
hereof unless the Indemnified Persons, or any of them, at any time prior to the
applicable Survival Date, give the Stockholder (a) written notice of the
existence of any such claim, specifying the nature and basis of such claim and
the amount thereof, to the extent known or (b) written notice pursuant to
Section 8.4 of any third party claim, the existence of which might give rise to
such a claim but the failure so to provide such notice to the Stockholder will
not relieve the Indemnifying Persons from any liability which they may have to
the Indemnified Persons under this Agreement or otherwise (unless and only to
the extent that such failure results in the loss or compromise of any rights or
defenses of the Indemnifying Persons and they were not otherwise aware of such
action or claim). Upon the giving of such written notice as aforesaid, the
Indemnified Persons, or any of them, shall have the right to commence legal
proceedings prior or subsequent to the Survival Date for the enforcement of
their rights under Section 8.2 hereof.
8.4 Notice and Defense of Third Party Claims. Losses resulting
from the assertion of liability by third parties (each, a "Third Party Claim")
shall be subject to the following terms and conditions:
----------------------------------------
(a) The Indemnified Persons shall promptly give written notice
to the Stockholders' Committee of any Third Party Claim that might give
rise to any Loss by the Indemnified Persons, stating the nature and basis
of such Third Party Claim, and the amount thereof to the extent known.
Such notice shall be accompanied by copies of all relevant documentation
with respect to such Third Party Claim, including, without limitation, any
summons, complaint or other pleading that may have been served, any
written demand or any other document or instrument. Notwithstanding the
foregoing, the failure to provide notice as aforesaid to the Stockholders'
Committee will not relieve the Indemnifying Persons from any liability
which they may have to the Indemnified Persons under this Agreement or
otherwise (unless and only to the extent that such failure results in the
loss or compromise of any rights or defenses of the Indemnifying Person
and they were not otherwise aware of such action or claim).
(b) The Indemnified Persons shall defend any Third Party Claims
with counsel of their own choosing, and shall act reasonably and in
accordance with their good faith business judgment in handling such Third
Party Claims. The Stockholders' Committee and the Indemnifying Persons, on
the one hand, and the Indemnified Persons, on the other hand, shall make
available to each other and their counsel and accountants all books and
records and information relating to any Third Party Claims, keep each
other fully apprised as to the details and progress of all proceedings
relating thereto and render to each other such assistance as may be
reasonably required to ensure the proper and adequate defense of any and
all Third Party Claims.
8.5 Survival of Representations and Warranties. Subject to the further
provisions of this Section 8.5, the representations and warranties of the Parent
and Acquisition Sub shall be deemed to be a condition to the Merger and shall
survive the Effective Time for one year and the representations and warranties
made by the Company in Section 3.1, the Stockholders in Section 3.2 and the
Founders in Section 3.3 hereof shall survive the Effective Time for one year;
provided, however, that the representations and warranties set forth in Section
3.1(h) (Tax Matters) shall survive for period of the applicable statute of
limitations. For convenience of reference, the date upon which any
representation and warranty contained herein shall terminate is referred to
herein as the "Survival Date." Anything contained herein to the contrary
notwithstanding, the representations and warranties of the Company contained in
this Agreement (including, without limitation, the Company Disclosure Schedule)
(i) are being given by the Company on behalf of the Stockholders and for the
purpose of binding the Stockholders to the terms and provisions of this Article
VIII and the Escrow Agreement, and as an inducement to Parent and Acquisition
Sub to enter into this Agreement and to approve the Merger (and the Company
acknowledges that Parent and Acquisition Sub have expressly relied thereon) and
(ii) are solely for the benefit of the Indemnified Persons and each of them.
Accordingly, no third party (including, without limitation, the Stockholders or
anyone acting on behalf of any thereof) other than the Indemnified Persons, and
each of them, shall be a third party or other beneficiary of such
representations and warranties and no such third party shall have any rights of
contribution against the Company or the Surviving Corporation with respect to
such representations or warranties or any matter subject to or resulting in
indemnification under this Article VIII or otherwise.
ARTICLE 9
MISCELLANEOUS
9.1 Expenses. As used in this Agreement, "Transaction Costs" shall
mean, with respect to any party, all actual, out-of-pocket expenses incurred by
such party to third parties, in connection with this Agreement, the Merger and
all other transactions provided for herein and therein; but shall not in any
event include general overhead; the time spent by employees of such party
internally; postage, telephone, telecopy, photocopy and delivery expenses of
such party; permit and filing fees; and other non-material expenses that are
incidental to the ordinary course of business. Each party hereto shall bear its
own fees and expenses in connection with the transactions contemplated hereby;
provided, however, that in the event the Merger shall be consummated, Parent and
Acquisition Sub shall bear all Transaction Costs of Parent and Acquisition Sub
and the Stockholders shall bear all Transaction Costs of the Company, whether or
not such fees and expenses have been paid by the Company on or before the
Closing Date and whether or not such fees and expenses are reflected in the
Company Disclosure Schedule or the Schedule of Expenses (such Transaction Costs
of the Company being herein collectively referred to as the "Company Expenses").
9.2 Entire Agreement. This Agreement (including the Company
Disclosure Schedule and the Exhibits attached hereto) and the other writings
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby and supersede all prior
agreements or understandings, written or oral, among the parties with respect
thereto including, but not limited to, the Original Reorganization Agreement.
----------------
9.3 Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
--------------------
9.4 Public Announcements. The parties hereto agree that, to the
maximum extent feasible, but subject, in the case of Parent, to its public
disclosure and, as to all parties, other legal and regulatory obligations, they
shall advise and confer with each other prior to the issuance (and provide
copies to the other party prior to issuance) of any public announcements,
reports, statements or releases pertaining to the Merger; provided that the
parties shall not disclose the purchase price of
the Merger in any such public announcements.
9.5 Notices.
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered
personally or sent by nationally-recognized overnight courier or
by registered or certified mail, postage prepaid, return receipt
requested or by telecopier, with confirmation as provided above
addressed as follows: (a) if to Parent or Acquisition Sub, to:
GHS, Inc.
2400 Research Blvd.
Rockville, Maryland 20850
Attention:
Telecopier: (301) 308-3254
with copies to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Martin H. Levenglick, Esq.
Telecopier: (212) 506-5151;
(b) if to the Company, to:
Concept Development, Inc.
20 Taconic Road
Millwood, New York 10546
Attention: William Zanker
Telecopier: (212) 967-6256;
with a copy to:
Swidler, Berlin, Shereff Friedman LLP
919 Third Avenue
New York, New York 10022-9998
Attention: Morris Orens, Esq.
Telecopier: (212) 891-9507
(c) if to the Founders, to:
20 Taconic Road
Millwood, New York 10546
Attention: William Zanker and Debbie Dworkin
Telecopier: (212) 967-6256;
(d) if to the Stockholder, at her address set forth on
Schedule 10.5 attached hereto;
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such
notices or communications shall be deemed to be received (a) in the case of
personal delivery or telecopy, on the date of such delivery, (b) in the case
of nationally-recognized overnight courier, on the next business day after the
date when sent and (c) in the case of mailing, on the third business day
following the date on which the piece of mail
containing such communication was posted.
9.6 Counterparts. This Agreement may be executed in any number
of counterparts by original or facsimile signature, each such counterpart shall
be an original instrument, and all such counterparts together shall constitute
one and the same agreement.
------------
9.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein (without regard to principles
of conflicts of laws) except for those terms and conditions that specifically
relate to Merger as described in Article I hereof, which shall be governed by
and construed in accordance with the General Corporation Law of the State of
Delaware (without regard to principles of
-------------
conflicts of laws).
9.8 Benefits of Agreement. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
9.9 Pronouns. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof whenever the
context and facts require such construction.
9.10 Amendment, Modification and Waiver. This Agreement shall not be
altered or otherwise amended except pursuant to (a) an instrument in writing
signed by Parent and the Company prior to the Effective Date, if Article VII is
not affected by such alteration or amendment and (b) an instrument in writing
signed by (i) Parent, (ii) the Company and (iii) the Stockholders, if Article
VII is affected thereby or the alteration or amendment occurs subsequent to the
Effective Date; provided, however, that after the approval and adoption of this
Agreement and the Merger by the Stockholders, no amendment of this Agreement
shall be made which pursuant to the Delaware Statute or other law requires the
further approval of the Stockholders; provided further, however, that any party
to this Agreement may waive any obligation owed to it by any other party under
this Agreement. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach.
[Remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto
has caused this Agreement and Plan of
Reorganization to be executed on its behalf
as of the day and year first above written.
GHS, INC.
By:___________________________
Name:
Title:
CONCEPT ACQUISITION CORPORATION
By:___________________________
Name: Beth Polish
Title: President
CONCEPT DEVELOPMENT, INC.
By:___________________________
Name:
Title:
FOUNDERS:
---------------------------
William Zanker
---------------------------
Debbie Dworkin
STOCKHOLDER:
Debbie Dworkin
<PAGE>
SCHEDULE 2.2(b)
ESCROW SHARES
[*]
SCHEDULE 3.2
STOCKHOLDER SHARES
1 share of Company Common Stock owned by D. Dworkin
SCHEDULE 4.1(a)
COMPANY AFFILIATES
D. Dworkin
W. Zanker
SCHEDULE 6.2(e)
CONTINUING EMPLOYEES
W. Zanker
<PAGE>
SCHEDULE 10.5
STOCKHOLDERS' ADDRESSES
20 Taconic Road
Millwood, New York 10546
EXHIBIT A
FORM OF AGREEMENT OF MERGER
EXHIBIT B
FORM OF ESCROW AGREEMENT
EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT
EXHIBIT D
FORM OF REPURCHASE AGREEMENT
<PAGE>
*Confidential treatment has been requested for certain portions of this exhibit.
Omitted positions have been filed separately with the Commission.
EXHIBIT 2(c)
AGREEMENT OF MERGER dated as of May
27, 1999, between CONCEPT ACQUISITION CORPORATION, a Delaware corporation
("Acquisition Sub"), and CONCEPT DEVELOPMENT, INC., a Delaware corporation (the
"Company").
The Boards of Directors of Acquisition Sub and the Company have each
duly approved and adopted this Agreement, the Agreement and Plan of
Reorganization dated as of May 27, 1999, (the "Reorganization Agreement"),
among, GHS, Inc. a Delaware corporation ("Parent"), Acquisition Sub, a
wholly-owned subsidiary of Parent, the Company and the other parties thereto and
the proposed merger of Acquisition Sub with and into the Company in accordance
with this Agreement, the Reorganization Agreement and the Delaware General
Corporation Law (the "Delaware Statute"), whereby, among other things, the
issued and outstanding shares of common stock, no par value, of the Company (the
"Company Common Stock"), will be exchanged and converted into the right to
receive cash and shares of Series C preferred stock, $.01 par value, of Parent
(the "Parent Preferred Stock") in the manner set forth in this Agreement and the
Reorganization Agreement, upon the terms and subject to the conditions set forth
in this Agreement and the Reorganization Agreement.
NOW, THEREFORE, in consideration of the mutual
benefits to be derived from this Agreement and
the Reorganization Agreement and the
representations, warranties, covenants,
agreements, conditions and promises contained
herein and therein, the parties hereby agree
as follows: Article 1
THE MERGER
Section 1. The Merger. In accordance with the provisions of this
Agreement, the Reorganization Agreement and the Delaware Statute, Acquisition
Sub shall be merged with and into the Company (the "Merger"), which at and after
the Effective Time (as defined in Article I, Section 2 hereof) shall be, and is
sometimes herein referred to as, the "Surviving Corporation". Acquisition Sub
and the Company are sometimes referred to as the "Constituent Corporations".
----------
Section 2. The Effective Time of the Merger. Subject to the provisions of
the Reorganization Agreement, this Agreement shall be executed and delivered to
and filed with the Secretary of State of the State of Delaware by each of the
Constituent Corporations on the Closing Date in the manner provided under
Section 251 of the Delaware Statute. The Merger shall become effective (the
"Effective Time") upon the filing of this Agreement with the Secretary of State
of the State of Delaware and the issuance of a certificate of merger by the
Secretary of State of the State of Delaware.
Section 3. Effect of Merger. At the Effective Time the separate existence
of Acquisition Sub shall cease and Acquisition Sub shall be merged with
and into the Surviving Corporation, and the Surviving Corporation shall
possess all of the rights, privileges, powers and franchises of a public
as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations as
provided in Section 251 of the Delaware Statute. Section 4. Charter and
By- Laws of Surviving Corporation. From and after the Effective Time, (i)
the Charter of Acquisition Sub shall be the Charter of the Surviving
Corporation, unless and until altered, amended or repealed as provided in
the Delaware Statute or the Charter, (ii) the by-laws of Acquisition Sub
shall be the by-laws of the Surviving Corporation, unless and until
altered, amended or repealed as provided in the Delaware Statute, the
Charter or such by-laws, (iii) the directors
of Acquisition Sub shall be the directors of the Surviving Corporation, unless
and until removed, or until their respective terms of office shall have expired,
in accordance with the Delaware Statute, the Charter and the by-laws of the
Surviving Corporation, as applicable and (iv) the officers of the Acquisition
Sub shall be the officers of the Surviving Corporation, unless and until
removed, or until their terms of office shall have expired, in accordance with
the Delaware Statute, the Charter and the by laws of the Surviving Corporation,
as applicable.
Section 5. Taking of Necessary Action. Prior to the Effective Time, the
parties hereto shall do or cause to be done all such acts and things as
may be necessary or appropriate in order to effectuate the Merger as
expeditiously as reasonably practicable, in accordance with this
Agreement, the Reorganization Agreement and the Delaware Statute. Section
6. Tax Free Reorganizations. For Federal income tax purposes, the parties
intend that the Merger be treated as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), by reason of Section 368(a)(2)(E) of the Code.
Article II -
-
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES -
Section 1. Total Consideration; Effect on Capital Stock. The entire
consideration payable by Parent with respect to all outstanding shares of
capital stock of the Company and for all options, warrants, rights, calls,
commitments, agreements or arrangements of any character to which the Company is
a party or by which it is bound calling for the issuance of shares of capital
stock of the Company or any securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or otherwise receive,
directly or indirectly, any such capital stock, or other arrangement to acquire,
at any time or under any circumstance, capital stock of the Company or any such
other securities (hereinafter collectively referred to as the "Fully Diluted
Company Shares,") other than any capital stock of the Company owned or held by
Parent or any Affiliate of Parent, shall be an aggregate of (A) [*] (the "Total
Parent Share Amount") and (B) [*], (the "Aggregate Cash Consideration") in cash
(the Aggregate Cash Consideration, together with the Total Parent Share Amount,
being sometimes hereinafter collectively referred to as the "Aggregate Purchase
Price"). For purposes of the calculation of the exchange ratio for Parent
Preferred Stock under Article II, Section 1(c)(i), it is assumed that the number
of Fully Diluted Company Shares is one (1) (the "Fully Diluted Company Share
Amount"). At the Effective Time, subject and pursuant to the terms and
conditions of this Agreement and the Reorganization Agreement, by virtue of the
Merger and without any action on the part of the Constituent Corporations or the
holders of the capital stock or options to purchase capital stock of the
Constituent Corporations: (a) Capital Stock of Acquisition Sub. Each issued and
outstanding share of common stock, $.01 par value per share, of Acquisition Sub
shall be converted into one share of common stock, $.01 par value per share, of
the Surviving Corporation; (b) Cancellation of Certain Shares of Company Stock.
Each share of capital stock of the Company that is authorized but unissued shall
cease to exist and no Parent Preferred Stock or other consideration shall be
delivered in exchange therefor. (c) Exchange of Company Stock. Subject to
Article II, Section 2 hereof, each share of Company Common Stock issued and
outstanding at the Effective Time, including all accrued and unpaid dividends
thereon, shall be exchanged and converted into the right to receive:
(i) [*]which are deliverable at the Closing and are subject
to the repurchase rights set forth in the Repurchase Agreement; and
(ii) [*]
For convenience of reference, the shares of Parent Preferred Stock to be issued
upon the exchange and conversion of Company Common Stock in accordance with this
Section 2.1(c) are sometimes hereinafter collectively referred to as the "Merger
Shares".
(d) Shares of Dissenting Shareholders. Each issued and outstanding share of
Company Stock held by a Dissenting Stockholder, if any, shall not be exchanged
and converted as described in Article II, Section 1(c) hereof but shall become
the right to receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to the Delaware Statute; provided, however, that
each share of Company Stock issued and outstanding at the Effective Time and
held by a Dissenting Stockholder who or which shall, after the Effective Time,
withdraw his or its demand for appraisal or lose or fail to perfect his or its
right of appraisal as provided in the Delaware Statute shall be deemed, as of
the Effective Time, to be exchanged and converted into Parent Preferred Stock as
provided in Article II, Section 2(d), without interest. After the Effective
Time, as provided in Section 262 of the Delaware Statute, no Dissenting
Stockholder will be entitled to vote the shares of Company Common Stock subject
to such Dissenting Stockholder's demand for appraisal for any purpose or be
entitled to the payment of dividends or other distributions on such shares. The
Company shall give Parent prompt notice of any demands received by the Company
for fair value of such Company Stock, and Parent shall have the right to
participate in all the negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Parent,
make any payment (except to the extent that any such payment is pursuant to a
court order) with respect to, or settle or offer to settle, any such demands.
Section 2. Escrow Deposit; Exchange of Certificates.
(a) Escrow Agreements. At the Effective Time, the Stockholder,
Parent and State Street Bank and Trust Company (the "Escrow
Agent") shall enter into an escrow agreement in the form of
Exhibit B to the Reorganization Agreement (the "Escrow
Agreement"). The Escrow Agreement is being entered into for
the purpose of securing the indemnification obligations of the
Stockholders under Article VII of the Reorganization
Agreement. (b) Escrow Deposit. At the Effective Time, Parent
shall cause to be deposited with the Escrow Agent (i) [*]
("Escrow Shares") and (ii) three stock powers duly endorsed in
blank for transfer on behalf of the stockholder, and the
stockholder by her execution and delivery of the
Reorganization Agreement authorizes and directs Parent to make
such deposit on her behalf. (c) Procedure for Exchange.
Immediately following the Effective Time, Parent shall deliver
to the Stockholder, other than Parent or any subsidiary of
Parent, of a certificate or certificates which immediately
prior to the Effective Time represented issued and outstanding
shares of Company Common Stock (each, an "Old Certificate") a
certificate (a "New Certificate") representing that number of
Merger Shares (other than the Escrow Shares) which such holder
has the right to receive
pursuant to Article II, Section 1(c)(i) with respect to such Old Certificate
against receipt by Parent of (i) such Old Certificate for cancellation and (ii)
an executed letter of transmittal, and the Old Certificate so surrendered shall
forthwith be canceled (the certificates representing the Escrow Shares having
therefore been deposited on behalf of the Stockholder into escrow as
contemplated by Article II, Section 2(b). In the event of a transfer of
ownership of shares of Company Common Stock which is not registered on the
transfer records of the Company, a New Certificate representing the proper
number of shares of Parent Preferred Stock may be issued to a transferee if the
Old Certificate representing such Company Common Stock is presented to Parent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock or other transfer taxes have been paid.
Until surrendered as contemplated by Article II, Section 2, each Old Certificate
shall be deemed, on and after the Effective Time, to represent only the right to
receive upon such surrender, New Certificates representing Merger Shares (other
than the Escrow Shares) as contemplated by Article II, Section 1(c)(i), without
interest. All Escrow Shares shall be held by, and distributed in accordance
with, the terms and provisions of the Escrow Agreement.
(d) No Further Ownership Rights in Company Stock. All Shares
of Parent Preferred Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms of this Article II shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock. If, after the Effective Time, any Old
Certificate is presented to the Surviving Corporation for any reason, such Old
Certificate shall be canceled and exchanged as provided in this Article II.
(e) No Liability. None of Parent, Acquisition Sub or the
Company shall be liable to any holder of shares of Company Common Stock or
Parent Preferred Stock, as the case may be, for shares (or dividends or
distributions with respect thereto) of Parent Preferred Stock to be issued in
exchange for Company Common Stock pursuant to this Article II, Section 2, if, on
or after the expiration of six months following the Effective Time, such shares
are delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(f) Lost, Stolen or Destroyed Company Certificates. In the
event any Old Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit to that effect by the person claiming such Old
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may reasonably direct
as indemnity against any claim that may be made against it with respect to such
Old Certificate, Parent will issue in exchange for such lost, stolen or
destroyed Old Certificate the Merger Shares and cash in lieu of fractional
shares deliverable in respect thereof pursuant to this Agreement.
Article III
MISCELLANEOUS
Section 1. Entire Agreement. This Agreement and the Reorganization
Agreement (including the Company Disclosure Schedule and the Exhibits attached
thereto) and the other writings referred to therein contain the entire agreemen
among the parties hereto with respect to the transactions contemplated hereby
and supersede all prior agreements or understandings, written or oral, among the
parties with respect thereto including, but not limited to, the Original
Reorganization Agreement.
----------------
Section 2. Notices. All notices or other communications which ar
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by nationally-recognized overnight courier or by registered
or certified mail, postage prepaid, return receipt requested or by telecopier,
with confirmation as provided above addressed as follows:
-------
(i) if to Parent or Acquisition Sub, to:
GHS, Inc.
2400 Research Blvd.
Rockville, Maryland 20850
Attention:
Telecopier: (301) 308-3254
with copies to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Martin H. Levenglick, Esq.
Telecopier: (212) 506-5151;
(b) if to the Company, to:
Concept Development, Inc.
20 Taconic Road
Millwood, New York 10546
Attention: William Zanker
Telecopier: (212) 967-6256;
with a copy to:
Swidler, Berlin, Shereff Friedman LLP
919 Third Avenue
New York, New York 10022-9998
Attention: Morris Orens, Esq.
Telecopier: (212) 891-9507
Section 3. Counterparts. This Agreement may be executed in any
number of counterparts by original or facsimile signature, each such counterpart
shall be an original instrument, and all such counterparts together shall
constitute one and the same agreement.
------------
Section 4. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein (without regard to principles
of conflicts of laws) except for those terms and conditions that specifically
relate to Merger as described in Article I of the Reorganization Agreement,
which shall be governed by and construed in accordance with the General
Corporation Law of the State of Delaware (without regard to principles of
conflicts of laws).
Section 5. Amendment, Modification and Waiver. The Reorganization
Agreement shall not be altered or otherwise amended except pursuant to (a) an
instrument in writing signed by Parent and the Company prior to the Effective
Date, if Article VII of the Reorganization Agreement is not affected by such
alteration or amendment and (b) an instrument in writing signed by (i) Parent,
(ii) the Company and (iii) the Stockholders, if Article VII of the
Reorganization Agreement is affected thereby or the alteration or amendment
occurs subsequent to the Effective Date; provided, however, that after the
approval and adoption of this Agreement and the Merger by the Stockholders, no
amendment of this Agreement shall be made which pursuant to the Delaware Statute
or other law requires the further approval of the Stockholders; provided
further, however, that any party to the Reorganization Agreement may waive any
obligation owed to it by any other party under the Reorganization Agreement. The
waiver by any party hereto of a breach of any provision of the reorganization
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
Remainder of this page intentionally left blank]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement of Merger to be executed and delivered on its behalf as of the date
first above written.
CONCEPT ACQUISITION CORPORATION
By:
Name: Beth Polish
Title: President
CONCEPT DEVELOPMENT, INC.
By:
Name:
Title:
1
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