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EXHIBIT 10.2
PLAN AND AGREEMENT OF MERGER
AMONG
SUPERIOR CONSULTANT
HOLDINGS CORPORATION, A
DELAWARE CORPORATION,
CHI ACQUISITION CO.,
A DELAWARE CORPORATION,
THE CHI GROUP, INC.,
A DELAWARE CORPORATION,
AND
CERTAIN STOCKHOLDERS OF THE CHI GROUP, INC.
DATED AS OF AUGUST 14, 1997
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TABLE OF CONTENTS
PAGE
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1. DEFINITIONS........................................................... 1
2. THE MERGER............................................................ 6
2.1. CERTIFICATE OF MERGER......................................... 6
2.2. CLOSING....................................................... 6
2.3. EFFECTS OF THE MERGER......................................... 6
2.4. CERTIFICATE OF INCORPORATION AND BYLAWS....................... 6
2.5. DIRECTORS AND OFFICERS........................................ 7
2.6. CONVERSION OF SECURITIES...................................... 7
2.7. CLOSING OF COMPANY TRANSFER BOOKS............................. 7
2.8. EXCHANGE OF CERTIFICATES...................................... 8
2.9. RIGHTS OF THE COMPANY STOCKHOLDERS............................ 9
2.10. TAKING OF NECESSARY ACTION; FURTHER ACTION.................... 9
2.11. SHARE ESCROW.................................................. 9
2.12. STOCKHOLDERS' REPRESENTATIVE.................................. 9
3.- REPRESENTATIONS AND WARRANTIES...................................... 12
3.1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS............ 12
3.2. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY......... 13
3.3. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND SUPERIOR.... 31
4.- CONDITIONS.......................................................... 33
4.1. CONDITIONS TO OBLIGATION OF SUPERIOR AND ACQUISITION.......... 33
4.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS. 36
5.- ADDITIONAL AGREEMENTS............................................... 37
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5.1. COMPANY OPTIONS......................................... 37
5.2. POST-MERGER COVENANTS................................... 38
5.3. WAIVER AND RELEASE...................................... 40
5.4. NONCOMPETITION.......................................... 41
5.5. INDEMNIFICATION......................................... 42
5.6. DISPUTE RESOLUTION REGARDING INDEMNIFICATION............ 46
5.7. ARBITRATION............................................. 46
5.8. MISCELLANEOUS........................................... 47
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EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Opinion of Stockholder/Company Counsel
Exhibit C Form of Opinion of Superior's Counsel
Chi Disclosure Schedule
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Section 3.2(a) States where Chi is Qualified
Section 3.2(c) Required Consents
Section 3.2(d) Capitalization
Section 3.2(e) Subsidiaries
Section 3.2(f) Financial Statements
Section 3.2(g) Recent Events
Section 3.2(j) Leases
Section 3.2(k) Intellectual Property
Section 3.2(l) Contracts
Section 3.2(n) Bank Accounts
Section 3.2(o) Litigation
Section 3.2(p) Employees
Section 3.2(q) Employee Benefits
Section 3.2(r) Permits
Section 3.2(u) Existing Clients
Section 3.2(v) Insurance Policies
Section 3.2(w) Warranties
Section 3.2(z) Potential Conflicts of Interest
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "AGREEMENT") is made and entered
into as of August 14, 1997, by and among Superior Consultant Holdings
Corporation, a Delaware corporation ("SUPERIOR"), Chi Acquisition Co., a
Delaware corporation and wholly-owned, direct subsidiary of Superior
("ACQUISITION"), The Chi Group, Inc., a Delaware corporation d/b/a Chi Systems,
Inc. ("CHI" or, the "COMPANY"), and those Stockholders of the Company who have
signed the signature page hereto (individually, a "STOCKHOLDER" and
collectively, the "STOCKHOLDERS"). Superior, Acquisition, the Company and the
Stockholders are sometimes referred to herein individually as a "PARTY" and
collectively as the "PARTIES."
RECITALS
A. The respective boards of directors of Superior, Acquisition and the
Company have approved the transactions contemplated hereby and have determined
that it is advisable and in their respective best interests to consummate the
merger described in Article 2 (the "MERGER").
B. As a result of the Merger, Acquisition will be merged with and into the
Company, all of the outstanding capital stock of the Company will be converted
into the right to receive common stock of Superior, and the Company will be the
surviving corporation, all on the terms and subject to the conditions set forth
in this Agreement.
C. For Federal income tax purposes, the Parties intend that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Code (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties hereby agree as follows:
1. DEFINITIONS
"AFFILIATE" means, with respect to any particular Person, any Person
controlling, controlled by or under common control with such Person, whether by
ownership or control of voting securities, by contract or otherwise.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Section 1504 of the Code.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, costs of defense,
judgments, orders, decrees, stipulations, injunctions, damages, dues,
penalties, fines, costs, amounts paid in settlement,
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Liabilities, Taxes, Security Interests, losses, expenses, and fees, including
all attorneys' fees and court costs.
"AVERAGE STOCK PRICE" means a dollar amount equal to the average last sale
price per share of Superior Common as reported by the Nasdaq National Market
for the twenty (20) trading days ending with the Determination Date.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission or any successor
agency.
"COMPANY COMMON" means the Company's Common Stock, par value $100 per
share.
"COMPANY OPTION" means an option to purchase Company Common granted under
The Chi Group, Inc. Stock Option Plan.
"COMPANY EQUITY RIGHTS" means the share appreciation rights of the Company
granted pursuant to Deferred Compensation Agreements.
"COMPANY SHARES DEEMED OUTSTANDING" means the sum of (i) the number of
shares of Company Common actually issued and outstanding as of the Effective
Time, plus (ii) the number of Net Option Shares obtainable upon exercise of all
Company Options outstanding as of the Effective Time (whether or not then
vested or exercisable), (iii) plus the number of shares of Company Common
obtainable upon exercise of all Company Equity Rights outstanding as of the
Effective Time (whether or not then vested or exercisable).
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of a Party other than any such information that (i) is generally
available to or known by the public immediately prior to the time of disclosure
(except through the actions or inactions of the Person to whom disclosure has
been made) or (ii) has been acquired or developed independent from such Party.
"DETERMINATION DATE" means the second trading day prior to the Closing.
"DGCL" means the Delaware General Corporation Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any corporation or other business entity that is
included in a controlled group of corporations within which the Company is also
included, as provided in Section 414(b) of the Code; or which is a trade or
business under common control with the
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Company, as provided in Section 414(c) of the Code; or which constitutes a
member of an affiliated service group within which the Company is also
included, as provided in Section 414(m) of the Code; or which is required to be
aggregated with the Company pursuant to regulations issued under Section 414(o)
of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING COMPANY DOCUMENTS" means, collectively, Section 2 of that
certain Conversion Agreement date of January 31, 1996 between the Company and
Radius Health Care System Inc. ("RADIUS") and that certain Stock Purchase
Agreement between the Company and Radius dated June 16, 1983 and each Stock
Option Agreement and deferred compensation agreements between the Company and
its employees.
"FINAL STOCK PRICE" shall mean the last sale price per share of Superior
Common as reported by the Nasdaq National Market on the date of the Closing.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied consistently with the principles used in preparing the
Financial Statements (as defined herein) for the Most Recent Fiscal Year End.
"INDEBTEDNESS" of any Person means all obligations of such Person which in
accordance with GAAP should be classified upon a balance sheet of such Person
as liabilities of such entity, and in any event, regardless of how classified
in accordance with GAAP, shall include (i) all obligations of such Person for
borrowed money or which have been incurred in connection with the acquisition
of property or assets, (ii) obligations secured by any Security Interest upon
property or assets owned by such Person, even though such Person has not
assumed or become liable for the payment of such obligations, (iii) obligations
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person, notwithstanding the
fact that the rights and remedies of the seller, lender or lessor under such
agreement in the event of default are limited to repossession or sale of the
property, and (iv) capitalized lease obligations.
"INTELLECTUAL PROPERTY" means any and all of the following which is owned
by, licensed by, licensed to, used or held for use by the Company (including
all copies and embodiments thereof, in electronic, written or other media):
(i) all registered and unregistered trademarks, trade dress, service marks,
logos, trade names, corporate names (including the name "CHI") and all
applications to register the same (the "TRADEMARKS"); (ii) all issued U.S. and
foreign patents and pending patent applications, patent disclosures and
improvements thereto (the "PATENTS"); (iii) all registered and unregistered
copyrights, mask work rights and all applications to register the same (the
"COPYRIGHTS"); (iv) all computer software and databases owned or used
(excluding software and databases licensed to the Company under standard,
non-exclusive software licenses granted to end-user customers by third parties
in the ordinary course of such third parties' business) by the Company or under
development for the Company by third parties (the "SOFTWARE"); (v) all
categories of trade secrets, know-how, inventions (whether or not patentable
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and whether or not reduced to practice), processes, procedures, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, client and supplier lists and information and other
confidential and proprietary information ("PROPRIETARY RIGHTS"); (vi) all
licenses and agreements pursuant to which the Company has acquired rights in or
to any of the Trademarks, Patents, Copyrights, Software or Proprietary Rights
(excluding software and databases licensed to the Company under standard,
non-exclusive software licenses granted to end-user customers by third parties
in the ordinary course of such third parties' business) ("LICENSES-IN"); and
(vii) all licenses and agreements pursuant to which the Company has licensed or
transferred any rights to any of the Trademarks, Patents, Copyrights, Software
or Proprietary Rights ("LICENSES-OUT").
"KNOWLEDGE" means, in the case of any individual, knowledge that a
reasonable person under similar circumstances would have after diligent
investigation and inquiry, and in the case of a corporation, the knowledge
(under the same standard as described immediately above) of the directors and
officers of the corporation and the employees having responsibility for the
particular subject matter at issue.
"LIABILITY" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), obligation or Indebtedness, including, any liability for Taxes.
"MATERIAL ADVERSE EFFECT" means a material adverse effect or impact upon
the assets, financial condition, results of operations, business, or prospects
of the Company or on the ability of the Parties to consummate the transactions
contemplated hereby.
""NET OPTION SHARES" means, with respect to each Company Option, the total
number of shares of Company Common obtainable upon exercise of such Company
Option (the "GROSS OPTION NUMBER"), less a number of shares of Company Common
having a value (based on the Valuation Per Company Share, using the Gross
Option Number in determining the Company Shares Deemed Outstanding for purposes
of calculating such Valuation Per Company Share) equal to the aggregate
exercise price payable upon exercise of such Company Option.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice of the Company, Superior, Acquisition
or the Surviving Corporation, respectively, as the context herein may require
(including with respect to quantity and frequency).
"PERSON" means any individual, trust, corporation, partnership, limited
partnership, limited liability company or other business association or entity,
court, governmental body or governmental agency.
"PLANS" means: (i) all employee benefit plans as defined in Section 3(3)
of ERISA; (ii) all other severance pay, deferred compensation, excess or
supplemental benefit, vacation, stock,
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stock option, and incentive plans, contracts, schemes, programs, funds,
commitments, or arrangements of any kind; and (iii) all other plans, contracts,
schemes, programs, funds, commitments, or arrangements providing money,
services, property, or other benefits, whether written or oral, qualified or
nonqualified, funded or unfunded, and including any that have been frozen or
terminated, which pertain to any employee, former employee, director, officer,
Stockholder, consultant, or independent contractor of the Company or any ERISA
Affiliate of the Company and (a) to which the Company or any ERISA Affiliate of
the Company is or has been a party or by which any of them is or has been bound
or (b) with respect to which the Company or any ERISA Affiliate of the Company
has made any payments or contributions since December 31, 1990 or (c) to which
the Company or any ERISA Affiliate of the Company may otherwise have any
liability (including any such plan or arrangement formerly maintained by the
Company or any ERISA Affiliate of the Company).
"PRO RATA PERCENTAGE" means, with respect to each Stockholder, the
percentage equivalent of a fraction, the numerator of which shall be the number
of shares of Superior Common to be issued to such Stockholder in the Merger,
and the denominator of which shall be all shares of Superior Common issued to
the Stockholders in the Merger.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest, charge,
lien or other encumbrance or right of any third party.
"SUBSIDIARY" means any corporation, limited liability company, limited
partnership, partnership, trust or other entity with respect to which another
Person has the power, directly or indirectly through one or more
intermediaries, to vote or direct the voting of sufficient securities or
interests to elect a majority of the directors or management committee or
similar governing body.
"SUPERIOR COMMON" means the Common Stock, par value $0.01 per share, of
Superior.
"TAX" or "TAXES" means any Federal, state, local, or foreign income, gross
receipts, sales, licenses, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, use, transfer, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TOTAL TRANSACTION VALUE" means $11,472,606.
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"VALUATION PER COMPANY SHARE" shall equal the dollar amount per share
resulting when $11,472,606 - less Section 5.8(j) expenses] is divided by the
aggregate number of Company Shares Deemed Outstanding.
2. THE MERGER
In connection with the Merger, the respective boards of directors and
stockholders of Acquisition and the Company have, by resolutions duly adopted,
approved the following provisions of this Article 2 as the Plan of
Reorganization within the meaning of Code Section 368(a) and as an "AGREEMENT
OF MERGER" with the meaning of Section 251 of the DGCL:
2.1. Certificate of Merger. Subject to the provisions of this Agreement, a
copy of this Agreement, together with an officer's certificate of each of
Acquisition and the Company (collectively the "CERTIFICATE OF MERGER"), shall
be duly prepared, executed and acknowledged by the Company, Acquisition and
such other parties as may be appropriate, and thereafter the Certificate of
Merger shall be delivered to the Secretary of State of the State of Delaware
(the "DELAWARE SECRETARY"), as provided in Section 103 of the DGCL, for filing
as soon as practicable on or after the date on which the Closing occurs. The
Merger shall become effective on the date and at the time of the acceptance of
the Certificate of Merger by the Delaware Secretary, or at such time thereafter
as is provided in the Certificate of Merger (the "EFFECTIVE TIME").
2.2. Closing. The closing of the Merger (the "CLOSING") will take place
commencing at 10:00 a.m. on August 14, 1997, or as soon as practicable after
the closing conditions set forth in Article 5 have been met or waived as
provided in Article 5, at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd., ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, unless another time, date or place is agreed
to by the Parties.
2.3. Effects of the Merger.
(a) At the Effective Time, the separate corporate existence of
Acquisition shall cease and Acquisition shall be merged with and into the
Company and the Company, as the surviving corporation in the Merger (the
"SURVIVING CORPORATION"), under the name "The Chi Group, Inc." shall continue
its corporate existence under the laws of the State of Delaware.
(b) At and after the Effective Time, the Merger will have the effects
set forth in Subchapter IX of the DGCL.
2.4. Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of Acquisition, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation and Bylaws of the
Surviving Corporation immediately after the Effective Time and shall thereafter
continue to be its Certificate of Incorporation and Bylaws until amended as
provided therein and under the DGCL.
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2.5. Directors and Officers. The directors of Acquisition holding office
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation immediately after the Effective Time. The officers of Acquisition
holding office immediately prior to the Effective Time shall be the officers of
the Surviving Corporation immediately after the Effective Time.
2.6. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Acquisition, the Company or the
holders of any of the following securities, the following securities will be
converted in the manner set forth below:
(a) (i) Each share of Company Common which is issued and outstanding
immediately prior to the Effective Time (other than treasury shares) shall be
canceled and extinguished and converted into and become a right to receive a
number of shares of Superior Common determined by dividing the Valuation Per
Company Share by the Average Stock Price (such quotient being referred to
herein as the "EXCHANGE RATIO"); provided, that if as the result of the
conversion of any Stockholder's Company Common upon consummation of the Merger,
a fractional interest in a share of Superior Common would be deliverable under
this Section 2.6(a), in lieu of a fractional share being delivered therefor,
such fractional interest shall automatically be converted into the right to
receive an amount in cash (without interest) equal to the product of the last
sale price of Superior Common as reported by the Nasdaq National Market on the
Determination Date, multiplied by the amount of such fractional interest. No
such holder will be entitled to dividends, voting rights or any other rights as
a Stockholder in respect of any fractional share.
(b) Each share of Common Stock, par value $.01 per share, of
Acquisition issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and nonassessable share
of Common Stock, par value $.01 per share, of the Surviving Corporation.
(c) Each Company Option identified on Schedule 5.1 attached hereto
shall be converted into a Superior Option in accordance with the provisions of
Section 5.1(a) of this Agreement.
(d) Each outstanding Company Equity Right identified on Schedule 5.1
attached hereto shall be converted into shares of Superior Common in accordance
with the terms of Section 5.1(b) of this Agreement.
2.7. Closing of Company Transfer Books. Immediately prior to the Effective
Time the stock transfer books of the Company shall be closed and no transfer of
shares of Company Stock shall thereafter be made or recognized. After the
Effective Time valid certificates previously representing shares of Company
Common which are presented in accordance with this Agreement to the Surviving
Corporation shall be exchanged as provided in Sections 2.6(a), 2.6(b) and 2.8.
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2.8. Exchange of Certificates. Prior to the Effective Time, Superior shall
designate ▇▇▇▇▇▇ Trust and Savings Bank to act as exchange agent in the Merger
(the "EXCHANGE AGENT"). As soon as practical after the Effective Time, the
Exchange Agent shall mail to each record holder of certificates that
immediately prior to the Effective Time represented shares of Company Common
("CERTIFICATES") the following: (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in a form and have such other provisions as Superior shall
reasonably specify), and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for the shares of Superior Common as specified
in this Agreement. Upon surrender of a Certificate for cancellation to the
Exchange Agent (either at or after the Closing, as applicable) together with
such letter of transmittal duly executed and such other documents as the
Exchange Agent may reasonably require, the Exchange Agent shall issue or pay,
as applicable, to such holder (a) a certificate or certificates representing
90% of the shares of Superior Common to be issued to such holder with respect
to the Company Common formerly represented by such Certificate pursuant to
Section 2.6(a), to be delivered to or at the direction of such holder, (b) a
certificate representing 10% of the shares of Superior Common to be issued to
such holder with respect to the Company Common formerly represented by such
Certificate pursuant to Section 2.6(a), to be delivered to the Escrow Agent to
hold in escrow under the Escrow Agreement in accordance with Section 2.11
hereof (the "ESCROW SHARES"), and, (c) in the case of payment for any
fractional interest in Superior Common, a check payable to the holder with
respect to the Company Common formerly represented by such Certificate.
Surrendered Certificates shall forthwith be canceled. Superior shall not be
obligated to deliver the consideration to which any former holder of Company
Common is entitled as a result of the Merger until such holder surrenders such
holder's Certificate or Certificates representing shares of Company Common for
exchange as provided in this Section 2.8; provided, however, that procedures
allowing for payment against receipt of customary and appropriate
certifications and reasonable indemnities, shall be provided with respect to
lost or destroyed Certificates. If any Certificate to be issued in the name of,
or directed to an account in the name of, a Person other than the Person in
whose name the Certificates are registered, it shall be a condition of the
exchange that the Certificate shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such exchange shall pay
to Superior any transfer or other Taxes required by reason of the issuance of
such Certificate and delivery of the Merger consideration to and in the name of
a Person other than the registered owner of the Certificates surrendered, or
shall establish to the satisfaction of Superior that such Tax has been paid or
is not applicable. Until so surrendered and exchanged, each such Certificate
shall represent solely the right to receive the shares of Superior Common to be
issued pursuant to Section 2.6(a) in exchange for the shares of Company Common
represented by such surrendered Certificate and the right to receive any
fractional share payment to be paid pursuant to Section 2.6(a), without
interest, and Superior shall not be required to instruct or permit the Exchange
Agent to issue to such holder the stock to which such holder otherwise would be
entitled; provided, that reasonable procedures allowing for payment against
receipt of customary and appropriate certifications and indemnities shall be
provided with respect to lost or destroyed Certificates.
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2.9. Rights of the Company Stockholders. From and after the Effective
Time, the holders of shares of the Company Common issued and outstanding at the
Effective Time shall have no rights with respect to such shares other than to
surrender the certificate or certificates representing such shares pursuant to
Section 2.8.
2.10. Taking of Necessary Action; Further Action. Superior and
Acquisition, on the one hand, and the Company and the Stockholders, on the
other hand, shall use reasonable efforts to take all such action (including
action to cause the satisfaction of the conditions to the Merger) as may be
necessary or appropriate in order to effectuate the Merger as promptly as
possible. If, at any time after the Effective Time, any further action is
necessary or desirable to vest the Surviving Corporation with full possession
of all the rights, privileges, immunities and franchises of the Company and
Acquisition, the officers of the Surviving Corporation are fully authorized in
the name of either the Company or Acquisition or otherwise to take, and shall
take, all such action.
2.11. Share Escrow. The Escrow Shares shall be delivered by Superior on
behalf of the Stockholders, pro rata in accordance with their respective Pro
Rata Percentages, to the ▇▇▇▇▇▇ Trust and Savings Bank, Chicago, Illinois,
pursuant to an Escrow Agreement in the form set forth in Exhibit A attached
hereto (such shares and the proceeds and products thereof, while subject to the
Escrow Agreement, being referred to herein as the "ESCROW FUND").
2.12. Stockholders' Representative.
(a) In order to administer efficiently the defense and/or settlement
of any claims for which the Stockholders may be required to indemnify Superior
or the Surviving Corporation pursuant to Section 5.5 hereof, the Stockholders
hereby designate ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ as their representative
(individually a "STOCKHOLDERS' REPRESENTATIVE" and collectively, the
"STOCKHOLDERS' REPRESENTATIVES").
(b) The Stockholders hereby authorize each of the Stockholders'
Representatives (i) upon the receipt of instructions of the Stockholders
representing a majority of Pro Rata Percentages, to take all action necessary
in connection with the defense and/or settlement of any claims for which the
Stockholders may be required to indemnify Superior and/or the Surviving
Corporation pursuant to Section 5.5 hereof, (ii) to give and receive all
notices required to be given and take all action required or permitted to be
taken under this Agreement and the other agreements contemplated hereby to
which all the Stockholders are parties, including, without limitation, the
Escrow Agreement ("OTHER AGREEMENTS"), and (iii) to take any and all additional
action as is contemplated to be taken by or on behalf of the Stockholders by
the terms of this Agreement and the Other Agreements (including, without
limitation, all investment directions under the Escrow Agreement with respect
to the Escrow Fund). Each Stockholders' Representative accepts that
authorization and agrees to perform such functions in good faith and as a
fiduciary to each Stockholder.
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(c) Upon receiving notice of the death or incapacity of a Stockholders'
Representative, Stockholders shall by majority vote (based on their Pro Rata
Percentages) appoint a successor to fill the vacancy. Stockholders may by such
majority vote to remove a Stockholders' Representative with or without cause
and appoint a successor, provided that notice thereof is given by the new
Stockholders' Representative to each of the other Parties hereto (including
Superior) and to the Escrow Agent. A Stockholders' Representative may resign
if, and only if, he is simultaneously replaced with a substitute Stockholders'
Representative.
(d) By their execution of this Agreement, the Stockholders agree that:
(i) Notwithstanding any other provision herein to the contrary,
Superior shall be able to rely conclusively on the instructions and decisions
of either Stockholders' Representative acting alone as to the settlement of any
claims for indemnification by Superior or the Surviving Corporation pursuant to
Section 5.5 hereof or any other actions required to be taken by the
Stockholders' Representatives hereunder, and no Party hereunder shall have any
cause of action against Superior or the Surviving Corporation for any action
taken by Superior or the Surviving Corporation in reliance upon the
instructions or decisions of either Stockholders' Representative.
(ii) all actions, decisions and instructions of the Stockholders'
Representative including, without limitation, the defense or settlement of any
claims for which the Stockholders may be required to indemnify Superior and/or
the Surviving Corporation pursuant to Section 5.5 hereof, shall be conclusive
and binding upon all of the Stockholders, and no Stockholder shall have any
right to object, dissent, protest or otherwise contest the same or have any
cause of action against either Stockholders' Representative for any action
taken, decision made or instruction given by either Stockholders'
Representative under this Agreement, except for fraud or willful breach of this
Agreement or breach of fiduciary duties by a Stockholders' Representative;
(iii) the provisions of this Subsection 2.12 are independent and
severable, are irrevocable and coupled with an interest and shall be
enforceable notwithstanding any rights or remedies that any Stockholder may
have in connection with the transactions contemplated by this Agreement;
(iv) remedies available at law for any breach of the provisions of
this Subsection 2.12 are inadequate; therefore, Superior, the Surviving
Corporation and the Stockholders' Representatives shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
damages if either Superior, the Surviving Corporation or the Stockholders'
Representatives brings an action to enforce the provisions of this Subsection
2.12; and
(v) the provisions of this Subsection 2.12 shall be binding upon the
executors, heirs, legal representatives, successors and assigns of each
Stockholder, and any references in this Agreement to a Stockholder or the
Stockholders shall mean and include the
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successors to the Stockholders' rights hereunder, whether pursuant to
assignment, testamentary disposition, the laws of descent, and distribution or
otherwise.
(e) All fees and expenses reasonably incurred by the Stockholders'
Representatives in connection with this Agreement and supported by appropriate
documentation shall be paid by the Stockholders in proportion to their
respective Pro Rata Percentages.
(f) In acting as the representative of the Stockholders, the Stockholders'
Representatives may rely upon, and shall not be liable to any Stockholder for
acting or refraining from acting upon, an opinion of counsel, certificate of
auditors or other certificate, statement, instrument, opinion, report, notice,
request, consent, order, arbitrator's award, appraisal, bond or other paper or
document reasonably believed by them to be genuine and to have been signed or
presented by the proper party or parties. The Stockholders' Representatives
shall incur no liability to any Stockholder with respect to any action taken or
suffered by them in their capacity as Stockholders' Representatives in reliance
upon any note, direction, instruction, consent, statement or other documents
reasonably believed by them to be genuinely and duly authorized, nor for other
action or inaction except his own willful misconduct or gross negligence or his
breach of the fiduciary duty owed to the Stockholders and the Stockholders'
Representatives shall be indemnified and held harmless by each Stockholder to
the extent of such Stockholder's Pro Rata Percentage from all losses, costs and
expenses which the Stockholders' Representatives may reasonably incur and which
are appropriately documented as a result of involvement in any legal
proceedings arising from the performance of his or her duties hereunder. The
Stockholders' Representatives may perform their duties as Stockholders'
Representative either directly or by or through their agents or attorneys and
the Stockholders' Representatives shall not be responsible to the other
Stockholders for any misconduct or negligence on the part of any agent or
attorney appointed with reasonable care by them hereunder, provided that the
relationships with such agents and attorneys are established in a manner which
renders the Stockholders as beneficiaries of such services.
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3. REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Stockholders. As a material
inducement to Superior and Acquisition to enter into this Agreement and
consummate the transactions contemplated hereby, each Stockholder hereby
severally represents and warrants to Superior and Acquisition that all of the
statements contained in this Section 3.1 are correct and complete with respect
to such Stockholder as of the date of this Agreement, and hereby covenants that
all of said statements will be correct and complete with respect to such
Stockholders as of the Effective Time (as though made as of the Effective Time
and as though the Effective Time were substituted for the date of this
Agreement throughout such statements), except as set forth in the schedule
attached to this Agreement setting forth exceptions to the representations and
warranties set forth herein (the "CHI DISCLOSURE SCHEDULE"):
(a) Such Stockholder has good and marketable title to the shares of
Company Common which are to be exchanged by such Stockholder pursuant to this
Agreement, free and clear of any and all Security Interests, options or rights
of any nature. Section 3.2(d) of the Chi Disclosure Schedule sets forth a true
and correct description of all shares of Company Common owned by such
Stockholder.
(b) Such Stockholder has the full right, power and authority to
execute and deliver this Agreement and all other agreements entered into in
connection herewith by such Stockholder, if any ("RELATED AGREEMENTS"), to
perform such Stockholder's obligations hereunder and thereunder, and to vote
such Stockholder's shares of Company Common in favor of the Merger. This
Agreement and the Related Agreements to which each Stockholder is a party
constitute the valid and legally binding obligations of such Stockholder
enforceable against such Stockholder in accordance with their respective terms.
(c) Such Stockholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of
any court or other governmental body which would prevent the execution or
delivery of this Agreement by such Stockholder, such Stockholder's approval of
the Merger or the conversion of such Stockholder's shares of Company Common
pursuant to the Merger.
(d) All existing agreements between such Stockholder and the Company,
except for all agreements ancillary to this Agreement, have been (or on or
prior to the Effective Time will be) terminated and such Stockholder is not a
party to, subject to or bound by any agreement, commitment or understanding
whatsoever between such Stockholder and the Company;
(e) Such Stockholder understands that: (i) the Superior Common to be
issued pursuant to the Merger has not been, and as of the Effective Time will
not be, registered under the Securities Act or under any state securities laws;
(ii) the Superior Common is being offered and issued in reliance upon Federal
and state exemptions for transactions not involving any public offering; (iii)
a "stop transfer" order will be placed against the certificates representing
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shares of Superior Common issued pursuant to the Merger; and (iv) such
certificates will (until such time as (A) such Superior Common is registered
under the Securities Act, or (B) if later, until the expiration of the Lock-Up
Period (as defined in Section 5.2(e)), or (C) if later, until expiration of the
period set forth in Section 5.2(e)(iii)(C), bear on their face the following
legend:
"The shares evidenced by this certificate have not
been registered under the Securities Act of 1933, as
amended, or any applicable state securities laws. No
transfer or sale of these shares or any interest
therein may be made without such registration and
qualification unless the issuer has received an
opinion of counsel satisfactory to it that a proposed
transfer or sale does not require registration or
qualification under applicable law.
The shares evidenced by this certificate were issued
pursuant to an Agreement and Plan of Merger, dated as
of August 14, 1997, among the issuer, The Chi Group,
Inc., the original holder of the such shares and
certain other parties (the "MERGER AGREEMENT"). A
copy of the Merger Agreement is on file at the offices
of the issuer. The Merger Agreement provides for,
among other things, certain restrictions upon transfer
of the shares evidenced by this certificate. By
accepting such shares, the holder agrees to be bound
by all such transfer restrictions in the Merger
Agreement."
(f) Such Stockholder further represents that: (i) such Stockholder is
acquiring the Superior Common to be acquired by such Stockholder pursuant to
the Merger solely for such Stockholder's own account for investment purposes
and not with a view to the distribution thereof within the meaning of the
Securities Act; (ii) such Stockholder is a sophisticated investor with
knowledge and experience in business and financial matters; (iii) such
Stockholder has had access to all Superior SEC Reports (as hereinafter defined)
filed by Superior during the current year and the year preceding the current
year, and has had the opportunity to obtain additional information and ask
questions and receive answers as desired in order to evaluate the merits and
risks inherent in holding the Superior Common; (iv) such Stockholder has not
been offered the Superior Common by any form of general advertising or general
solicitation; and (v) such Stockholder is able to bear the economic risk and
lack of liquidity inherent in holding the Superior Common.
3.2. Representations and Warranties Concerning the Company. As a material
inducement to Superior and Acquisition to enter into this Agreement and
consummate the transactions contemplated hereby, the Company and the
Stockholders hereby jointly and severally represent and warrant to Superior and
Acquisition that all of the statements contained in this Section 3.2 are
correct and complete as of the date of this Agreement, and hereby covenant that
said statements will be correct and complete as of the Effective Time (as
though made as of the Effective Time and as though the Effective Time were
substituted for the date of this Agreement throughout this Section 3.2), except
as set forth in the Chi Disclosure Schedule. The
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Chi Disclosure Schedule will be arranged in sections corresponding to the
numbered and lettered sections contained in this Section 3.2.
(a) Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power
and authority to carry on the business in which it is engaged and to own and
use the properties owned and used by it. True and correct copies of the
Company's Certificate of Incorporation and By-Laws, in each case as amended to
date, have been delivered to Superior. The Company is qualified to conduct
business and is in good standing under the laws of each jurisdiction wherein
the nature of its business or its ownership of property requires it to be so
qualified, except where the failure to be so qualified would not individually
or in the aggregate, have a Material Adverse Effect. Section 3.2(a) of the Chi
Disclosure Schedule lists all jurisdictions in which the Company is qualified
to do business.
(b) Authorization of Transaction. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the prior sentence,
the Board of Directors and the Stockholders of the Company have duly authorized
the execution, delivery and performance of this Agreement and the consummation
of the Merger by the Company (and all applicable notice requirements of Section
251 of the DGCL with respect to such approval have been satisfied). This
Agreement constitutes the valid and legally binding obligation of the Company
enforceable against the Company in accordance with its terms.
(c) Noncontravention. Except as set forth on Section 3.2(c) of the Chi
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby will (i) violate
or conflict in any way with any statute, regulation, law, rule or common law
doctrine applicable to the Company, (ii) violate or conflict in any way with
any judgment, order, decree, stipulation, injunction, charge or other
restriction of any governmental body, governmental agency or court to which the
Company is subject or any provision of the Certificate of Incorporation or
By-Laws of the Company, or (iii) conflict with, result in a breach of,
constitute a default under (with or without notice or lapse of time, or both),
result in the acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice under, or result in the
creation of any Security Interest upon any of the Company's assets pursuant to
the terms of, any contract, agreement, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the Company is a
party or by which it is bound or to which any of its assets are subject. The
Company is not required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government, governmental agency
or court, or any other Person in order for the parties to consummate the Merger
and the transactions contemplated by this Agreement and in order that the
Merger and such transactions not constitute a breach or violation of, or result
in a right of termination or acceleration or any encumbrance on any of the
Company's assets pursuant to the
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provisions of, any agreement, arrangement or understanding or any license,
franchise or permit, except for the filing of the Certificate of Merger with
the Delaware Secretary.
(d) Capitalization. The authorized capital stock of the Company consists
of 1,400 shares of Company Common, of which 1,185.65 shares are issued and
outstanding on the date hereof and 194.39 shares are subject to issuance under
options and Company Equity Rights currently outstanding. Set forth on Section
3.2(d) of the Chi Disclosure Schedule is a true and correct description of (i)
the full legal names, current address and social security or tax identification
number of each owner of issued and outstanding shares of Company Common, (ii)
the number of shares of Company Common owned of record by each such Stockholder
and the certificate numbers of the stock certificates representing such shares,
(iii) the full legal name, current address and social security number of each
of the holders of outstanding options to acquire shares of Company Common
(collectively, the "OPTION HOLDERS") and of Company Equity Rights ("RIGHTS
HOLDERS"), (iv) with respect to each Option Holder and Rights Holder, the
number of Company Options or Company Equity Rights, as applicable, held by such
holder, the number of shares of Company Common subject to each such Company
Option or Company Equity Rights, as applicable and the exercise price, vesting
schedule, if applicable, and expiration date for each such Company Option or
Company Equity Rights, as applicable, and (v) all of the current directors and
officers of the Company. The Company has never authorized, offered, sold or
issued capital stock other than the Company Common. All offerings, sales and
issuances by the Company of any Company Common have been conducted in
compliance with, in accordance with or in reliance upon exemptions from all
applicable Federal and state securities laws and all applicable state
corporation laws. All of the issued and outstanding shares of Company Common
have been duly authorized, validly issued, fully paid, and nonassessable, and
not subject to any preemptive rights. Except for the Company Options and
Company Equity Rights described on Section 3.2(d) of the Chi Disclosure
Schedule there are no currently outstanding or authorized options, warrants,
rights, contracts, rights of first refusal or first offer, calls, puts, rights
to subscribe, conversion rights, or other agreements or commitments to which
the Company is a party or which are binding upon the Company providing for the
issuance, disposition, or acquisition of any of its capital stock or securities
convertible or exchangeable for its capital stock and there are no outstanding
or authorized stock appreciation, phantom stock, or similar rights (except the
Company Equity Rights) with respect to the Company and except as provided in
the Existing Company Documents, there are no contractual or statutory
preemptive rights or similar restrictions with respect to the issuance or
transfer of any shares of Company Common. Except as provided in the Existing
Company Documents, there are no voting trusts, proxies, or any other
agreements, restrictions or understandings with respect to the voting of any of
the capital stock of the Company, except for those agreements expressly
contemplated hereby.
(e) No Subsidiaries. The Company does not own or control any direct or
indirect equity interest or participation in any corporation, partnership,
limited liability company, trust, or other business association or Subsidiary
other than minority ownership interests in the entity described in Section
3.2(e) of the Chi Disclosure Schedule.
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(f) Financial Statements; Books and Records.
(i) The Company has provided Superior with the following financial
statements, correct and complete copies of which are set forth on Section
3.2(f) of the Chi Disclosure Schedule (collectively the "FINANCIAL
STATEMENTS"): (A) audited balance sheet and related statements of
income, changes in stockholders' equity and cash flows for the Company as
of and for each of the fiscal years ended April 30, 1994, 1995 and 1996
(the "MOST RECENT FISCAL YEAR END"), and (B) the unaudited balance sheet
as of April 30, 1997 (the "LATEST BALANCE SHEET") and related statement
of income for the twelve months then ended. The Financial Statements are
correct and complete, have been prepared in accordance with GAAP,
consistently applied throughout the period indicated, subject in the case
of interim financial statements to normal year-end adjustments and the
absence of certain footnote information, and fairly present the financial
condition and results of operations of the Company as of the times and
for the periods referred to therein.
(ii) The Company's books and records are and have been properly
prepared and maintained in form and substance adequate for preparing
audited financial statements in accordance with GAAP, and fairly and
accurately reflect all of the assets and Liabilities of the Company and
all contracts and transactions to which the Company is or was a party or
by which the Company or any of its business or assets is or was affected.
The corporate minute books of the Company, copies of which have been
made available to Superior, correctly reflect all resolutions adopted and
all other material corporate actions taken at all meetings or through
consents of the directors (including committees thereof) and the
Stockholders of the Company. The stock transfer books and stock ledger
of the Company are complete and correctly reflect all issuances and
transfers of the capital stock of the Company.
(g) Recent Events. Since the Most Recent Fiscal Year End, the Company
has not experienced or suffered any Material Adverse Effect. Without limiting
the generality of the foregoing, except as set forth on the Latest Balance
Sheet and Section 3.2(g) of the Chi Disclosure Schedule, since the date of the
Latest Balance Sheet, the Company has not:
(i) sold, leased, transferred or assigned any of its assets,
tangible or intangible, other than in the Ordinary Course of Business;
(ii) accelerated, terminated, modified, canceled or committed any
breach of any contract, lease, sublease, license, or sublicense (or
series of related contracts, leases, subleases, licenses, and
sublicenses) either involving more than $10,000 or otherwise outside of
the Ordinary Course of Business;
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(iii) canceled, compromised, waived, or released any right or claim
(or series of related rights and claims) either involving more than
$10,000 or outside of the Ordinary Course of Business;
(iv) experienced any damage, destruction, or loss to its property in
excess of $10,000 (whether or not covered by insurance);
(v) created or suffered to exist any Security Interest upon any of
its assets, tangible or intangible, outside the Ordinary Course of
Business or securing any Liabilities in the aggregate in excess of
$5,000;
(vi) issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to purchase or
obtain (including upon conversion or exercise) any of its capital stock,
or any securities convertible or exchangeable into any of its capital
stock;
(vii) declared, set aside, or paid any dividend or distribution with
respect to its capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock;
(viii) entered into any transaction, arrangement or contract with,
or distributed or transferred any property or other assets to, any
officer, director, Stockholder or other insider or Affiliate of the
Company (other than salaries and employee benefits in the Ordinary Course
of Business);
(ix) made or committed to make any capital expenditures or entered
into any other material transaction outside the Ordinary Course of
Business or involving an expenditure in excess of $10,000;
(x) amended or modified in any respect any Plan (beyond any
amendments and modifications reflected in true and complete copies of
such Plans delivered to Superior);
(xi) entered into any employment agreement or collective bargaining
agreement or granted any increase in excess of $5,000 in the salary of
any officer or management employee of the Company (or increase in excess
of $1,000 in the case of any non-management employee) or paid or
committed to pay any bonus to any officer or employee;
(xii) changed the manner in which the business has been conducted,
including, without limitation, billing of clients or collection of
accounts receivable, purchases of goods and services or payment of
accounts payable;
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(xiii) changed the accounting principles, methods or practices or
any change in the depreciation or amortization policies or rates;
(xiv) changed the relationships with any client, contractor or
supplier which might reasonably be expected to result in a Material
Adverse Effect; or
(xv) committed (orally or in writing) to any of the foregoing.
(h) Undisclosed Liabilities. The Company has no Liability (and there is
no Basis for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Company giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Latest
Balance Sheet, (ii) Liabilities, in an amount less than $25,000 payable to any
single Person or any group of Affiliated Persons or which have arisen out of
normal travel of employees, which have arisen after the date of the Latest
Balance Sheet (the "LATEST BALANCE SHEET DATE") in the Ordinary Course of
Business (none of which relates to any breach of contract, breach of warranty,
tort, infringement, or violation of law or arose out of any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand) and (iii)
Liabilities otherwise expressly disclosed in this Agreement or on the Chi
Disclosure Schedule.
(i) Tax Matters.
(i) The Company has filed all Tax Returns that it was required to
file on or prior to the date hereof. All such Tax Returns were correct
and complete in all material respects and accurately reflected all
Liability for Taxes for the periods covered thereby. The Company's
Liability for unpaid Taxes, whether to any governmental authority or to
another Person such as under a tax sharing agreement, for all periods
ending on or before the Effective Time do not exceed the amount of the
Liability accruals for Taxes (excluding reserves for deferred Tax assets
or deferred Tax Liabilities) on the Latest Balance Sheet. Neither the
Company, nor any of the Stockholders have received notice of any claim
made by an authority in a jurisdiction where the Company does not file
Tax Returns that the Company is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
the Company that arose in connection with any failure (or alleged
failure) to pay any Tax when due.
(ii) The Company has withheld and paid when due all Taxes required
to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third party.
(iii) Neither the Company nor any of the Stockholders has any
Knowledge of any Basis on which any taxing authority could assess any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax Liability of the Company
either (A) claimed or raised by any taxing authority in writing or (B) as
to which any of the Stockholders or the Company has Knowledge. The
Company has previously provided to Superior correct copies of all
▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇,
▇▇
▇▇
and foreign Tax Returns filed with respect to the Company for all taxable
periods for which the applicable statue of limitations has not closed.
None of such Tax Returns have been audited, and none currently are the
subject of audit, and there are no examination reports or statements of
deficiencies assessed against or agreed to by the Company for such
taxable periods.
(iv) The Company has disclosed on its Federal income tax returns all
positions taken therein that could give rise to a substantial
understatement of Federal income tax within the meaning of Section 6662
of the Code. The Company has not filed a consent under Section 341(f) of
the Code concerning collapsible corporations. The Company has not made
any material payments, is not obligated to make any material payments,
and is not a party to any agreement that would obligate it to make any
material payments that will not be deductible under Section 280G of the
Code. The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Sec. 897(c)(A)(ii) of the Code. The
Company is not a party to any tax allocation or sharing agreement. The
Company never has been a member of an Affiliated Group which filed
federal income tax returns, other than a group of which the Company was
the common parent. The Company has no Liability for Taxes owed by any
Person (other than the Company), including without limitation, (A) as a
transferee, assignee or other successor or (B) pursuant to a Tax sharing
agreement or other contract.
(v) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(j) Title and Condition of Properties.
(i) No Owned Real Property. The Company does not own any real
property.
(ii) Leased Real Property. The leases described in Section 3.2(j)
of the Chi Disclosure Schedule (the "PROPERTY LEASES") cover all of the
real estate leased, used or occupied by the Company. Each of the
Property Leases is in full force and effect and the Company holds a valid
and existing leasehold interest under each of such Property Leases. The
Company has delivered to Superior complete and accurate copies of each of
the Property Leases and none of such Property Leases has been modified in
any respect, except to the extent that such modifications are disclosed
by the copies delivered to Superior. The Company is not in default, and
no circumstances exist which would result in such default (including upon
the giving of notice or the passage of time, or both), under any of such
Property Leases, and no other party thereto has the right to terminate,
accelerate performance under or otherwise modify any of such leases. To
the Knowledge of the Company and the Stockholders, no lessor under any
such lease is in default under any of such leases in its duties to the
lessee. Except as described in Section 3.2(j) of the
▇▇
▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the Company has not assigned, transferred,
conveyed, subjected to a Security Interest, or otherwise encumbered any
interest in any of the Property Leases.
(iii) Title to Assets. The Company owns good and marketable title,
free and clear of all Security Interests, to all of the personal property
and assets reflected on the Latest Balance Sheet or acquired after the
Latest Balance Sheet Date, except for (1) assets with an aggregate
original purchase price of less than $10,000 in the aggregate which have
been disposed of to non-affiliated third parties since the Most Recent
Fiscal Year End in the Ordinary Course of Business, (2) Security
Interests securing liabilities reflected on the Latest Balance Sheet and
(3) Security Interests for current Taxes not yet due and payable.
(iv) Condition and Sufficiency of Assets. The Company's computer
hardware, equipment and other tangible personal property and assets are
in good condition and repair, except for ordinary wear and tear not
caused by neglect, and are useable in the Ordinary Course of Business.
The personal property and assets shown on the Latest Balance Sheet or
acquired after the Most Recent Fiscal Year End, the lease rights under
the Property Leases and leases of personal property and the Intellectual
Property owned or used by the Company under valid license, collectively
include all assets necessary to the conduct of the Company's business as
presently conducted or currently proposed to be conducted. Other than as
set forth on Section 3.2(j) of the Chi Disclosure Schedule none of the
Stockholders, other employees or independent contractors of the Company
or their respective Affiliates owns any rights in any assets, real or
personal, which are used by the Company in its business.
(k) Intellectual Property.
(i) Section 3.2 (k) of the Chi Disclosure Schedule contains a
complete list and an accurate functional description by category and
indication of status (completed or in process, registered or
unregistered) of all items of Intellectual Property which are owned,
licensed by, licensed to, used or held for use in or necessary for the
conduct of the business of the Company as such business is currently
conducted and presently contemplated to be conducted.
(ii) Other than Intellectual Property covered by Licenses-In and as
set forth on Section 3.2(k) of the Chi Disclosure Schedule, the rights of
the Company in and to each item of the Intellectual Property are owned
outright by the Company, free and clear of any Security Interests.
Except to the extent provided in the Licenses-In, all of the Company's
rights in and to such Intellectual Property are freely assignable in its
own name, including the right to create derivatives, and the Company is
under no obligation to pay any royalty or other compensation to any third
party or to obtain any approval or consent for use of any of the
Intellectual Property. None of the Intellectual Property is subject to
any outstanding judgment, order, decree, stipulation, injunction or
charge; no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is
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pending or, to the Knowledge of the Company or any of the Stockholders,
threatened, which challenges the legality, validity, enforceability, use
or ownership of any of the Intellectual Property; and, except pursuant to
the Licenses-Out, the Company has never agreed to indemnify any Person
for or against any interference, infringement, misappropriation, or other
conflict with respect to Intellectual Property.
(iii) No breach or default (or event which with notice or lapse of
time or both would result in a breach or default) by the Company exists
or has occurred under any License-In or other agreement pursuant to which
the Company uses any Intellectual Property, and the consummation of the
transactions contemplated by this Agreement will not violate or conflict
with or constitute a breach or default (or an event which, with notice or
lapse of time or both, would constitute a breach or default) or result in
a forfeiture under, or constitute a material Basis for termination of,
any such License-In or other agreement, except where such breaches,
defaults, violations, conflicts or other events which would not,
individually or in the aggregate, result in a Material Adverse Effect.
(iv) The Company owns or has the right to use all the Intellectual
Property necessary to provide, sell and license the services currently
provided, sold and licensed by the Company, and to conduct the Company's
business as presently conducted, and to satisfy and perform the existing
contracts, commitments, arrangements and understandings with clients of
the Company, and the consummation of the transactions contemplated hereby
will not alter or impair any such rights, including any right of the
Company to use or sublicense any Intellectual Property owned by others.
(v) No Intellectual Property owned by the Company, and no product or
service practiced, offered, licensed, sold or under development by the
Company, infringes any trademark, trade name, copyright, trade secret,
patent, right of publicity, right of privacy or other proprietary right
of any Person or would give rise to an obligation to render an accounting
to any Person as a result of co-authorship, co-invention or an express or
implied contract for any use or transfer. Neither the Company nor any of
the Stockholders has any Knowledge of any Basis for any charge or claim,
threatened claim or any suit or action asserting any such infringement or
conflict or asserting that the Company does not have the legal right to
own, enforce, sell, license, sublicense, lease or otherwise use any such
Intellectual Property, process, product or service.
(vi) The Company has not sent or otherwise communicated to any other
Person any notice, charge, claim or assertion of, and neither the Company
nor any of the Stockholders has any Knowledge of, any present, impending
or threatened infringement by any other Person of any Intellectual
Property.
(vii) The Company has not licensed to any person the right to use or
disclose its trade secrets, know-how and other confidential Intellectual
Property, and the Company is not aware of any other breaches or lapses in
its protection of the Intellectual Property,
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except with respect to the exclusive license to use certain confidential
information granted to Health Strategy Group, Inc., the result of which
would be to compromise the rights of the Company to apply for or enforce
appropriate legal protection of such Intellectual Property.
(viii) To the Knowledge of the Company and the Stockholders, no
former employees or independent contractors of the Company have any
claims or rights to any of the Intellectual Property necessary for the
lawful conduct of the Company's business as now conducted. To the
Knowledge of the Company and the Stockholders, no employee of the Company
is a party to or otherwise bound by any agreement with or obligated to
any other Person (including, any former employer) which in any respect
conflicts with any obligation, commitment or job responsibility of such
employee to the Company under any agreement to which currently he or she
is a party or otherwise.
(ix) Section 3.2(k) of the Chi Disclosure Schedule identifies each
Person to whom the Company has sold, licensed, leased or otherwise
transferred or granted any interest or rights to any Intellectual
Property, and the date of each such sale, license, lease or other
transfer or grant other than consulting services provided in the Ordinary
Course of Business.
(l) Contracts. Section 3.2(l) of the Chi Disclosure Schedule lists each
of the twenty (20) largest current customers of the Company (based on gross
revenue from January 1, 1996 through March 31, 1997) and each of the following
contracts, agreements, and other written arrangements to which the Company is a
party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
with annual payments exceeding $10,000 or with a term exceeding one year;
(ii) any written arrangement concerning a partnership or joint
venture;
(iii) any written arrangement (or group of related written
arrangements) under which the Company has (A) created, incurred, assumed,
or guaranteed (or may create, incur, assume, or guarantee) Indebtedness
in excess of $25,000 or (B) imposed (or may impose) a Security Interest
on any of its assets, tangible or intangible;
(iv) all client service contracts and engagements under which the
Company's work is not yet complete or was completed within the past two
years, or under which the Company otherwise has on-going client service
obligations;
(v) any written arrangement concerning confidentiality or any
written arrangement concerning non-competition;
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(vi) any written arrangement not disclosed in the Chi Disclosure
Schedule pursuant to any other provision in this Section 3.2 under which
the consequences of a default or termination could have a Material
Adverse Effect on the Company;
(vii) any contract with any labor union or contract for the
employment of any officer, individual employee or other Person on a
full-time, part-time or consulting basis, and any contract for the
engagement of any consultants or independent contractors;
(viii) any guaranty of any obligation for borrowed money or
otherwise, other than endorsements made for collection in the Ordinary
Course of Business, or any agreement or commitment with respect to the
lending or investing of funds to or in other Persons;
(ix) any contract or group of related contracts with the same party
(or group of related parties) for or relating to the purchase or sale of
products or services, either (A) which is not terminable by the Company
on sixty (60) days or less notice or (B) under which the undelivered
balance of products and services has a selling price in excess of
$25,000;
(x) any other contract or group of related contracts with the same
party either (A) requiring payments after the date hereof to or by the
Company of more than $25,000 or (B) not terminable by the Company on
sixty (60) days or less notice;
(xi) any agreement with any employee, the benefits of which are
contingent or the terms of which are materially altered upon the
occurrence of a transaction of the nature contemplated by this Agreement
involving the Company;
(xii) any agreement or plan the benefits of which will be increased
or accelerated by the occurrence of the transactions contemplated by this
Agreement; and
(xiii) any other written arrangement or group of related written
arrangements not entered into in the Ordinary Course of Business or the
breach, default or termination of which would have Material Adverse
Effect.
The Company has delivered or otherwise made available to Superior a correct and
complete copy of each written arrangement (including all amendments thereto)
listed in Section 3.2(l) of the Chi Disclosure Schedule. With respect to each
written arrangement so listed: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force
and effect on identical terms immediately after the Effective Time; (C) neither
the Company (nor, to the Knowledge of the Company and the Stockholders, any
other party) is in material breach or default (including, with respect to any
express or implied warranty), and no event has occurred which with notice or
lapse of time or both would constitute a material breach or default or permit
termination, modification, or acceleration, under the written arrangement,
except for any breaches, defaults, terminations, modifications or accelerations
which have been cured or
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waived; and (D) no party has repudiated any provision of any such written
arrangement. The Company is not a party to any verbal contract, agreement, or
other arrangement which, if reduced to written form, would be required to be
listed in the Chi Disclosure Schedule under the terms of this Section 3.2(l).
Correct and complete copies of the general forms of client engagement and
services used by the Company have been delivered to Superior. Except for those
Contracts set forth on Section 3.2(l) of the Chi Disclosure Schedule (the
"FIXED RATE ENGAGEMENTS"), the Company is not a party to any fixed fee or
capped price contracts or engagement arrangements, nor does the Company have
any outstanding offers, bids or proposals to perform any services on a fixed
fee or capped basis. Section 3.2(l) of the Company Disclosure Schedule
identifies each Fixed Rate Engagement and the amount of fees uncollected with
respect thereto. In the aggregate, the number of hours to complete and
remaining to complete the work under such Fixed Rate Engagements is not out of
balance with the aggregate rate charged in such Fixed Rate Engagements.
Section 3.2(1) of the Chi Disclosure Schedule also sets forth the full amount,
to the Knowledge of any of the Stockholders and the Company, of client payments
to the Company through the date hereof with respect to services not yet
performed by the Company ("PRE-COLLECTED REVENUE").
(m) Notes and Accounts Receivable. All notes and accounts receivable of
the Company are reflected properly on its books and records, such receivables
are valid receivables subject to no set-offs or counterclaims, are current and
collectible in the aggregate amount shown, and will be collected in accordance
with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth on the face of the Latest Balance Sheet, as adjusted for
operations and transactions through the Effective Date in accordance with the
past custom and practice of the Company. Since the Most Recent Fiscal Year
End, there has not been a material change in the aggregate amount of the
accounts receivable of the Company or the aging thereof.
(n) Powers of Attorney; Bank Accounts. There are no outstanding powers of
attorney executed by or on behalf of the Company. Section 3.2(n) of the Chi
Disclosure Schedule lists each bank account and credit arrangement maintained
by the Company (together with relevant account information, authorized
signatures and account users).
(o) Litigation. Section 3.2(o) of the Chi Disclosure Schedule sets forth
each instance in which the Company (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction or charge or (ii) is a party to or, to
the Knowledge of any of the Stockholders or the Company, is threatened to be
made a party to, any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency of
any Federal, state, local, or foreign jurisdiction or before any arbitrator.
None of the charges, complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 3.2(o) of the Chi Disclosure Schedule could
reasonably be expected to result in any Material Adverse Effect. None of the
Stockholders or the Company has any reason to believe that there exists a Basis
on which any such charge, complaint, action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Company.
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(p) Employees; Employment Matters.
(i) Except as set forth in Section 3.2(p) of the Chi Disclosure
Schedule, to the Knowledge of the Stockholders and the Company, no key
employee or group of employees has any plans to terminate their
employment with the Company generally or as a result of the transactions
contemplated hereby or otherwise. The Company is not a party to or bound
by any collective bargaining agreement, and the Company has not
experienced any strikes, grievances, other collective bargaining disputes
or, to the Knowledge of any of the Stockholders or the Company, claims of
unfair labor practices. Neither the Company nor any of the Stockholders
has any Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees
of the Company.
(ii) Section 3.2(p) of the Chi Disclosure Schedule contains a true,
correct and complete list setting forth the names and current salaries or
rates of compensation of all employees of the Company and independent
contractors who render services to the Company on more than a single
occasion. Except as disclosed on Section 3.2(p) of the Chi Disclosure
Schedule, the Company has no unsatisfied Liability to any previously
terminated employee or independent contractor. The Company has disclosed
all written (and summarized all oral) employee handbooks, policies,
programs and arrangements to Superior.
(iii) All Persons employed by the Company are employees at will or
otherwise employed such that the Company may lawfully terminate their
employment at any time, with or without cause, and, subject to delivery
of notice as required under the Company's employment procedures, without
creating any severance payment, any termination pay obligation, any
obligation under any Plan which is unfunded or underfunded, or any
material cause of action against the Company or otherwise giving rise to
any material Liability of the Company for wrongful discharge, breach of
contract or tort.
(iv) The Company has materially complied with all applicable laws
relating to labor, including, without limitation, any provisions thereof
relating to wages, termination pay, vacation pay, fringe benefits,
collective bargaining and the payment and/or accrual of the same and all
Taxes, insurance and all other costs and expenses applicable thereto, and
the Company is not liable for any arrearage, or any Taxes, costs or
penalties for failure to comply with any of the foregoing. Without
limiting the generality of the foregoing, the Company has not incurred a
violation of Part 6 of Subtitle B of Title I of ERISA ("COBRA") or other
applicable state insurance continuation law. No material COBRA or other
state insurance continuation law violation exists or will exist with
respect to any employees of the Company prior to and including the
Effective Time, nor will any such violation occur as a result of the
transactions contemplated hereby. As of the Effective Time, the Company
will not be, nor has the Company ever been, an enterprise subject to the
Workers Adjustment Retraining and Notification Act ("WARN")
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and the Company will not incur, nor will the Company ever have incurred,
material Liabilities, penalties or other charges under WARN.
(v) Each Person whom the Company currently retains as a consultant
or previously retained as a consultant qualifies, or at all times while
performing services for the Company qualified, as an independent
contractor and not as an employee of the Company, under the Code and all
applicable state laws. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby shall cause the
Company to be in breach of any agreement with any employee, contractor or
consultant or cause the Company to be liable to pay any severance or
other amount to any employee, contractor or consultant of the Company.
(q) Employee Benefit Plans.
(i) All Plans are listed and briefly described in Section 3.2(q) of
the Chi Disclosure Schedule. Each Plan is in compliance with its terms
and with ERISA and other applicable laws (including, without limitation,
compliance with the health care continuation requirements of COBRA and
any proposed regulations promulgated thereunder), and all agreements and
instruments applicable to any Plan. Section 3.2(q) of the Chi Disclosure
Schedule sets forth each former employee of the Company entitled to COBRA
benefits and the remaining period of such benefits. The Company and each
applicable ERISA Affiliate of the Company have received favorable
determination letters as to the qualification under the Code of each
pension plan, as defined in Section 3(2) of ERISA ("PENSION PLAN"), and
there have been no amendments or other developments since the date of
such determination letters which would cause the loss of such qualified
status. No material violation of ERISA has at any time occurred in
connection with the administration of any of the Plans, and there are no
actions, suits, or claims (other than routine, non-contested claims for
benefits) pending or threatened against the Plans, or any administrator
or fiduciary thereof, which could result in any Material Adverse Effect.
(ii) With respect to all present Plans, the Company and all ERISA
Affiliates of the Company have heretofore delivered to Superior true and
complete copies of each of the following (including descriptions of
vacation, severance pay, sickness, and separation policies):
(A) the Plan documents (and any applicable trust agreement or
insurance contract);
(B) the most recent Internal Revenue Service determination
letter request relating to each of the Pension Plans, if any;
(C) the summary plan description (as currently in effect) and
any summary of material modification for each of the Plans, if any;
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(D) the most recent Annual Report (Form 5500 Series), and
accompanying schedules, filed for each of the Plans, if any, and
the most recent summary annual report furnished for each of the
Plans;
(E) the most recent actuarial valuations, if applicable, and
latest financial statements for each of the Plans; and
(F) all documents filed with the Internal Revenue Service,
Department of Labor or Pension Benefit Guaranty Corporation since
January 1, 1991, if any.
There is and has been no material violation of ERISA known to the Company or
any ERISA Affiliate of the Company with respect to the filing of applicable
reports, documents, and notices regarding such past or present Plans with the
Secretary of Labor or the Secretary of the Treasury or the furnishing of such
documents to the participants or beneficiaries of such Plans.
(iii) Each Plan is maintained by the Company or any ERISA Affiliate
of the Company under a plan document which does not provide for other
participating employers except for the Company or any ERISA Affiliate of
the Company and no Plan provides or has provided credit with respect to
service other than with the Company or any ERISA Affiliate of the
Company.
(iv) Neither the Company nor any ERISA Affiliate of the Company nor
any of their employees, Stockholders, or directors have engaged in any
transaction in connection with which any of them would be subject either
to a civil penalty assessed pursuant to Section 502 of ERISA or a tax
imposed by Section 4975 of the Code. The execution and performance of
this Agreement will not involve any prohibited transaction within the
meaning of Section 406 of ERISA.
(v) None of the assets of any of the Plans is or has been invested
in any property constituting employer real property or any employer
security within the meaning of Section 407(d) of ERISA.
(vi) No Pension Plan or trust created under any such Pension Plan
has, since September 2, 1974, been terminated in whole or in part.
Additionally, there is no reasonable Basis for the Company or any ERISA
Affiliate of the Company to anticipate material Liability to the Pension
Benefit Guaranty Corporation with respect to a Pension Plan and there has
been no reportable event (within the meaning of Section 4043(c) of
ERISA), or any event requiring disclosure under Section 4063(a) or
4041(c) of ERISA with respect to such a Pension Plan since September 2,
1974. There has been no event or condition which presents a material
risk of termination of any Pension Plan by the Pension Benefit Guaranty
Corporation, and no circumstances exist that constitute grounds under
Section 4042 of ERISA entitling the Pension Benefit Guaranty Corporation
to institute any such proceeding.
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(vii) Full payment as of the Effective Time will have been made of
all amounts which the Company and any ERISA Affiliate of the Company are
required, under the terms of all Plans, to have paid as contributions to
such Plans as of the last day of the most recent fiscal year prior to the
Effective Time. Further, no accumulated funding deficiency (as defined
in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any Plan, nor has there been any lien
imposed under Section 412(n) of the Code.
(viii) The execution and performance of this Agreement will not
constitute a stated triggering event under any Plan or employment
agreement that will result in any payment (whether of severance pay or
otherwise) becoming due to any employee of the Company or ERISA Affiliate
of the Company.
(ix) Neither the Company nor any ERISA Affiliate of the Company
provides, nor have they at any time provided, coverage under any welfare
plan (as defined in Section 3(l) of ERISA) (including, but not limited
to, life insurance, disability, medical, dental, prescription drugs, or
accidental death or dismemberment) to any of their retirees, other than
any continuation or conversion coverage which any such retiree may have
purchased at his own expense.
(x) The financial statements of each Pension Plan as of the end of
the most recent plan year, and the list of the investments of such
Pension Plan as of the most recent plan year end, accurately reflect the
financial conditions of the Pension Plans, and there have been no
material changes in such investments between such date and the Effective
Time.
(xi) Neither the Company nor any ERISA Affiliate of the Company
currently contributes, or at any time in the past has contributed, to a
multiemployer plan, as defined in Section 3(37) of ERISA, or a defined
benefit plan (as defined in Section 3 (35) of ERISA).
(r) Licenses, Permits and Approvals. Section 3.2(r) of the Chi Disclosure
Schedule lists all governmental and regulatory licenses, permits and approvals
necessary to the conduct of the Company's business. All such licenses, permits
and approvals are in full force and effect. There are no violations by the
Company of, or any claims or proceedings, pending or, to the Knowledge of any
of the Stockholders or the Company, threatened, challenging the validity of or
seeking to discontinue, any such licenses, permits or approvals.
(s) Unlawful Payments. No payments of either cash or other consideration
have been made to any Person by the Company or any Stockholder or, to the
Knowledge of any of the Stockholders or the Company, on behalf of the Company
by any agent, employee, officer, director, Stockholder or other Person, that
were unlawful under the laws of the United States or
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any state or any other foreign or municipal government authority having
appropriate jurisdiction over the Company.
(t) Compliance with Laws. The Company and its facilities are in
compliance with and have not in the past violated any applicable law, rule or
regulation of any Federal, state, local or foreign government or agency
thereof, including without limitation, environmental laws and laws relating to
labor and employment, and no notice, claim, charge, complaint, action, suit,
proceeding, investigation or hearing has been received by the Company or filed,
commenced or, to the Knowledge of the Company or any of the Stockholders
threatened against the Company alleging any such violation.
(u) Suppliers and Clients. Section 3.2(u) of the Chi Disclosure Schedule
lists all of the existing clients of the Company as of the Closing Date and all
clients with whom the Company has had engagements during the last three (3)
years. Since the Latest Balance Sheet Date, no material licensor, vendor,
supplier or licensee, or any client of the Company accounting for more than 1%
of the Company's revenues in fiscal 1996, has canceled or otherwise adversely
modified its relationship with the Company and, to the Knowledge of the Company
or any of the Stockholders, no such Person has any intention to do so, and, to
the Knowledge of the Company or any of the Stockholders, except as set forth on
Section 3.2(u) of the Chi Disclosure Schedule, there are no disputes or
problems or notices of dissatisfaction with or from any client of the Company,
and the consummation of the transactions contemplated hereby shall not
adversely affect any relationships with such clients.
(v) Insurance.
(i) Section 3.2(v) of the Chi Disclosure Schedule sets forth the
following information with respect to each insurance policy (including
policies providing property, casualty, Liability, and workers'
compensation coverage and bond and surety arrangements) to which the
Company is or within the past three (3) years has been a party, a named
insured, or otherwise the beneficiary of coverage at any time: (A) the
name, address, and telephone number of the agent; (B) the name of the
nsurer, the name of the policyholder, and the name of each covered
insured; (C) the policy number and the period of coverage; and (D) the
scope (including an indication of whether the coverage was on a claims
made, occurrence, or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage.
(ii) With respect to each such insurance policy: (A) the policy is
legal, valid, binding, enforceable, and in full force and effect; (B) the
policy will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms immediately following the consummation
of the transactions contemplated hereby; (C) neither the Company nor, to
the Knowledge of the Company or the Principal Stockholders, any other
party to the policy, is in breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, or both, would
constitute such a breach or default, or permit termination,
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modification, or acceleration, under the policy; and (D) no party to the
policy has repudiated any provision thereof.
(w) Warranty. All services rendered by the Company have been in material
conformity with all applicable contractual commitments and all applicable
express and implied warranties, and the Company has no Liability (and neither
the Company nor any of the Stockholders has any Knowledge of any Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand giving rise to any Liability) for damages in
connection therewith, subject only to the reserve for customer claims set forth
on the face of the Latest Balance Sheet as adjusted for the passage of time
through the Effective Time in accordance with the past custom and practice of
the Company. No services provided by the Company are subject to any guaranty,
warranty, or other indemnity beyond the Company's applicable standard terms and
conditions of engagement and such other indemnities and warranties disclosed on
Section 3.2(w) of the Chi Disclosure Schedule.
(x) Transaction-Related Tax and Accounting Matters. Neither the Company
nor any Stockholder has taken or agreed to take any action, nor does the
Company nor any Principal Stockholder have any Knowledge of any fact or
circumstance, that would (i) prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning of
Section 368 of the Code, or (ii) prevent the transactions contemplated hereby,
including the Merger, from being accounted for as a pooling of interests in
accordance with GAAP. Each of the Stockholders represents severally that such
Stockholder has no present plan or intention to sell, exchange or otherwise
dispose of a number of shares of Superior Common to be received in the Merger
that would reduce the Stockholders' collective ownership of Superior Common to
a number of shares having a value, as of the Effective Time, of less than fifty
percent (50%) of the value of all of the shares of Company Common outstanding
as of the Effective Time. In addition, each of the Stockholders who are, as of
the date hereof, "Affiliates" of the Company, as defined in Rule 145 under the
Securities Act, represent that they have no intention or binding commitment to
sell any shares of the Superior Common to be received in the Merger prior to
the Lock-Up Period (as defined in Section 5.2(d)).
(y) Brokers' Fees. Except as provided in Section 5.8(j), neither the
Company nor any of the Stockholders has any Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Superior or Acquisition
could become liable or otherwise obligated.
(z) Potential Conflicts of Interest. No officer, director or Stockholder
of the Company: (i) owns, directly or indirectly, any interest in (excepting
not more than 2% stock holdings for investment purposes in securities of
publicly held and traded companies) or is an officer, director, employee or
consultant of any Person which is a competitor, lessor, lessee, customer or
supplier of the Company, except as disclosed in Section 3.2(z) of the Chi
Disclosure Schedule; (ii) owns, directly or indirectly, in whole or in part,
any interest in Intellectual Property which the Company is using or the use of
which is necessary for the business of the Company; (iii) has any loan
outstanding to or any cause of action or other claim whatsoever against the
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Company, except for claims in the Ordinary Course of Business, such as for
accrued salary, bonus, vacation pay and benefits under Benefit Plans and
similar matters and agreements existing on the date hereof; (iv) has made, on
behalf of the Company, any payment or commitment to pay any commission, fee or
other amount to, or purchase or obtain or otherwise contract to purchase or
obtain any goods or services from, any corporation or other Person of which any
officer or director of the Company, or, a relative of any of the foregoing, is
a partner or stockholder (except stock holdings solely for investment purposes
in securities of publicly held and traded companies).
(aa) Disclosure. Neither this Agreement nor the Chi Disclosure Schedule
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading. There is no material
fact which has not been disclosed to Superior which results in, or could
reasonably be anticipated to result in, a Material Adverse Effect.
3.3. Representations and Warranties of Acquisition and Superior.
Acquisition and Superior hereby jointly and severally represent and warrant to
the Company and to each of the Stockholders that the statements contained in
this Section are correct and complete as of the date of this Agreement and
Superior and Acquisition hereby jointly and severally covenant that said
statements will be correct and complete as of the Effective Time (as though
then made and as though the Effective Time were substituted for the date of
this Agreement throughout this Section 3.3).
(a) Organization. Superior is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
Acquisition is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Authorization of Transaction. Each of Acquisition and Superior has
all requisite corporate power and authority to execute and deliver this
Agreement and to perform their respective obligations hereunder. Without
limiting the generality of the prior sentence, the Board of Directors of
Superior and the Board of Directors and sole stockholder of Acquisition have
duly authorized the execution, delivery and performance of this Agreement by
Superior and Acquisition, respectively, and the consummation of the Merger by
Acquisition. This Agreement constitutes the valid and legally binding
obligation of each of Superior and Acquisition, enforceable against each of
them, respectively, in accordance with its terms.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) violate or conflict in any way with any statute, regulation, law, rule or
common law doctrine, (ii) violate or conflict in any way with any judgment,
order, decree, stipulation, injunction, charge or other restriction of any
government, governmental agency or court to which Superior or Acquisition is
subject or any provision of the respective Certificates of Incorporation, as
applicable, and By-Laws of Superior and Acquisition, or (iii) conflict with,
result in a breach of, constitute a default under (with or without notice or
lapse of time, or both), result in the acceleration of, create in any party the
right
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to accelerate, terminate, modify or cancel, or require any notice under,
any contract, agreement, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement for borrowed money, instrument of indebtedness,
Security Interest or other arrangement to which Superior or Acquisition is a
party or by which either of them is bound or to which any of their respective
assets are subject, except where such violations, conflicts, breaches, defaults
or other events would not, individually or in the aggregate, result in a
material adverse effect or impact upon the assets, business, financial
condition or results of operations of Superior and its Subsidiaries, taken as a
whole (a "SUPERIOR ADVERSE EFFECT") or prevent or materially delay the
consummation of the transactions contemplated hereby. Neither Superior nor
Acquisition is required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government, governmental agency
or court, or any other Person in order for the parties to consummate the
transactions contemplated by this Agreement and in order that the Merger and
such transactions shall not constitute a breach or violation of, or result in a
right of termination or acceleration or any encumbrance on any of Superior's
assets pursuant to the provisions of, any agreement, arrangement or
understanding or any license, franchise or permit, except for the filing of the
Certificate of Merger with the Delaware Secretary.
(d) Superior Common. Superior has taken all actions necessary to
authorize and approve the issuance of the Superior Common, and as of the
Effective Time the Superior Common will, when issued in accordance herewith, be
duly authorized, validly issued, fully paid and nonassessable. There are no
statutory or contractual Stockholders' preemptive rights or rights of refusal
with respect to the issuance of the Superior Common upon consummation of the
Merger.
(e) Brokers' Fees. Neither Superior or Acquisition has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which any of the
Stockholders is or could become liable or obligated.
(f) Commission Filings. Superior has filed and made available to the
Company and the Stockholders all forms, reports and documents required to be
filed by Superior with the Commission under the Exchange Act and the Securities
Act during the one year period ending on the date hereof (collectively, the
"SUPERIOR SEC REPORTS"). The Superior SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Exchange Act, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Superior SEC Reports or necessary
in order to make the statements in such Superior SEC Reports, in the light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of Superior included in the Superior
SEC Reports (the "SUPERIOR FINANCIAL STATEMENTS") complied when filed as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, and were,
when filed, in accordance with the books and records of Superior, complete and
accurate in all material respects, and presented fairly the consolidated
financial position and the consolidated
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results of operations, changes in stockholders' equity and cash flows of
Superior and its Subsidiaries as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles, consistently applied,
subject in the case of interim financial statements to normal year-end
adjustments and the absence of certain footnote information.
(g) Capital Structure.
(i) The authorized capital stock of Superior consists of 30,000,000
shares of Superior Common and 7,000,000 shares of preferred stock, par
value $0.01 per share ("SUPERIOR PREFERRED STOCK"). As of June 30, 1997,
7,634,325 shares of Superior Common and no shares of Superior Preferred
Stock were issued and outstanding, and 450,522 shares of Superior Common
were reserved for issuance under outstanding options. All outstanding
shares of Superior's outstanding capital stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(ii) Except for Superior's Rights Plan and for options granted in
the normal course pursuant to Superior's stock option plans and employee
stock purchase plan, as described in Superior SEC Reports, and except as
contemplated herein, there are no options, warrants, calls, rights,
commitments or agreements of any character to which Superior or any
Subsidiary of Superior is a party or by which any of them is bound
obligating Superior or any Subsidiary of Superior or any securities or
rights convertible into or exchangeable for any such capital stock.
(h) No Material Adverse Changes. Since the date of the most recent
Superior SEC Report, no event has occurred which has had a Superior Adverse
Effect and no action, suit, claim or proceeding has been filed, or threatened
in writing, which if adversely determined, would result in a Superior Adverse
Effect.
(i) Transaction-Related Tax and Accounting Matters. Neither Superior nor
Acquisition has taken or agreed to take any action, nor does Superior or
Acquisition have any Knowledge of any fact or circumstance, that would (i)
prevent the transactions contemplated hereby, including the Merger, from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code, or (ii) prevent the transactions contemplated hereby, including the
Merger, from being accounted for as a pooling of interests in accordance with
GAAP.
4. CONDITIONS
4.1. Conditions to Obligation of Superior and Acquisition. The
obligations of Superior and Acquisition to effect the Merger are also subject
to satisfaction at or prior to the Effective Time of the following conditions:
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(a) The representations and warranties set forth in Sections 3.1 and 3.2
shall be true and correct in all material respects at and as of the Effective
Time;
(b) Each of the Company and the Stockholders shall have performed and
complied with all of their respective covenants hereunder through the Effective
Time;
(c) The Company shall have delivered to Superior and Acquisition a
certificate signed by an officer of the Company to the effect that each of the
conditions set forth in Section 4.1(a), (b) and (d) are satisfied in all
respects;
(d) There shall not have been, since the Most Recent Fiscal Year End, any
change in or effect on the Company's assets, financial condition, operating
results, customer or employee relations or business prospects which results or
may reasonably be expected to result, in a Material Adverse Effect;
(e) The Company shall have delivered to Superior (i) a copy of the text of
the director and Stockholder resolutions by which the corporate action on the
part of the Company necessary to approve this Agreement and the Merger were
taken, certified by the Company's Secretary, (ii) an incumbency certificate
signed by an officer of the Company certifying the signature and office of each
officer of the Company executing this Agreement or any other agreement,
certificate or other instrument executed pursuant hereto, (iii) a copy of the
Company's Certificate of Incorporation, as amended to date, certified by the
Delaware Secretary, and (iv) good standing certificates for the Company, issued
as of a recent date, by the Secretaries of State of Delaware and each other
jurisdiction in which the Company is required to be qualified to do business;
(f) Each of the key Company employees identified by Superior shall have
entered an Employment Agreement with the Company and Superior Consultant
Company, Inc., a Michigan corporation and wholly-owned subsidiary of Superior
("SUPERIOR CONSULTANT") in form and substance acceptable to Superior (the
"EMPLOYMENT AGREEMENTS"), and as of the Effective Time each of the Employment
Agreements shall be in full force and effect;
(g) Superior and Acquisition shall have received from Hooper, Hathaway,
Price, Beuche & ▇▇▇▇▇▇▇, counsel to the Company and the Stockholders, an
opinion with respect to the matters set forth in Exhibit B attached hereto,
addressed to Superior and Acquisition and dated as of the Effective Time;
(h) The Company shall not have received any demands for appraisal with
respect to the Merger under Section 262 of the DGCL from any Stockholders
holding in the aggregate 10% of more of the Company Shares Deemed Outstanding;
(i) Superior shall have received an opinion or other advice, in form and
substance reasonably satisfactory to Superior, from its accounting
professionals, that the Merger
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may be accounted for as a "pooling of interests," in accordance with generally
accepted accounting principles and all rules, regulations and policies of the
SEC;
(j) The Company shall have delivered to Superior and Acquisition
certificates, in form and substance reasonably satisfactory to Superior, signed
by the Secretary of the Company, dated as of the Effective Time, identifying
the following documents to be delivered therewith: (i) the minute books of the
Company which, to the Knowledge of the Secretary of the Company, shall contain
minutes of all meetings (or consents to action in lieu thereof) of the
directors and Stockholders of the Company from their inception to the date
thereof; (ii) the corporate seal of the Company; (iii) certified copies of the
By-laws of the Company as in effect on the date thereof; (iv) all stock
certificate books and stock ledger of the Company; and (v) such other documents
or instruments as Superior or Acquisition may reasonably request in writing not
less than two days prior to the Effective Date to carry out the intents and
purposes of this Agreement, and such minute books, stock certificate books and
other documents shall be complete, accurate and sufficient, to the reasonable
satisfaction of Superior and its counsel;
(k) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any Federal, state,
local or foreign jurisdiction, to which any of the Parties is a party which
would prevent or inhibit the consummation of the transaction contemplated
hereby or seek to impose any Liability on any Party as a result of the
consummation of the Merger, and all necessary regulatory approvals shall have
been obtained;
(l) Superior shall be satisfied with the results of its due diligence
review and investigation of the Company and its business, including, without
limitation, the Company's clients and client engagements and rights and
interests in and to all Intellectual Property necessary for the operation of
Chi's business as presently conducted or presently contemplated to be
conducted;
(m) The Company shall have procured all of the consents, if any,
identified in Section 3.2(c) of the Chi Disclosure Schedule;
(n) The Existing Company Documents shall have terminated by a written
instrument satisfactory in form and substance to Superior and its counsel;
(o) The Boards of Directors of Superior and Acquisition shall have
approved this Agreement and authorized the Merger;
(p) The Company shall cause each insurance policy set forth in Section
3.2(v) of the Company Disclosure Schedule and each Plan set forth on the
Company Disclosure Schedule to be terminated as of the Closing Date (except
that the Company's 401k Plan shall be terminated as of the day immediately
prior to the Closing Date and participation in such Plans frozen as of such
date);
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(q) The Company shall have terminated the employment of all of its
existing employees;
(r) The Company shall have entered into a settlement agreement, in form
and substance acceptable to Superior, settling all claims against and asserted
by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and Health
Strategy Group, Inc.;
(s) All actions and proceedings hereunder and all documents and other
papers required to be delivered by the Company hereunder or in connection with
the consummation of the transactions contemplated hereby, and all other related
matters, shall have been approved by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd., counsel to
Superior, as to their form and substance.
Superior, on behalf of itself and Acquisition, may waive any condition, in
whole or in part, specified in this Section 4.1 if it executes a writing so
stating at or prior to the Effective Time.
4.2. Conditions to Obligations of the Company and the Stockholders. The
obligations of the Company and the Stockholders to effect the Merger are
subject to satisfaction at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties set forth in Section 3.3 shall be
true and correct at and as of the Effective Time;
(b) Acquisition and Superior shall have performed and complied with all of
their respective covenants hereunder through the Effective Time;
(c) Acquisition and Superior shall have delivered to the Company and the
Stockholders a certificate signed by an officer of Acquisition and Superior to
the effect that each of the conditions specified above in Sections 4.2(a) and
(b) are satisfied in all respects;
(d) Acquisition shall have delivered to the Company and the Stockholders
(i) a copy of the text of the director and stockholder resolutions by which the
corporate action on the part of Acquisition necessary to approve this Agreement
and the Merger were taken, certified by Acquisition's corporate secretary, and
(ii) an incumbency certificate signed by an officer of Acquisition certifying
the signature and office of each officer executing this Agreement or any other
agreement, certificate or other instrument executed pursuant hereto;
(e) Superior shall have delivered to the Company and the Stockholders (i)
a copy of the text of the director resolutions by which the corporate action on
the part of Superior necessary to approve this Agreement and the Merger were
taken, certified by Superior's corporate secretary, (ii) an incumbency
certificate signed by an officer of Superior certifying the signature and
office of each officer executing this Agreement or any other agreement,
certificate or other instrument executed pursuant hereto; and (iii)
certificates representing shares of Superior Common and payment for fractional
interests to be delivered in accordance with Section 2.8;
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(f) The Company and the Stockholders shall have received an opinion from
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd., with respect to the matters set forth in Exhibit C
attached hereto, addressed to the Company and the Stockholders and dated as of
the Effective Time;
(g) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any Federal, state,
local or foreign jurisdiction, to which any of the Parties is a party which
would prevent or inhibit the consummation of the transaction contemplated
hereby or seek to impose any liability on any Party as a result of the
consummation of the Merger, and all necessary regulatory approvals shall have
been obtained;
(h) Each Company Option shall have been converted into a Substituted
Option in accordance with Section 5.1(a), and each outstanding Company Equity
Right shall be converted as provided in Section 5.1(b) ; and
(i) All actions and proceedings hereunder and all documents and other
papers required to be delivered by Acquisition and Superior hereunder or in
connection with consummation of the transactions contemplated hereby and all
other related matters shall have been approved by Hooper, Hathaway, Price,
Beuche & ▇▇▇▇▇▇▇, counsel to the Company, as to their form or substance.
Each of the Company and the Stockholders may waive, in whole or in part, any
condition specified in this Section 4.2 if it executes a writing so stating
at or prior to the Effective Time.
5. ADDITIONAL AGREEMENTS
5.1. Company Options.
(a) Option Substitution. At the Effective Time, each Company Option
identified on Schedule 5.1 attached hereto shall be canceled and substituted
with an option to acquire Superior Common (each, a "SUPERIOR OPTION") in
accordance with the following provisions. Each Superior Option shall contain
substantially the same terms and conditions, including vesting schedules, that
were provided as of the Effective Time under the Company Option for which the
Superior Option was substituted (the "SUBSTITUTED OPTION"), provided that the
provisions relating to mandatory repurchase by the Company in the event of
termination of employment shall be eliminated and, to the extent required to
enable the merger to be accounted for as a pooling of interests, the
exercisability of the Superior Option may be suspended until the end of the
Lock-up Period. With respect to each Superior Option granted hereunder: (i)
the number of shares of Superior Common obtainable under such Superior Option
will be determined by multiplying the number of shares of Company Common
obtainable under the related Substituted Option by the Exchange Ratio, and
rounding down to the nearest whole number and (ii) the exercise price under
such Superior Option will be determined by dividing the exercise price per
share in effect immediately prior to the Effective Time under the Substituted
Option by the Exchange Ratio, and rounding the exercise price thus determined
to the nearest whole cent. After the Effective Time, Superior shall issue to
each holder of a Substituted Option
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a document evidencing the foregoing cancellation and substitution by Superior
with a Superior Option.
(b) Company Equity Rights. At the Effective Time, each Company Equity
Right identified on Schedule 5.1 attached hereto shall be canceled and
extinguished and converted into and becomes a right to receive a number of
shares of Superior Common determined pursuant to the relevant Deferred
Compensation Agreements, rounding down to the nearest whole number.
5.2. Post-Merger Covenants. The Parties agree as follows with respect to
the period following the Effective Time.
(a) General. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification with respect to
such matter under Section 5.5).
(b) Financial Statements. The Stockholders will cooperate and
provide all assistance reasonably requested by Superior's independent
accountants and the Company's independent accountants (including without
limitation, executing any and all customary management representation letters
with respect to the Company's financial statements) in connection with the
preparation and delivery to Superior, on or prior to 45 days after the
Effective Time, of audited financial statements and for the Company as of and
for each of the fiscal years ended April 30, 1995, 1996 and 1997.
(c) Transition. For a period of not less than three years following
the Effective Time, except upon the request or direction of Superior or its
Affiliates, none of the Stockholders will take any action that primarily is
designed or intended to have the effect of discouraging any client, supplier,
or other business partner or affiliate of the Company from maintaining the same
business relationships with the Surviving Company after the Effective Time as
it maintained with the Company prior to the Effective Time; provided, however,
that nothing in this Section 5.2(c) shall be deemed or interpreted to restrict
any right of Radius or its Affiliates to modify or terminate any agreement
between itself and Superior. From and after the Effective Time, for a period
of not less than three years following the Effective Time, each of the
Stockholders will refer all inquiries by current or former clients (as of the
Effective Time) of the Company relating to the Company's business to Superior
or its Affiliates, including the Surviving Company. The provisions of this
Section 5.2(c) shall not apply to those Stockholders listed in Schedule 5.4.
(d) Confidentiality. Each of the Stockholders will treat and hold as
confidential all of the Confidential Information of the Company, refrain from
using any of such Confidential Information (except, as applicable, in direct
furtherance of such Stockholder's duties
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on behalf of the Surviving Corporation as directed by the Surviving Corporation
or Superior) and shall deliver promptly to the Surviving Corporation or
destroy, at the request and option of the Surviving Corporation, all tangible
embodiments (and all copies) of such Confidential Information which are in such
Stockholder's possession. In the event that any of the Stockholders is
requested or required (by oral question or written request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information of the
Company, such Stockholder will notify the Company promptly of the request or
requirement so that the Company may seek an appropriate protective order or
waive compliance with the provisions of this Section 5.2(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, any of the
Stockholders is, on the advice of counsel, compelled to disclose any
Confidential Information of the Company to any tribunal or else stand liable
for contempt or other penalty, such Stockholder may disclose such Confidential
Information to the tribunal; provided, however, that the disclosing
Stockholder shall, upon the request of Superior or the Surviving Corporation
and at the expense of Superior or the Surviving Corporation, exert all
reasonable efforts to obtain an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Company or Superior shall reasonably designate.
(e) Transfer of Superior Common.
(i) The Stockholders hereby acknowledge and agree that the Superior
Common may not be transferred except pursuant to (a) a registered
offering under the Securities Act (in which case all transfers shall be
made in accordance with all applicable provisions of the Registration
Agreement), (b) Rule 144 promulgated pursuant to the Securities Act (or
any similar rule or rules then in force) if available, or (c) subject to
the conditions specified in subparagraph (ii) below, any other legally
available means of transfer.
(ii) In connection with the transfer of any Superior Common (other
than a transfer pursuant to a registered public offering), the holder
thereof shall deliver written notice to Superior describing in reasonable
detail the transfer or proposed transfer, together with an opinion of
securities counsel (with such opinion and such counsel being satisfactory
to Superior) to the effect that such transfer of Superior Common may be
effected without registration of such Superior Common under the
Securities Act or any applicable state securities law. In addition, if
the holder of Superior Common delivers to Superior such an opinion that
concludes that no subsequent transfer of such Superior Common will
require registration under the Securities Act or any applicable state
securities law, Superior shall promptly upon such contemplated transfer
deliver new certificates for such Superior Common which do not bear the
restrictive legend set forth in this Section 5.2(e). If Superior is not
required to deliver new certificates for such Superior Common not bearing
such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to Superior in writing its agreement
to be bound by the conditions contained in this Section . In addition,
at any time following the second anniversary of the Closing Date, if a
holder of Superior Common who is not an
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Affiliate of Superior delivers a written request to remove the legend set
forth in this Section 5.2(e) together with an opinion of securities
counsel (which opinion and such counsel being reasonably satisfactory to
Superior) to the effect that such transfer of Superior Common may be
effected without registration of such Superior Common under the
Securities Act or any applicable state securities law, Superior shall
remove such restrictive legend.
(iii) Each of the Stockholders hereby agrees that such Stockholder
will not (A) take any action that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code or prevent the Merger and transactions contemplated hereby from
being accounted for as a pooling of interests under generally accepted
accounting principles, (B) sell, sell options or other rights against,
lend, or otherwise transfer or dispose of any shares of Superior Common
obtained hereunder in violation of Rule 145 under the Securities Act or
(C) sell, sell options or other rights against, lend, or otherwise
transfer or dispose of any shares of Superior Common obtained hereunder
until the such shares first become eligible for sale pursuant to Rule 144
promulgated pursuant to the Securities Act. Without limiting the
generality of the foregoing, each of the Stockholders who is an Affiliate
of the Company agrees that such Stockholder will not sell, transfer or
otherwise dispose of any Superior Common issued to such Stockholder in
the Merger until Superior has published financial results including at
least thirty (30) days of combined operations with the Surviving
Corporation (the period of prohibition being referred to as the "LOCK-UP
PERIOD").
5.3. Waiver and Release. Each Stockholder, on behalf of himself and his
heirs, executors, administrators, successors and assigns (with respect to each
Stockholder, the "RELEASING PARTIES"), irrevocably and unconditionally waives
and releases any and all rights with respect to, and releases, forever acquits
and discharges each and all of the Company, the Company's Stockholders,
directors, officers, employees, agents and other representatives, and their
respective heirs, executors, administrators, successors and assigns ("RELEASED
PARTIES") with respect to, each and all claims, demands, charges, complaints,
obligations, causes of action, suits, liabilities, indebtedness, sums of money,
covenants, agreements, instruments, contracts (written or oral, express or
implied), controversies, promises, fees, expenses (including attorneys' fees,
costs and expenses), damages and judgments, at law or in equity, in contract or
tort, in federal, state or other judicial, administrative, arbitration or other
proceedings, of any nature whatsoever, known or unknown, suspected or
unsuspected, previously, now or hereafter arising, in each case which arise out
of, are based upon or are connected with facts or events occurring or in
existence on or prior to the date of the Closing ("RELEASED CLAIMS"). Each
Stockholder further represents and warrants that he has not assigned or
otherwise transferred any right or interest in or to any of the Released
Claims. This Section 5.3 shall not apply to any of the following: (i) claims
for salaries and benefits accrued in the Ordinary Course of Business through
the Effective Time under the express terms of the Company's written benefit
plans, (ii) claims against either Superior or Superior Consultant for
indemnification pursuant to Section 5.5(d) herein, to the
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extent applicable or (iii) claims against either Superior or Superior
Consultant under any existing consulting agreement with such Shareholder.
5.4. NonCompetition.
(a) In consideration of benefits to be received by the Stockholders in
connection with the Merger, each Stockholder is prohibited, for a period of two
years following the Effective Time, or such longer period as may be specified
in any employment agreement between such Stockholder and the Surviving
Corporation or Superior Consultant (the "Restricted Period"), from recruiting
on his own behalf or on behalf of any third party any employees of the
Surviving Corporation or Superior Consultant, either directly or indirectly,
specifically including, without limitation, identification of Surviving
Corporation or Superior Consultant personnel to any third parties, or assisting
in the recruitment or solicitation of employees of the Surviving Corporation or
Superior Consultant or any of their subsidiaries or affiliates
(b) In consideration of benefits to be received by the Stockholders in
connection with the Merger, each Stockholder is prohibited, during the
Restricted Period, from directly or indirectly, on behalf of himself or others,
soliciting business from and/or performing services through a party other than
the Surviving Corporation, Superior Consultant, their subsidiaries or
affiliates which are similar to those offered by the Surviving Corporation,
Superior Consultant, their subsidiaries or affiliates, for clients of the
Surviving Corporation or Superior Consultant or prospective clients of the
Surviving Corporation or Superior Consultant identified during the Restricted
Period, including those of the Company, prior to the Merger or without the
prior written consent of Superior Consultant from seeking or taking direct
employment with any client or prospective client of the Surviving Corporation,
Superior Consultant, their affiliates or subsidiaries. For purposes of
defining clients and prospective clients relative to non-competition, a
"client" is any entity that the Surviving Corporation or Superior Consultant
has provided services within the thirty-six (36) month period prior to the
Effective Time; a "prospective client" is any entity that has been subject to
documented sales and marketing activity, other than mass mailings, within
twelve (12) months prior to the Effective Time.
(c) In consideration of benefits to be received by the Stockholder in
connection with the Merger, each Stockholder agrees that during the Restricted
Period, he will not, directly or indirectly, engage in business competitive
with the Surviving Corporation or Superior Consultant.
(d) The parties hereto agree that the Surviving Corporation and
Superior Consultant would suffer irreparable harm from a breach of any of the
covenants or agreements contained in this Section 5.4. In the event that an
alleged or threatened breach by any Stockholder of any of the provisions of
this Section 5.4, the Surviving Corporation, Superior Consultant or their
successors or assigns may, in addition to all other rights and remedies
existing in its favor, apply to any court of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof
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(including the extension of the Restricted Period with respect to such
Stockholder in breach by a period equal to the length of the violation of this
Section 5.4 and the Restricted Period described above will be tolled with
respect to such Stockholder until such alleged breach or violation is
resolved). The Stockholders agree that the restrictions in this Section 5.4
are reasonable protections under the circumstances of the Merger.
(e) If, at the time of enforcement of any of the provisions of this
Section 5.4, a court holds that the restrictions stated herein are unreasonable
under the circumstances then existing, the Stockholders agree that the maximum
period, scope or geographical area reasonable under such circumstances will be
substituted for the stated period, scope or area.
(f) Notwithstanding any other provision contained herein, this
Section 5.4 shall not apply to those Stockholders listed on Schedule 5.4.
(g) The Stockholders agree that the covenants made in this Section 5.4
shall be construed as an agreement independent of any provision of this
Agreement and shall survive any order of a court of competent jurisdiction
terminating any other provision of this Agreement.
5.5. Indemnification.
(a) Survival. Survival Periods Generally. All of the
representations and warranties of the Stockholders contained in Sections 3.1
and 3.2 (the "CHI REPRESENTATIONS"), shall survive the closing of the Merger
(regardless of any Knowledge or investigation of Superior, Acquisition or the
Surviving Corporation) and shall continue in full force and effect for a period
of one year thereafter (the "SURVIVAL PERIOD"). It is acknowledged that
certain representations and warranties may be resolved upon the issuance of the
first independent audit report following the Closing and to the extent Superior
acknowledges that such representations and warranties have been resolved, such
representations and warranties shall terminate. All of the representations and
warranties of Superior and Acquisition contained in Section 3.3 (the "SUPERIOR
REPRESENTATIONS") shall survive the Closing of the Merger (regardless of any
Knowledge or investigation of the Stockholders or the Company) and shall
continue in full force and effect until the expiration of the Survival Period.
All covenants of the Parties in this Agreement shall survive the Closing of the
Merger and shall continue in full force thereafter.
(b) Indemnification by the Stockholders. Subject to Section 5.5(c),
and subject to Superior's duty under applicable law to mitigate damages, each
of the Stockholders shall severally (in accordance with their respective Pro
Rata Percentages) indemnify, defend and hold Superior and the Surviving
Corporation, and each of their directors, officers, employees and agents
(collectively, the "ACQUIRING PARTIES") harmless, from and against the entirety
of any Adverse Consequences any of the Acquiring Parties may suffer, sustain or
become subject to, through and after the date of the claim for indemnification,
including any Adverse Consequences any of the Acquiring Parties may suffer
after the end of any applicable Survival Period, resulting from, arising out
of, relating to, in the nature of, or caused by: (i) any breach or inaccuracy
of any representation or warranty of the Stockholders or the Company in this
Agreement or in the
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schedules or certificates delivered by them in connection herewith (other than
the representations and warranties set forth in Section 3.1 of this Agreement
(the "STOCKHOLDER INDIVIDUAL REPRESENTATIONS")), (ii) any nonfulfillment or
breach of any covenant or agreement on the part of the Stockholders or the
Company set forth in this Agreement, (iii) without limiting the generality of
the foregoing, any claim by any Person asserting any ownership interest in or
rights to acquire any capital stock of the Company, to the extent such
ownership interest or rights are not set forth on Section 3.2(d) of the Chi
Disclosure Schedule, (iv) without limiting the generality of Section 5.5(b)(i)
and regardless of whether the matter is disclosed on the Chi Disclosure
Schedule, any Tax Liabilities arising out of the operation of the business of
the Company prior to the Effective Time, to the extent not accrued on the
Latest Balance Sheet or to the extent not attributable to the operations of the
Company in the Ordinary Course of Business from the date of the Latest Balance
Sheet through the Effective Date and not accrued in accordance with GAAP on the
Company's books, evidence of which has been provided to Superior in form and
substance reasonably acceptable to Superior, (v) without limiting the
generality of Section 5.5(b)(i), any Liability payable to any employee of the
Company arising out of such employee's employment with the Company prior to his
or her termination, any Liability existing under any Plan of the Company prior
to the termination of such Plan or arising out of such Plan as a result of the
termination of such employee by the Company in connection with the transactions
contemplated hereby, or any Liability to such employee under any existing
agreement or understanding between the Company or any Principal Shareholder and
such employee, in each case to the extent such Liabilities are not (A) accrued
on the Latest Balance Sheet or (B) remuneration (i.e. compensation, accrued
vacation time and other benefits) accrued by the Company in the Ordinary Course
of Business from the date of the Latest Balance Sheet through the Effective
Date and accrued in accordance with GAAP on the Company's books, in form and
substance reasonably acceptable to Superior, or (C) amounts, if any,
constituting severance, deferred compensation or similar payments under the
settlement agreement described in Section 4.2(r) or (D) Superior Common issued
in cancellation of the Company Equity Rights, or (vi) the costs and expense of
defending any action, demand or claim by any third-party against or affecting
any of the Acquiring Parties which, if true or successful, would give rise to a
breach of any of the representations, warranties or covenants of the Company or
the Stockholders, even if such action, demand or claim ultimately proves to be
untrue or unfounded. Subject to Section 5.5(c), each Stockholder shall,
severally (in accordance with their respective Pro Rata Percentages) and not
jointly, indemnify, defend and hold the Acquiring Parties harmless, from and
against the entirety of any Adverse Consequences any of the Acquiring Parties
may suffer, sustain or become subject to, through and after the date of the
claim for indemnification, including any Adverse Consequences any of the
Acquiring Parties may suffer after the end of any applicable Survival Period,
resulting from, arising out of, relating to, in the nature of, or caused by any
breach or inaccuracy of any of the Stockholder Individual Representations made
by such Stockholder or any covenants made by such Stockholder in this
Agreement. All Adverse Consequences for which the Acquiring Parties are
entitled to seek indemnification under this Agreement are referred to herein as
"SUPERIOR INDEMNIFIABLE LOSSES." To the extent a Stockholder holds sufficient
Superior Common, such Stockholder's obligation to indemnify the Acquiring
Parties shall be satisfied by such Stockholder transferring to the Acquiring
Parties
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shares of Superior Common having a value (measured based on the Average Stock
Price) equal to the Superior Indemnifiable Losses.
(c) Certain Limits On and Provisions Relating to Stockholders'
Indemnification. The obligation of the Stockholders to indemnify the Acquiring
Parties under any provision of this Agreement shall be subject to the
following:
(i) the aggregate liability of each Stockholder hereunder with
respect to all Superior Indemnifiable Losses shall not exceed the product
of such Stockholder's Pro Rata Percentage, multiplied by the Total
Transaction Value;
(ii) no Stockholder will have any obligation to indemnify the
Acquiring Parties from and against any Superior Indemnifiable Losses
(other than those arising (x) under Section 5.5(b)(iii) or (y) out of a
breach of any Stockholder Individual Representations) until the
Acquiring Parties have suffered such aggregate Superior Indemnifiable
Losses in excess of $150,000 (at which point the Stockholders will be
obligated to indemnify the Acquiring Parties from and against all
Superior Indemnifiable Losses relating back to the first dollar); and
(iii) no Stockholder shall have any obligation to indemnify the
Acquiring Parties from and against any Superior Indemnifiable Losses
arising out of the breach of any of the Chi Representations, unless the
Acquiring Parties make a written claim within the Survival Period with
respect to the breach which gives rise to such Superior Indemnifiable
Losses; provided, however, that the previous clause shall not apply to
matters set forth in Section 5.5(b)(iii)-(v) above.
(d) Indemnification by Superior. Subject to Section 5.5(e), Superior
shall indemnify, defend and hold the Stockholders harmless from and against the
entirety of any Adverse Consequences the Stockholders may suffer, sustain or
become subject to, through and after the date of the claim for indemnification,
including any Adverse Consequences the Stockholders may suffer after the end of
the Survival Period, resulting from, arising out of, relating to, in the nature
of, or caused by: (i) any breach or inaccuracy of any representation or
warranty of Superior or Acquisition in this Agreement or in the schedules or
certificates delivered by them in connection herewith, (ii) any nonfulfillment
or breach of any covenant or agreement on the part of Superior or Acquisition
set forth in this Agreement or (iii) the costs and expense of defending any
action, demand or claim by any third-party against or affecting any of
Stockholders which, if true or successful, would give rise to a breach of any
of the representations, warranties or covenants of Superior or Acquisition,
even if such action, demand or claim ultimately proves to be untrue or
unfounded. All adverse consequences for which the Stockholders may seek
indemnification under this Agreement are referred to herein as the "CHI
INDEMNIFIABLE LOSSES."
(e) Limits on Superior's Indemnification. The obligation of Superior to
indemnify the Stockholders under this Section 5.5 shall be subject to the
following:
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(i) Superior will not have any obligation to indemnify the
Stockholders from and against any Chi Indemnifiable Losses until the
Stockholders have suffered such aggregate Chi Indemnifiable Losses in
excess of $150,000 (at which point Superior will be obligated to
indemnify the Stockholders from and against all Indemnifiable Losses
relating back of the first dollar); and
(ii) Superior shall have no obligation to indemnify the Stockholders
from and against any Chi Indemnifiable Losses arising out of the breach
of any of the Superior Representations unless the Stockholders'
Representative makes a written claim within the Survival Period with
respect to the breach of which gives rise to such Chi Indemnifiable
Losses.
(f) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give
rise to a claim by such Indemnified Party for indemnification against any
other Party (the "INDEMNIFYING PARTY") under this Agreement, then the
Indemnified Party shall notify each Indemnifying Party thereof promptly;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party
from any liability or obligation hereunder unless (and then solely to the
extent that) the Indemnifying Party is damaged thereby.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of the
Indemnifying Party's choice, reasonably satisfactory to the Indemnified
Party, so long as (A) the Indemnifying Party notifies the Indemnified
Party, within twenty (20) business days after the Indemnified Party has
given notice of the Third Party Claim to the Indemnifying Party (or by
such earlier date as may be necessary under applicable procedural rules
in order to file a timely appearance and response) that the Indemnifying
Party is assuming the defense of such Third Party Claim and will
indemnify the Indemnified Party against such Third Party Claim in
accordance with the terms and limitations of this Section 5.5, (B) the
Indemnifying Party provides the Indemnified Party with reasonable
evidence that the Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its indemnification
obligations hereunder with respect thereto, and (C) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the conditions set forth in Section 5.5(f)(ii) are
and remain satisfied, then (A) the Indemnifying Party may conduct the
defense of the Third-Party Claim in accordance with Section 5.5(f)(ii),
(B) the Indemnified Party may retain separate co-counsel at its sole cost
and expense (except that the Indemnifying Party will be responsible for
the fees and expenses of the separate co-counsel to the extent the
Indemnified Party reasonably concludes that the counsel the Indemnifying
Party has
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selected has an actual or potential conflict of interest), (C) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be unreasonably
withheld, conditioned or delayed), (D) the Indemnifying Party will not
consent to the entry of any judgment with respect to the matter, or enter
into any settlement which either imposes an injunction or other equitable
relief upon the Indemnified Party or does not include a provision whereby
the plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, and (E) the Indemnified Party
shall, at the Indemnifying Party's reasonable request and at the
Indemnifying Party's expense, cooperate in the defense of the matter. In
the event that the conditions in Section 5.5(f)(ii) are not satisfied or
become unsatisfied in the case of any Third Party Claim, then the
Indemnified Party may assume control of the defense of such claim.
(g) No Contribution. None of the Stockholders shall have any right of
contribution against the Surviving Corporation with respect to any
Indemnifiable Losses.
5.6. Dispute Resolution Regarding Indemnification. In the event that any
dispute should arise among the Parties with respect to any claims under Section
5.5, the Parties shall first use their best efforts to resolve such dispute
among themselves. If the Parties are unable to resolve the dispute within 30
calendar days after the commencement of efforts to resolve the dispute, the
dispute will be submitted to arbitration in accordance with Subsection 5.7
hereof.
5.7. Arbitration.
(a) Either Superior or the Stockholders' Representative may submit any
matter referred to in Subsection 5.6 hereof to binding arbitration by notifying
the other party hereto, in writing, of such dispute and submission.
(b) Either Party requesting arbitration shall serve a written demand for
arbitration on the other Party by registered or certified mail. The demand
shall set forth a statement of the nature of the dispute, the amount involved
and the remedies sought. Each Party shall have the right to be represented by
counsel and shall have the right to full discovery. Except as specifically
provided herein, the arbitration shall be conducted by and in accordance with
the commercial rules of the American Arbitration Association and the
arbitrator's ruling shall be in accordance with law and the terms of this
Agreement. The arbitrator shall not have the power to amend this Agreement in
any respect.
(c) No later than twenty (20) calendar days after a demand for
arbitration is served, the parties shall jointly select and appoint a
disinterested person to act as the arbitrator. In the event that the parties
do not agree on the selection of an arbitrator, each Party shall select an
arbitrator within ten (10) days after the date on which the parties do not
agree on the selection of a sole arbitrator and the two arbitrators so selected
shall select a third arbitrator within ten (10) days after the parties select
their arbitrators; the provisions set forth herein regarding the single
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arbitrator shall apply to the three arbitrators so selected. Any arbitrator
designated hereunder shall not now or in the three years preceding such
arbitration be an employee, consultant, officer, director or Stockholder of any
Party hereto or any Affiliate of any Party to this Agreement or have now or in
the three years preceding such arbitration any business relationship with any
Party hereto or any Affiliate of any Party hereto.
(d) No later than ten (10) calendar days after the arbitrator is
appointed, the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. The hearing shall commence no later
than thirty (30) calendar days after the arbitrator is appointed and shall
continue from day to day until completed.
(e) The arbitrator shall use his or her best efforts to rule on each
disputed issue within 30 days after the completion of the hearings described in
paragraph (c) above. The determination of the arbitrator as to the resolution
of any dispute shall be binding and conclusive upon all Parties; provided, that
the arbitrator may not award any punitive damages. All rulings of the
arbitrator shall be in writing, shall set forth the basis for the decision and
shall be delivered to the Parties.
(f) The prevailing Party in any arbitration shall be entitled to an
award of reasonable attorneys' fees incurred in connection with the arbitration
and the disputed issues with respect thereto. The non-prevailing Party shall
pay such fees, together with the fees of the arbitrator and the costs and
expenses of the arbitration. For purposes hereof, a Party seeking payment of
any amount in arbitration shall be deemed to be the prevailing Party if it is
determined that such Party is entitled to receive at least 51% of the payment
initially claimed by it to be due to such Party in such arbitration, and the
Party from which such payment is sought shall be deemed to be the "prevailing
party" if the other Party is not so deemed to be the prevailing party.
(g) Any arbitration pursuant to this Subsection 5.8 shall be
conducted in the County of Oakland, State of Michigan. Any arbitration award
may be entered in and enforced by any court having jurisdiction thereof and the
parties hereby consent and commit themselves to the jurisdiction of the courts
of the State of Michigan and the United States District Court for the Eastern
District of Michigan, Southern Division at Detroit for purposes of the
enforcement of any arbitration award.
5.8. Miscellaneous.
(a) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement
without the prior written approval of the other Party; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by law or regulation, including, without limitation, any disclosures made
necessary by Superior's status as a public company (in which case the
disclosing Party will advise the other Party prior to making the disclosure)
and shall insofar as
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may be practicable reflect on such disclosure substantially all reasonable
comments of the other parties.
(b) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the other documents
referred to herein and executed in connection herewith) constitutes the entire
agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties, written or oral, that
may have related in any way to the subject matter hereof. Without limiting the
generality of the foregoing, this Agreement supersedes the letter of intent
between Superior and the Company dated May 9, 1997.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign this Agreement or any of
such Party's rights, interests, or obligations hereunder without the prior
written approval of the other Parties.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) three
(3) business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid, (ii) one day after receipt is
electronically confirmed, if sent by fax (provided that a hard copy shall be
promptly sent by first class mail), or (iii) one (1) business day following
deposit with a recognized national overnight courier service for next day
delivery, charges prepaid, and, in each case, addressed to the intended
recipient as set forth below:
If to the Company: With a Copy To:
Chi Systems, Inc., c/o
Superior Consultant Holdings Corporation ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇ 30 South ▇▇▇▇▇▇ Drive - Suite 2900
Southfield, Michigan 48075 ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If to the Stockholders, c/o With a Copy To:
Stockholders' Representative:
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Hooper, Hathaway, Price, Beuche & ▇▇▇▇▇▇▇
c/o Chi Systems, Inc. ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
If to Superior or Acquisition: Copy to:
------------------------------- --------
Superior Consultant Holdings Corporation ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇ 30 South ▇▇▇▇▇▇ Drive - Suite 2900
Southfield, Michigan 48075 ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is delivered to
the individual for whom it is intended. Any Party may change the address to
which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Parties notice in the manner herein set
forth.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Michigan, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of Michigan or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Michigan.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Superior, the Company and each of the Stockholders. The Company may consent to
any such amendment at any time prior to the Effective Time with the prior
authorization of its board of directors; provided, however, that after the
Stockholders have approved the Merger, no amendment may be made which would
have the effect of reducing the amount of Superior Common into which any share
of Company Stock will be converted in the Merger without the further approval
of the Stockholders (or their legal representatives) holding a majority of the
outstanding shares of Company Stock outstanding immediately prior to the
Effective Time. No waiver by any Party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent occurrence of such kind.
(i) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of
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the remaining terms and provisions hereof or the validity or enforceability of
the invalid or unenforceable term or provision in any other situation or in any
other jurisdiction. If a final judgment of a court of competent jurisdiction
declares that any term or provision hereof is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
(j) Expenses. Except as otherwise explicitly provided in this Agreement,
each of Superior and the Stockholders will bear his or its own direct and
indirect costs and expenses (including fees and expenses of legal counsel,
investment bankers, brokers or other representatives or consultants) incurred
in connection with the negotiation, preparation and execution of this Agreement
and the transactions contemplated hereby, whether or not such transactions are
consummated. If the Merger is consummated, then, except as provided below,
expenses paid or accrued by the Company to effect the Merger shall be paid by
the Stockholders and shall not be paid or accrued by the Company or become
post-Closing obligations of the Surviving Corporation. Notwithstanding the
foregoing, Superior acknowledges that if the Merger is consummated, the
Surviving Corporation shall pay (i) the negotiated aggregate fee of $100,000
which the Company is obligated to McDonald & Company as set forth in the
agreement dated June 3, 1997 (a true and correct copy of which has been
provided to Superior); and (ii) the reasonable legal and accounting fees and
expenses incurred by the Company (up to a maximum of $117,000) in connection
with the transactions contemplated hereby.
(k) Construction. The Parties have jointly participated in the
negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumptions or burdens of proof
shall arise favoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
Parties intend that each representation, warranty and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which
the Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant. Each
defined term used in this Agreement has a comparable meaning when used in its
plural or singular form. Each gender-specific term used herein has a
comparable meaning whether used in a masculine, feminine or gender-neutral
form. The term "include" and its derivatives shall have the same construction
as the phrase "include, without limitation," and its derivatives. The section
headings
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contained in this Agreement are inserted for convenience or reference
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(l) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(m) Directly or Indirectly. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such Person.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Plan and
Agreement of Merger as of the date first above written.
CHI ACQUISITION CO. THE CHI GROUP, INC.
By: _______________________________ By: __________________________
Title: ____________________________ Title: _______________________
SUPERIOR CONSULTANT
HOLDINGS CORPORATION
By: _______________________________
Title: ____________________________
THE STOCKHOLDERS:
___________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
RADIUS HEALTH CARE SYSTEM
By:________________________________
Title:_____________________________
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