SHARE EXCHANGE AGREEMENT Between Finity Holdings, Inc. and Flagship Healthcare Management, Inc. Dated January 30, 2006
Between
Finity
Holdings, Inc.
and
Flagship
Healthcare Management, Inc.
Dated
January 30, 2006
TABLE
OF CONTENTS
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PAGE
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ARTICLE
I REPRESENTATIONS, COVENANTS, AND WARRANTIES OF FLAGSHIP
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1
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Section
1.01 Organization
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1
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Section
1.02 Capitalization
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2
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Section
1.03 Subsidiaries and Predecessor Corporations
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2
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Section
1.04 Financial Statements
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2
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Section
1.05 Information
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3
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Section
1.06 Options or Warrants
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3
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Section
1.07 Absence of Certain Changes or Events
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3
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Section
1.08 Litigation and Proceedings
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4
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Section
1.09 Contracts
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5
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Section
1.10 Material Contract Defaults
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5
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Section
1.11 No Conflict With Other Instruments
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5
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Section
1.12 Compliance With Laws and Regulations
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6
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Section
1.13 Approval of Agreement
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6
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Section
1.14 Flagship Schedules
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6
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Section
1.15 Valid Obligation
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7
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ARTICLE
II REPRESENTATIONS, COVENANTS, AND WARRANTIES OF FINITY
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7
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Section
2.01 Organization
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7
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Section
2.02 Capitalization
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7
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Section
2.03 Subsidiaries and Predecessor Corporations
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8
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Section
2.04 Financial Statements
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8
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Section
2.05 Information
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9
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Section
2.06 Options or Warrants
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9
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Section
2.07 Absence of Certain Changes or Events
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9
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Section
2.08 Litigation and Proceedings
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10
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Section
2.09 Contracts
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10
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Section
2.10 Material Contract Defaults
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11
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Section
2.11 No Conflict With Other Instruments
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11
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Section
2.12 Compliance With Laws and Regulations
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11
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Section
2.13 Approval of Agreement
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11
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Section
2.14 Material Transactions or Affiliations
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11
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Section
2.15 Finity Schedules
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12
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Section
2.16 Bank Accounts; Power of Attorney
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12
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Section
2.17 Valid Obligation
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13
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ARTICLE
III PLAN OF EXCHANGE
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13
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Section
3.01 The Exchange
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13
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Section
3.02 Anti-Dilution
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13
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Section
3.03 Closing
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13
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Section
3.04 Closing Events
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14
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Section
3.05 Additional Share Issuances
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14
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Section
3.06 Termination
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14
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-i-
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ARTICLE
IV SPECIAL COVENANTS
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14
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Section
4.01 Access to Properties and Records
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14
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Section
4.02 Delivery of Books and Records
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14
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Section
4.03 Third Party Consents and Certificates
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15
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Section
4.04 Name Change
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15
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Section
4.05 Finity Shareholder Meeting
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15
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Section
4.06 Waiver of Rights of Flagship Preferred Shareholders
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15
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Section
4.07 Designation of Directors and Officers
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15
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Section
4.08 Exclusive Dealing Rights
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15
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Section
4.09 Actions Prior to Closing
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16
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Section
4.10 Indemnification
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17
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Section
4.11 The Acquisition of Finity Common Stock
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18
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Section
4.12 Sales of Securities Under Rule 144, If Applicable
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19
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Section
4.13 Recapitalization
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20
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Section
4.14 Financing
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20
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ARTICLE
V CONDITIONS PRECEDENT TO OBLIGATIONS OF FINITY
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20
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Section
5.01 Accuracy of Representations and Performance of
Covenants
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20
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Section
5.02 Officer's Certificate
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20
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Section
5.03 Good Standing
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20
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Section
5.04 Approval by Flagship Shareholders
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21
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Section
5.05 No Governmental Prohibition
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21
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Section
5.06 Consents
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21
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Section
5.07 Other Items
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21
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ARTICLE
VI CONDITIONS PRECEDENT TO OBLIGATIONS OF FLAGSHIP AND THE FLAGSHIP
SHAREHOLDERS
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21
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Section
6.01 Accuracy of Representations and Performance of
Covenants
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21
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Section
6.02 Officer's Certificate
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21
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Section
6.03 Good Standing
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22
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Section
6.04 No Governmental Prohibition
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22
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Section
6.05 Consents
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22
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Section
6.06 Other Items
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22
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ARTICLE
VII MISCELLANEOUS
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22
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Section
7.01 Brokers
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22
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Section
7.02 Governing Law
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22
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Section
7.03 Notices
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23
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Section
7.04 Attorney's Fees
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24
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Section
7.05 Confidentiality
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24
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Section
7.06 Public Announcements and Filings
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24
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Section
7.07 Schedules; Knowledge
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24
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Section
7.08 Third Party Beneficiaries
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24
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Section
7.09 Expenses
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25
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Section
7.10 Entire Agreement
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25
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Section
7.11 Survival; Termination
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25
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Section
7.12 Counterparts
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25
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Section
7.13 Amendment or Waiver
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25
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Section
7.14 Best Efforts
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25
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Exhibits
A. Suitability
Letter
B. Investment
Letter
-ii-
EXCHANGE
AGREEMENT
THIS
EXCHANGE AGREEMENT
(hereinafter referred to as this "Agreement") is entered into as of this
30th
day of
January, 2006, by and between Finity
Holdings, Inc. a
Delaware corporation (hereinafter referred to as "Finity"), Flagship
Healthcare Management, Inc.,
a
Delaware corporation (hereinafter referred to as "Flagship") and the
shareholders of Flagship listed below, upon the following premises:
Premises
WHEREAS,
Finity
is a publicly held corporation organized under the laws of the State of Delaware
with no significant operations;
WHEREAS,
Flagship is a privately held corporation organized under the laws of Delaware
and engaged in healthcare management;
WHEREAS,
Finity
agrees to acquire up to 100%, but not less than 95% of the issued and
outstanding securities of Flagship in exchange for the issuance of certain
shares of Finity (the "Exchange") and Flagship agrees to use its best efforts
to
cause its shareholders (the "Flagship Shareholders") to exchange their
securities of Flagship on the terms described herein;
WHEREAS,
Finity
and Flagship desire to set forth the terms of the Exchange, which is intended
to
constitute a tax-free reorganization pursuant to the provisions of Section
368(a)(1)(B) of the Internal Revenue Code of 1986.
Agreement
NOW
THEREFORE,
on the
stated premises and for and in consideration of the mutual covenants and
agreements hereinafter set forth and the mutual benefits to the parties to
be
derived here from, it is hereby agreed as follows:
ARTICLE
I
REPRESENTATIONS,
COVENANTS, AND WARRANTIES OF FLAGSHIP
As
an
inducement to, and to obtain the reliance of Finity, except as set forth in
the
Flagship Schedules, (as hereinafter defined), Flagship represents and warrants
as of the date hereof and as of the Closing Date, as defined below, as
follows:
Section
1.01 Organization.
Flagship is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware and has the corporate power and is
duly
authorized, qualified, franchised, and licensed under all applicable laws,
regulations, ordinances, and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects
as
it is now being conducted, including qualification to do business as a foreign
corporation in the states or countries in which the character and location
of
the assets owned by it or the nature of the business transacted by it requires
qualification, except where failure to be so qualified would not have a material
adverse effect on its business. Included in the Flagship Schedules are complete
and correct copies of the articles of incorporation, and bylaws of Flagship
(or
their equivalent) as in effect on the date hereof. The execution and delivery
of
this Agreement does not, and the consummation of the transactions contemplated
hereby will not, violate any provision of Flagship’s articles of incorporation
or bylaws. Flagship has taken all actions required by law, its articles of
incorporation, or otherwise to authorize the execution and delivery of this
Agreement. Flagship has full power, authority, and legal right and has taken
all
action required by law, its articles of incorporation, and otherwise to
consummate the transactions herein contemplated.
-1-
Section
1.02 Capitalization.
The
authorized capitalization of Flagship consists of 100,000,000 shares of stock
of
which 30,000,000 are designated as preferred shares and 70,000,000 are
designated as common shares. All shares have of par value of $0.001 per share.
There are 34,567,560 shares of common stock, 7,755,481 shares of Series A
convertible preferred stock and 5,205,764 shares Series B convertible preferred
stock currently issued and outstanding. All issued and outstanding shares are
legally issued, fully paid, and non-assessable and not issued in violation
of
the preemptive or other rights of any person.
Section
1.03 Subsidiaries
and Predecessor Corporations.
Flagship does not have any predecessor corporation(s) or subsidiaries, and
does
not own, beneficially or of record, any shares of any other corporation. For
purposes hereinafter, the term " Flagship " also includes those subsidiaries,
if
any, set forth on the Flagship Schedules.
Section
1.04 Financial
Statements.
(a) Included
in the Flagship Schedules are (i) the audited balance sheets of Flagship as
of
December 31, 2004 and December 31, 2003 and the related audited statements
of
operations, stockholders' equity and cash flows for the fiscal years ended
December 31, 2004 and December 31, 2003, together with the notes to such
statements and the opinion of ▇.▇. ▇▇▇▇, LLP, independent certified public
accountants.
(b) All
such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved.
The
Flagship balance sheets present fairly as of their respective dates the
financial condition of Flagship. As of the date of such balance sheets, except
as and to the extent reflected or reserved against therein, Flagship had no
liabilities or obligations (absolute or contingent) which should be reflected
in
the balance sheets or the notes thereto prepared in accordance with generally
accepted accounting principles, and all assets reflected therein are properly
reported and present fairly the value of the assets of Flagship, in accordance
with generally accepted accounting principles. The statements of operations,
stockholders' equity and cash flows reflect fairly the information required
to
be set forth therein by generally accepted accounting principles.
-2-
(c) Flagship
has no liabilities with respect to the payment of any federal, state, county,
local or other taxes (including any deficiencies, interest or penalties), except
for taxes accrued but not yet due and payable.
(d) Flagship
has timely filed all state, federal or local income and/or franchise tax returns
required to be filed by it from inception to the date hereof. Each of such
income tax returns reflects the taxes due for the period covered thereby, except
for amounts which, in the aggregate, are immaterial.
(e) The
books
and records, financial and otherwise, of Flagship are in all material aspects
complete and correct and have been maintained in accordance with good business
and accounting practices.
(f) All
of
Flagship’s assets are reflected on its financial statements, and, except as set
forth in the Flagship Schedules or the financial statements of Flagship or
the
notes thereto, Flagship has no material liabilities, direct or indirect, matured
or unmatured, contingent or otherwise.
Section
1.05 Information.
The
information concerning Flagship set forth in this Agreement and in the Flagship
Schedules is complete and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under which
they were made, not misleading. In addition, Flagship has fully disclosed in
writing to Finity (through this Agreement or the Flagship Schedules) all
information relating to matters involving Flagship or its assets or its present
or past operations or activities which (i) indicated or may indicate, in the
aggregate, the existence of a greater than $250,000 liability , (ii) have led
or
may lead to a competitive disadvantage on the part of Flagship or (iii) either
alone or in aggregation with other information covered by this Section,
otherwise have led or may lead to a material adverse effect on Flagship, its
assets, or its operations or activities as presently conducted or as
contemplated to be conducted after the Closing Date, including, but not limited
to, information relating to governmental, employee, environmental, litigation
and securities matters and transactions with affiliates.
Section
1.06 Options
or Warrants.
The
existing options, warrants, calls, or commitments of any character relating
to
the authorized and unissued Flagship common stock are disclosed on the Flagship
Schedules.
Section
1.07 Absence
of Certain Changes or Events.
Since
September 30, 2005:
(a) there
has
not been (i) any material adverse change in the business, operations,
properties, assets, or condition of Flagship or (ii) any damage, destruction,
or
loss to Flagship (whether or not covered by insurance) materially and adversely
affecting the business, operations, properties, assets, or condition of
Flagship;
-3-
(b) Flagship
has not (i) amended its articles of incorporation or bylaws; (ii) declared
or
made, or agreed to declare or make, any payment of dividends or distributions
of
any assets of any kind whatsoever to stockholders or purchased or redeemed,
or
agreed to purchase or redeem, any of its capital stock; (iii) waived any rights
of value which in the aggregate are outside of the ordinary course of business
or material considering the business of Flagship; (iv) made any material change
in its method of management, operation or accounting; (v) entered into any
other
material transaction other than sales in the ordinary course of its business;
(vi) made any accrual or arrangement for payment of bonuses or special
compensation of any kind or any severance or termination pay to any present
or
former officer or employee; or (vii) made any increase in any profit sharing,
bonus, deferred compensation, insurance, pension, retirement, or other employee
benefit plan, payment, or arrangement made to, for, or with its officers,
directors, or employees;
(c) Flagship
has not (i) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or contingent) except
as disclosed herein and except liabilities incurred in the ordinary course
of
business; (ii) paid or agreed to pay any material obligations or liability
(absolute or contingent) other than current liabilities reflected in or shown
on
the most recent Flagship balance sheet, and current liabilities incurred since
that date in the ordinary course of business and professional and other fees
and
expenses in connection with the preparation of this Agreement and the
consummation of the transactions contemplated hereby; (iii) sold or transferred,
or agreed to sell or transfer, any of its assets, properties, or rights (except
assets, properties, or rights not used or useful in its business which, in
the
aggregate have a value of less than $1,000), or canceled, or agreed to cancel,
any debts or claims (except debts or claims which in the aggregate are of a
value of less than $1,000); (iv) made or permitted any amendment or termination
of any contract, agreement, or license to which it is a party if such amendment
or termination is material, considering the business of Flagship; or (v) issued,
delivered, or agreed to issue or deliver any stock, bonds or other corporate
securities including debentures (whether authorized and unissued or held as
treasury stock); and
(d) to
the
best knowledge of Flagship, Flagship has not become subject to any law or
regulation which materially and adversely affects, or in the future may
adversely affect the business, operations, properties, assets, or condition
of
Flagship.
Section
1.08 Litigation
and Proceedings.
There
are no actions, suits, proceedings, or investigations pending or, to the
knowledge of Flagship after reasonable investigation, threatened by or against
Flagship or affecting Flagship or its properties, at law or in equity, before
any court or other governmental agency or instrumentality, domestic or foreign,
or before any arbitrator of any kind. Flagship does not have any knowledge
of
any material default on its part with respect to any judgment, order,
injunction, decree, award, rule, or regulation of any court, arbitrator, or
governmental agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a
default.
-4-
Section
1.09 Contracts.
(a) All
"material" contracts, agreements, franchises, license agreements, debt
instruments or other commitments to which Flagship is a party or by which it
or
any of its assets, products, technology, or properties are bound other than
those incurred in the ordinary course of business are set forth on the Flagship
Schedules. A "material" contract, agreement, franchise, license agreement,
debt
instrument or commitment is one which (i) will remain in effect for more than
six (6) months after the date of this Agreement or (ii) involves aggregate
obligations of at least fifty thousand dollars ($50,000);
(b) All
contracts, agreements, franchises, license agreements, and other commitments
to
which Flagship is a party or by which its properties are bound and which are
material to the operations of Flagship taken as a whole are valid and
enforceable by Flagship in all respects, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally;
and
(c) Except
as
included or described in the Flagship Schedules or reflected in the most recent
Flagship balance sheet, Flagship is not a party to any oral or written (i)
contract for the employment of any officer or employee which is not terminable
on 30 days, or less notice; (ii) profit sharing, bonus, deferred compensation,
stock option, severance pay, pension benefit or retirement plan, (iii)
agreement, contract, or indenture relating to the borrowing of money, (iv)
guaranty of any obligation, other than one on which Flagship is a primary
obligor, for the borrowing of money or otherwise, excluding endorsements made
for collection and other guaranties of obligations which, in the aggregate
do
not exceed more than one year or providing for payments in excess of $25,000
in
the aggregate; (vi) collective bargaining agreement; or (vii) agreement with
any
present or former officer or director of Flagship.
Section
1.10 Material
Contract Defaults.
Flagship is not in default in any material respect under the terms of any
outstanding contract, agreement, lease, or other commitment which is material
to
the business, operations, properties, assets or condition of
Flagship.
Section
1.11 No
Conflict With Other Instruments.
The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, constitute an event of default under, or terminate, accelerate
or
modify the terms of any material indenture, mortgage, deed of trust, or other
material contract, agreement, or instrument to which Flagship is a party or
to
which any of its properties or operations are subject.
-5-
Section
1.12 Compliance
With Laws and Regulations.
To the
best of its knowledge, Flagship has complied with all applicable statutes and
regulations of any federal, state, or other governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets, or condition
of
Flagship or except to the extent that noncompliance would not result in the
occurrence of any material liability for Flagship.
Section
1.13 Approval
of Agreement.
The
Board of Directors of Flagship has authorized the execution and delivery of
this
Agreement by Flagship and has approved this Agreement and the transactions
contemplated hereby, and will recommend to the Flagship Shareholders that the
Exchange be accepted by them.
Section
1.14 Flagship
Schedules.
Flagship has delivered to Finity the following schedules, which are collectively
referred to as the " Flagship Schedules" and which consist of separate schedules
dated as of the date of execution of this Agreement, all certified by the chief
executive officer of Flagship as complete, true, and correct as of the date
of
this Agreement in all material respects:
(a) a
schedule containing complete and correct copies of the articles of
incorporation, and bylaws of Flagship in effect as of the date of this
Agreement;
(b) a
schedule containing the financial statements of Flagship identified in paragraph
1.04(a);
(c) a
schedule of outstanding options, warrants, calls, and commitments pursuant
to
paragraph 1.06;
(d) a
schedule containing a list indicating the name and address of each shareholder
of Flagship together with the number of shares owned by him, her or
it;
(e) a
schedule setting forth a description of any material adverse change in the
business, operations, property, inventory, assets, or condition of Flagship
since September 30, 2005, required to be provided pursuant to section 1.07
hereof;
(f) a
schedule of any exceptions to the representations made herein; and
(g) a
schedule containing the other information requested above.
Flagship
shall cause the Flagship Schedules and the instruments and data delivered to
Finity hereunder to be promptly updated after the date hereof up to and
including the Closing Date.
It
is
understood and agreed that not all of the schedules referred to above have
been
completed or are available to be furnished by Flagship. Flagship shall have
until January 31, 2006 to provide such schedules. If Flagship cannot or fails
to
do so, or if Finity acting reasonably finds any such schedules or updates
provided after the date hereof to be unacceptable according to the criteria
set
forth below, Finity may terminate this Agreement by giving written notice to
Flagship within five (5) days after the schedules or updates were due to be
produced or were provided. For purposes of the foregoing, Finity may consider
a
disclosure in the Flagship Schedules to be "unacceptable" only if that item
would have a material adverse impact on the financial statements listed in
Section 1.04(a), taken as a whole.
-6-
Section
1.15 Valid
Obligation.
This
Agreement and all agreements and other documents executed by Flagship in
connection herewith constitute the valid and binding obligation of Flagship,
enforceable in accordance with its or their terms, except as may be limited
by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and subject to the qualification
that
the availability of equitable remedies is subject to the discretion of the
court
before which any proceeding therefore may be brought.
ARTICLE
II
REPRESENTATIONS,
COVENANTS, AND WARRANTIES OF FINITY
As
an
inducement to, and to obtain the reliance of Flagship and the Flagship
Shareholders, except as set forth in the Finity Schedules (as hereinafter
defined), Finity represents and warrants, as of the date hereof and as of the
Closing Date, as follows:
Section
2.01 Organization.
Finity
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware
and has the corporate power and is duly authorized, qualified, franchised,
and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets, to carry on its
business in all material respects as it is now being conducted, and except
where
failure to be so qualified would not have a material adverse effect on its
business, there is no jurisdiction in which it is not qualified in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in the Finity Schedules are
complete and correct copies of the certificate of incorporation and bylaws
of
Finity as in effect on the date hereof. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of Finity’s certificate of incorporation or
bylaws. Finity has taken all action required by law, its certificate of
incorporation, its bylaws, or otherwise to authorize the execution and delivery
of this Agreement, and Finity has full power, authority, and legal right and
has
taken all action required by law, its certificate of incorporation, bylaws,
or
otherwise to consummate the transactions herein contemplated.
Section
2.02 Capitalization.
Finity's authorized capitalization consists of 100,000,000 shares of common
stock, par value $.001
of
which 55,761,512 shares are issued and outstanding. All issued and outstanding
shares are legally issued, fully paid, and non-assessable and not issued in
violation of the preemptive or other rights of any person.
-7-
Section
2.03 Subsidiaries
and Predecessor Corporations.
Finity
does not have any predecessor corporation(s) and since June, 2001 no
subsidiaries, and does not own, beneficially or of record, any shares of any
other corporation.
Section
2.04 Financial
Statements.
(a) Included
in the Finity Schedules are (i) the audited balance sheets of Finity as of
December 31, 2004 and December 31, 2003 and the related audited statements
of
operations, stockholders' equity and cash flows for the fiscal years ended
December 31, 2004 and December 31, 2003, together with the notes to such
statements and the opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., independent certified
public accountants with respect thereto.
(b) Included
in the Finity Schedules are: (i) an unaudited balance sheets of March 31, June
30 and September 30, 2005 and the related unaudited statements of operations,
stockholders’ equity and cash flows for the quarters ended on such dates and all
such financial statements have been reviewed by ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
P.C.
(c) All
such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved.
The
Finity balance sheets present fairly as of their respective dates the financial
condition of Finity. As of the date of such balance sheets, except as and to
the
extent reflected or reserved against therein, Finity had no liabilities or
obligations (absolute or contingent) which should be reflected in the balance
sheets or the notes thereto prepared in accordance with generally accepted
accounting principles, and all assets reflected therein are properly reported
and present fairly the value of the assets of Finity, in accordance with
generally accepted accounting principles. The statements of operations,
stockholders' equity and cash flows reflect fairly the information required
to
be set forth therein by generally accepted accounting principles.
(d) Finity
has no liabilities with respect to the payment of any federal, state, county,
local or other taxes (including any deficiencies, interest or penalties), except
for taxes accrued but not yet due and payable.
(e) Finity
has filed all state, federal or local income and/or franchise tax returns
required to be filed by it from inception to the date hereof. Each of such
income tax returns reflects the taxes due for the period covered thereby, except
for amounts which, in the aggregate, are immaterial.
-8-
(f) The
books
and records, financial and otherwise, of Finity are in all material aspects
complete and correct and have been maintained in accordance with good business
and accounting practices.
(g) All
of
Finity’s assets are reflected on its financial statements, and, except as set
forth in the Finity Schedules or the financial statements of Finity or the
notes
thereto, Finity has no material liabilities, direct or indirect, matured or
unmatured, contingent or otherwise.
Section
2.05 Information.
The
information concerning Finity set forth in this Agreement and the Finity
Schedules is complete and accurate in all material respects and does not contain
any untrue statements of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under which
they were made, not misleading. In addition, Finity has fully disclosed in
writing to Flagship (through this Agreement or the Finity Schedules) all
information relating to matters involving Finity or its assets or its present
or
past operations or activities which (i) indicated or may indicate, in the
aggregate, the existence of a greater than $1,000 liability , (ii) have led
or
may lead to a competitive disadvantage on the part of Flagship or (iii) either
alone or in aggregation with other information covered by this Section,
otherwise have led or may lead to a material adverse effect on the transactions
contemplated herein or on Finity, its assets, or its operations or activities
as
presently conducted or as contemplated to be conducted after the Closing Date,
including, but not limited to, information relating to governmental, employee,
environmental, litigation and securities matters and transactions with
affiliates.
Section
2.06 Options
or Warrants.
There
are no existing options, warrants, calls, or commitments of any character
relating to the authorized and unissued stock of Finity.
Section
2.07 Absence
of Certain Changes or Events.
Since
the date of the most recent Finity balance sheet:
(a) there
has
not been (i) any material adverse change in the business, operations,
properties, assets or condition of Finity or (ii) any damage, destruction or
loss to Finity (whether or not covered by insurance) materially and adversely
affecting the business, operations, properties, assets or condition of
Finity;
(b) Finity
has not (i) amended its certificate of incorporation or bylaws except as
required by this Agreement; (ii) declared or made, or agreed to declare or
make
any payment of dividends or distributions of any assets of any kind whatsoever
to stockholders or purchased or redeemed, or agreed to purchase or redeem,
any
of its capital stock; (iii) waived any rights of value which in the aggregate
are outside of the ordinary course of business or material considering the
business of Finity; (iv) made any material change in its method of management,
operation, or accounting; (v) entered into any transactions or agreements other
than in the ordinary course of business; (vi) made any accrual or arrangement
for or payment of bonuses or special compensation of any kind or any severance
or termination pay to any present or former officer or employee; (vii) increased
the rate of compensation payable or to become payable by it to any of its
officers or directors or any of its salaried employees whose monthly
compensation exceed $1,000; or (viii) made any increase in any profit sharing,
bonus, deferred compensation, insurance, pension, retirement, or other employee
benefit plan, payment, or arrangement, made to, for or with its officers,
directors, or employees;
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(c) Finity
has not (i) granted or agreed to grant any options, warrants, or other rights
for its stock, bonds, or other corporate securities calling for the issuance
thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid or agreed
to
pay any material obligations or liabilities (absolute or contingent) other
than
current liabilities reflected in or shown on the most recent Finity balance
sheet and current liabilities incurred since that date in the ordinary course
of
business and professional and other fees and expenses in connection with the
preparation of this Agreement and the consummation of the transaction
contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer,
any of its assets, properties, or rights (except assets, properties, or rights
not used or useful in its business which, in the aggregate have a value of
less
than $1,000), or canceled, or agreed to cancel, any debts or claims (except
debts or claims which in the aggregate are of a value less than $1,000); (v)
made or permitted any amendment or termination of any contract, agreement,
or
license to which it is a party if such amendment or termination is material,
considering the business of Finity; or (vi) issued, delivered or agreed to
issue
or deliver, any stock, bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock), except in
connection with this Agreement; and
(d) to
the
best knowledge of Finity, it has not become subject to any law or regulation
which materially and adversely affects, or in the future, may adversely affect,
the business, operations, properties, assets or condition of
Finity.
Section
2.08 Litigation
and Proceedings.
There
are no actions, suits, proceedings or investigations pending or, to the
knowledge Finity after reasonable investigation, threatened by or against Finity
or affecting Finity or its properties, at law or in equity, before any court
or
other governmental agency or instrumentality, domestic or foreign, or before
any
arbitrator of any kind except as disclosed in the Finity Schedules. Finity
has
no knowledge of any default on its part with respect to any judgment, order,
writ, injunction, decree, award, rule or regulation of any court, arbitrator,
or
governmental agency or instrumentality or any circumstance which after
reasonable investigation would result in the discovery of such
default.
Section
2.09 Contracts.
(a) Finity
is
not a party to, and its assets, products, technology and properties are not
bound by, any contract, franchise, license agreement, agreement, debt instrument
or other commitments whether such agreement is in writing or oral.
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(b) Finity
is
not a party to or bound by, and the properties of Finity are not subject to
any
contract, agreement, other commitment or instrument; any charter or other
corporate restriction; or any judgment, order, writ, injunction, decree, or
award; and
(c) Finity
is
not a party to any oral or written (i) contract for the employment of any
officer or employee; (ii) profit sharing, bonus, deferred compensation, stock
option, severance pay, pension benefit or retirement plan, (iii) agreement,
contract, or indenture relating to the borrowing of money, (iv) guaranty of
any
obligation,; (vi) collective bargaining agreement; or (vii) agreement with
any
present or former officer or director of Finity.
Section
2.10 Material
Contract Defaults.
Finity
is not in default in any material respect under the terms of any outstanding
contract, agreement, lease, or other commitment.
Section
2.11 No
Conflict With Other Instruments.
The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, constitute a default under, or terminate, accelerate or modify
the
terms of, any indenture, mortgage, deed of trust, or other material agreement
or
instrument to which Finity is a party or to which any of its assets or
operations are subject.
Section
2.12 Compliance
With Laws and Regulations.
To the
best of its knowledge, Finity has complied with all applicable statutes and
regulations of any federal, state, or other applicable governmental entity
or
agency thereof. This compliance includes, but is not limited to, the filing
of
all reports to date with federal and state securities authorities.
Section
2.13 Approval
of Agreement.
The
Board of Directors of Finity has authorized the execution and delivery of this
Agreement by Finity and has approved this Agreement.
Section
2.14 Material
Transactions or Affiliations.
Except
as disclosed herein and in the Finity Schedules, there exists no contract,
agreement or arrangement between Finity and any predecessor and any person
who
was at the time of such contract, agreement or arrangement an officer, director,
or person owning of record or known by Finity to own beneficially, 5% or more
of
the issued and outstanding common stock of Finity and which is to be performed
in whole or in part after the date hereof or was entered into not more than
three years prior to the date hereof. Neither any officer, director, nor 5%
shareholder of Finity has, or has had since inception of Finity, any known
interest, direct or indirect, in any such transaction with Finity which was
material to the business of Finity. Finity has no commitment, whether written
or
oral, to lend any funds to, borrow any money from, or enter into any other
transaction with, any such affiliated person.
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Section
2.15 Finity
Schedules.
Finity
has delivered to Flagship the following schedules, which are collectively
referred to as the " Finity Schedules" and which consist of separate schedules,
which are dated the date of this Agreement, all certified by the chief executive
officer of Finity to be complete, true, and accurate in all material respects
as
of the date of this Agreement:
(a) a
schedule containing complete and accurate copies of the certificate of
incorporation and bylaws of Finity as in effect as of the date of this
Agreement;
(b) a
schedule containing the financial statements of Finity identified in paragraph
2.04(a) and (b);
(c) a
schedule setting forth a description of any material adverse change in the
business, operations, property, inventory, assets, or condition of Finity since
September 30, 2005, required to be provided pursuant to section 2.07 hereof;
and
(d) a
schedule setting forth any other information, together with any required copies
of documents, required to be disclosed in the Finity Schedules by Sections
2.01
through 2.15.
Finity
shall cause the Finity Schedules and the instruments and data delivered to
Flagship hereunder to be promptly updated after the date hereof up to and
including the Closing Date.
It
is
understood and agreed that if not all of the schedules referred to above have
been completed or are available to be furnished by Finity. Finity shall have
until January 31, 2006 to provide such schedules. If Finity cannot or fails
to
do so, or if Flagship acting reasonably finds any such schedules or updates
provided after the date hereof to be unacceptable according to the criteria
set
forth below, Flagship may terminate this Agreement by giving written notice
to
Finity within five (5) days after the schedules or updates were due to be
produced or were provided. For purposes of the foregoing, Flagship may consider
a disclosure in the Finity Schedules to be "unacceptable" only if that item
would have a material adverse impact on the financial statements listed in
Section 2.04(a) and (b), taken as a whole.
Section
2.16 Bank
Accounts; Power of Attorney.
Set
forth in the Finity Schedules is a true and complete list of (a) all accounts
with banks, money market mutual funds or securities or other financial
institutions maintained by Finity within the past twelve (12) months, the
account numbers thereof, and all persons authorized to sign or act on behalf
of
Finity, (b) all safe deposit boxes and other similar custodial arrangements
maintained by Finity within the past twelve (12) months, (c) the check ledger
for the last 12 months, and (d) the names of all persons holding powers of
attorney from Finity or who are otherwise authorized to act on behalf of Finity
with respect to any matter, other than its officers and directors, and a summary
of the terms of such powers or authorizations.
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Section
2.17 Valid
Obligation.
This
Agreement and all agreements and other documents executed by Finity in
connection herewith constitute the valid and binding obligation of Finity,
enforceable in accordance with its or their terms, except as may be limited
by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and subject to the qualification
that
the availability of equitable remedies is subject to the discretion of the
court
before which any proceeding therefore may be brought.
ARTICLE
III
PLAN
OF EXCHANGE
Section
3.01 The
Exchange.
On the
terms and subject to the conditions set forth in this Agreement, on the Closing
Date (as defined in Section 3.03), each Flagship Shareholder who shall elect
to
accept the exchange offer described herein (the "Accepting Shareholders") by
executing this Agreement, shall assign, transfer and deliver, free and clear
of
all liens, pledges, encumbrances, charges, restrictions or known claims of
any
kind, nature, or description, the number of shares of common stock or preferred
stock of Flagship set forth on the Flagship Schedules
attached
hereto, constituting all of the shares of common stock and preferred stock
including voting power, of Flagship held by each of such shareholders; the
objective of such Exchange being the acquisition by Finity of not less than
95%
of the issued and outstanding common stock and preferred stock, in the aggregate
of Flagship. In exchange for the transfer of such securities by the Flagship
Shareholders, Finity shall issue to the Flagship Shareholders one share of
Finity Common Stock for each share of Flagship Common Stock, Series A Preferred
Stock, and Series B Preferred Stock held by each Flagship Shareholder (the
“Initial Shares”). In the event the Exchange is consummated, as provided in
Section 5.05, but less than 100% of the common stock and preferred stock of
Flagship is delivered to Finity the number of Shares issuable by Finity to
the
Flagship Shareholders as described above shall be reduced proportionately.
At
the Closing, each Flagship Shareholder shall, on surrender of his certificate
or
certificates representing such Flagship shares to Finity or its registrar or
transfer agent, be entitled to receive a certificate or certificates evidencing
his proportionate interest in the Initial Shares. Upon consummation of the
transaction contemplated herein, assuming participation by all of the Flagship
Shareholders, all of the shares of capital stock of Flagship shall be held
by
Finity.
Section
3.02 Anti-Dilution.
The
number of shares of Finity common stock issuable upon exchange pursuant to
Section 3.01 shall be appropriately adjusted to take into account any other
stock split, stock dividend, reverse stock split, recapitalization, or similar
change in the Finity common stock which may occur, other than the
recapitalization described in Section 4.13, (i) between the date of the
execution of this Agreement and the Closing Date, as to the Initial Shares,
and
(ii) between the date of the execution of this Agreement and the release
date.
Section
3.03 Closing.
The
closing ("Closing") of the transactions contemplated by this Agreement shall
occur immediately following the filing of an Amended and Restated Certificate
of
Incorporation of Finity (“Restated COI”) which shall effectuate the Name Change
and the Recapitalization, as set forth in Sections 4.04 and 4.13, respectively.
Such Closing shall take place at a mutually agreeable time and
place.
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Section
3.04 Closing
Events.
At the
Closing, Finity, Flagship and each of the Accepting Shareholders shall execute,
acknowledge, and deliver (or shall ensure to be executed, acknowledged, and
delivered), any and all certificates, opinions, financial statements, schedules,
agreements, resolutions, rulings or other instruments required by this Agreement
to be so delivered at or prior to the Closing, together with such other items
as
may be reasonably requested by the parties hereto and their respective legal
counsel in order to effectuate or evidence the transactions contemplated hereby.
Section
3.05 Additional
Share Issuances.
In
addition to the shares issued in the Exchange, shares will be issued to the
entities listed on Schedule 3.05 attached hereto, which shall include
approximately 1,300,000 restricted shares or 2% of the total outstanding shares
on a fully diluted basis to Common Solutions, LLC (the "Additional Shares").
The
Additional Shares shall be registered in the filing of Flagship's registration
statement.
Section
3.06 Termination.
This
Agreement may be terminated by the Board of Directors of Flagship only in the
event that Finity does not file the Restated COI on or before August 31, 2006.
If this Agreement is terminated pursuant to Section 3.05, this Agreement shall
be of no further force or effect, and no obligation, right or liability shall
arise hereunder.
ARTICLE
IV
SPECIAL
COVENANTS
Section
4.01 Access
to Properties and Records.
Finity
and Flagship will each afford to the officers and authorized representatives
of
the other full access to the properties, books and records of Finity or
Flagship, as the case may be, in order that each may have a full opportunity
to
make such reasonable investigation as it shall desire to make of the affairs
of
the other, and each will furnish the other with such additional financial and
operating data and other information as to the business and properties of Finity
or Flagship, as the case may be, as the other shall from time to time reasonably
request. Without limiting the foregoing, as soon as practicable after the end
of
each fiscal quarter (and in any event through the last fiscal quarter prior
to
the Closing Date), each party shall provide the other with quarterly internally
prepared and unaudited financial statements.
Section
4.02 Delivery
of Books and Records.
At the
Closing, Flagship shall deliver to Finity the originals of the corporate minute
books, books of account, contracts, records, and all other books or documents
of
Flagship now in the possession of Flagship or its representatives. Finity shall
deliver to Flagship the originals of the corporate minute books, books of
account, contracts, records, and all other books or documents of Finity now
in
the possession of Finity or its representatives.
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Section
4.03 Third
Party Consents and Certificates.
Finity
and Flagship agree to cooperate with each other in order to obtain any required
third party consents to this Agreement and the transactions herein
contemplated.
Section
4.04 Name
Change.
After
the Closing Date, Finity’s Board of Directors shall have approved an amendment
to the certificate of incorporation to change the name of Finity to "Flagship
Holdings, Inc." Such amendment shall be carried out promptly upon approval
of
the same by the shareholders of Finity. Additionally, the Board of Directors
of
Finity shall take such steps as may be necessary to change the trading symbol
of
Finity's common stock to a mutually agreed and available symbol.
Section
4.05 Finity
Shareholder Meeting.
Finity
shall promptly call a special shareholders meeting to be held on or prior to
the
Closing Date at which meeting the shareholders of Finity shall be requested
to
approve, and Finity’s Board of Directors shall recommend approval of, the terms
of this Agreement and the name change described in Section 4.04 and such other
matters as shall require shareholder approval hereunder. In addition, Finity
shall promptly file with the SEC necessary disclosure statements required by
federal securities law. After achieving the requested vote, Finity shall
immediately file the Restated COI.
Section
4.06 Waiver
of Rights of Flagship Preferred Shareholders.
Upon
the signing of this Agreement, the holders of Series A and Series B Convertible
Preferred Stock of Flagship (the “Flagship Preferred Holders”) hereby waive all
preemptive, registration and anti-dilution rights that they may have with
respect to the issuance of the Flagship Convertible Debt, as defined below.
Section
4.07 Designation
of Directors and Officers.
Upon
signing this Agreement, Finity shall increase its Board of Directors to eight
(8) and the following individual will immediately be added to the Board of
Directors: ▇▇▇▇ ▇. ▇▇▇▇▇, Chairman. After compliance with Rule 14F-1,
promulgated under the Securities Exchange Act of 1934, as amended, the following
directors will take the position of Director ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, MD, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, MD, and the existing director of Finity, after the
signing of this Agreement, shall tender his resignation effective upon the
expiration of the time periods required under Rule 14F-1. In addition, upon
the
signing of this Agreement, Finity shall immediately appoint as officers of
Finity the following persons: ▇▇▇▇ ▇. ▇▇▇▇▇, as Chief Executive Officer ▇▇▇▇
▇▇▇▇▇, III, as EVP - Sales and Marketing, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, MD, as EVP -
Chief Medical Officer, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, VP - Chief Financial Officer.
Section
4.08 Exclusive
Dealing Rights.
Until
5:00 P.M. New York City Time on August 31, 2006:
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(a) In
recognition of the substantial time and effort which Finity has spent and will
continue to spend in investigating Flagship and its business and in addressing
the matters related to the transactions contemplated herein, each of which
may
preempt or delay other management activities, neither Flagship, nor any of
its
officers, employees, representatives or agents will directly or indirectly
solicit or initiate any discussions or negotiations with or, except where
required by fiduciary obligations under applicable law as advised by counsel,
participate in any negotiations with or provide any information to or otherwise
cooperate in any other way with, or facilitate or encourage any effort or
attempt by, any corporation, partnership, person or other entity or group (other
than Finity and its directors, officers, employees, representatives and agents)
concerning any merger, sale of substantial assets, sale of shares of capital
stock, (including without limitation, any public or private offering of the
common stock of Flagship) or similar transactions involving Flagship (all such
transactions being referred to as "Flagship Acquisition Transactions"), other
than activities related to financings. If Flagship receives any proposal with
respect to a Flagship Acquisition Transaction, it will immediately communicate
to Finity the fact that it has received such proposal and the principal terms
thereof.
(b) In
recognition of the substantial time and effort which Flagship has spent and
will
continue to spend in investigating Finity and its business and in addressing
the
matters related to the transactions contemplated herein, each of which may
preempt or delay other management activities, neither Finity, nor any of its
officers, employees, representatives or agents will directly or indirectly
solicit or initiate any discussions or negotiations with or, except where
required by fiduciary obligations under applicable law as advised by counsel,
participate in any negotiations with or provide any information to or otherwise
cooperate in any other way with, or facilitate or encourage any effort or
attempt by, any corporation, partnership, person or other entity or group (all
such transactions being referred to as "Finity Acquisition Transactions").
If
Finity receives any proposal with respect to a Finity Acquisition Transaction,
it will immediately communicate to Flagship the fact that it has received such
proposal and the principal terms thereof.
Section
4.09 Actions
Prior to Closing.
(a) From
and
after the date of this Agreement until the Closing Date and except as set forth
in the Finity Schedules or Flagship Schedules or as permitted or contemplated
by
this Agreement, Finity (subject to paragraph (d) below) and Flagship
respectively, will each:
(i) carry
on
its business in substantially the same manner as it has heretofore;
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(ii) maintain
and keep its properties in states of good repair and condition as at present,
except for depreciation due to ordinary wear and tear and damage due to
casualty;
(iii) maintain
in full force and effect insurance comparable in amount and in scope of coverage
to that now maintained by it;
(iv) perform
in all material respects all of its obligations under material contracts,
leases, and instruments relating to or affecting its assets, properties, and
business;
(v) use
its
best efforts to maintain and preserve its business organization intact, to
retain its key employees, and to maintain its relationship with its material
suppliers and customers; and
(vi) fully
comply with and perform in all material respects all obligations and duties
imposed on it by all federal and state laws and all rules, regulations, and
orders imposed by federal or state governmental authorities.
(b) From
and
after the date of this Agreement until the Closing Date, neither Finity nor
Flagship will:
(i) make
any
changes in their articles or certificate of incorporation or bylaws except
as
contemplated by this Agreement including a name change;
(ii) take
any
action described in Section 1.07 in the case of Flagship or in Section 2.07,
in
the case of Finity (all except as permitted therein or as disclosed in the
applicable party's schedules);
(iii) enter
into or amend any contract, agreement, or other instrument of any of the types
described in such party's schedules, except that a party may enter into or
amend
any contract, agreement, or other instrument in the ordinary course of business
involving the sale of goods or services; or
(iv) sell
any
assets or discontinue any operations, sell any shares of capital stock or
conduct any similar transactions other than in the ordinary course of
business.
Section
4.10 Indemnification.
(a) Flagship
hereby agrees to indemnify Finity and each of the officers, agents and directors
of Finity as of the date of execution of this Agreement against any loss,
liability, claim, damage, or expense (including, but not limited to, any and
all
expense whatsoever reasonably incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claim whatsoever)
(“Loss”), to which it or they may become subject arising out of or based on any
inaccuracy appearing in or misrepresentations made under Article I of this
Agreement. The indemnification provided for in this paragraph shall survive
the
Closing and consummation of the transactions contemplated hereby and termination
of this Agreement for one year following the Closing.
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(b) Flagship
Shareholders, individually and not jointly, agree to indemnify Finity and each
of the officers, agents and directors of Finity as of the date of execution
of
this Agreement against any Loss, to which it or they may become subject arising
out of or based on any inaccuracy appearing in or misrepresentations made under
Article 3.01 of this Agreement. The indemnification provided for in this
paragraph shall survive the Closing and consummation of the transactions
contemplated hereby and termination of this Agreement for one year following
the
Closing.
(c) Finity
hereby agrees to indemnify Flagship and each of the officers, agents, and
directors of Flagship and each of the Flagship Shareholders as of the date
of
execution of this Agreement against any Loss to which it or they may become
subject arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article II of this Agreement. The indemnification
provided for in this paragraph shall survive the Closing and consummation of
the
transactions contemplated hereby and termination of this Agreement for one
year
following the Closing.
Section
4.11 The
Acquisition of Finity Common Stock.
Finity
and Flagship understand and agree that the consummation of this Agreement
including the issuance of the Finity common
stock to Flagship Shareholders in exchange for the Flagship Shares as
contemplated hereby constitutes the offer and sale of securities under the
Securities Act and applicable state statutes. Finity and Flagship agree that
such transactions shall be consummated in reliance on exemptions from the
registration and prospectus delivery requirements of such statutes, which
depend, among other items, on the circumstances under which such securities
are
acquired.
(a) In
order
to provide documentation for reliance upon the exemptions from the registration
and prospectus delivery requirements for such transactions, each shareholder
of
Flagship shall execute and deliver to Finity an Suitability Letter and an
Investment Representation Letter in substantially the same form as that attached
hereto as Exhibit “A” and “B,” respectively.
(b) In
connection with the transaction contemplated by this Agreement, Finity and
Flagship shall each file, with the assistance of the other and their respective
legal counsel, such notices, applications, reports, or other instruments as
may
be deemed by them to be necessary or appropriate in an effort to document
reliance on such exemptions, and the appropriate regulatory authority in the
states where the shareholders of Flagship reside unless an exemption requiring
no filing is available in such jurisdictions, all to the extent and in the
manner as may be deemed by such parties to be appropriate.
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(c) In
order
to more fully document reliance on the exemptions as provided herein, Flagship,
the Flagship Shareholders, and Finity shall execute and deliver to the other,
at
or prior to the Closing, such further letters of representation, acknowledgment,
suitability, or the like as Flagship or Finity and their respective counsel
may
reasonably request in connection with reliance on exemptions from registration
under such securities laws.
(d) The
Flagship Shareholders acknowledges that the basis for relying on exemptions
from
registration or qualifications are factual, depending on the conduct of the
various parties, and that no legal opinion or other assurance will be required
or given to the effect that the transactions contemplated hereby are in fact
exempt from registration or qualification.
Section
4.12 Sales
of Securities Under Rule 144, If Applicable.
(a) Finity
will use its best efforts to at all times satisfy the current public information
requirements of Rule 144 promulgated under the Securities Act so that its
shareholders can sell restricted securities that have been held for one year
or
more or such other restricted period as required by Rule 144 as it is from
time
to time amended.
(b) Upon
being informed in writing by any person holding restricted stock of Finity
that
such person intends to sell any shares under rule 144 promulgated under the
Securities Act (including any rule adopted in substitution or replacement
thereof), Finity will certify in writing to such person that it is compliance
with Rule 144 current public information requirement to enable such person
to
sell such person’s restricted stock under Rule 144, as may be applicable under
the circumstances.
(c) If
any
certificate representing any such restricted stock is presented to Finity’s
transfer agent for registration or transfer in connection with any sales
theretofore made under Rule 144, provided such certificate is duly endorsed
for
transfer by the appropriate person(s) or accompanied by a separate stock power
duly executed by the appropriate person(s) in each case with reasonable
assurances that such endorsements are genuine and effective, and is accompanied
by a legal opinion that such transfer has complied with the requirements of
Rule
144, as the case may be, Finity will promptly instruct its transfer agent to
register such transfer and to issue one or more new certificates representing
such shares to the transferee and, if appropriate under the provisions of Rule
144, as the case may be, free of any stop transfer order or restrictive
legend.
-19-
(d) The
shareholders of Finity as well as those receiving Finity common stock pursuant
to this Agreement which section shall survive the closing of this Agreement
for
a period of two years.
Section
4.13 Recapitalization.
Recognizing the need to have a limited number of shares outstanding after the
merger and the current disparity in value of the two companies, Flagship has
indicated it will not enter into this Agreement unless Finity reduces its
outstanding shares to
174,092
shares. Accordingly, Finity has agreed and will complete, prior to the Closing
Date, and as part of the proposed exchange, a one hundred twenty five (125)
for
one (1) reverse split. In addition, Finity shall take all actions necessary
to
effectuate the proposed recapitalization in an expedited manner.
Section
4.14 Financing.
At the
Closing Date, Finity shall execute all documents necessary to effectuate the
assumption by Finity of the convertible notes, closing shares and warrants
issued by Flagship (the “Flagship Convertible Debt”).
ARTICLE
V
CONDITIONS
PRECEDENT TO OBLIGATIONS OF FINITY
The
obligations of Finity under this Agreement are subject to the satisfaction,
at
or before the Closing Date, of the following conditions:
Section
5.01 Accuracy
of Representations and Performance of Covenants.
The
representations and warranties made by Flagship and Flagship Shareholders in
this Agreement were true when made and shall be true at the Closing Date with
the same force and effect as if such representations and warranties were made
at
and as of the Closing Date (except for changes therein permitted by this
Agreement). Flagship shall have performed or complied with all covenants and
conditions required by this Agreement to be performed or complied with by
Flagship prior to or at the Closing. Finity shall be furnished with a
certificate, signed by a duly authorized executive officer of Flagship and
dated
the Closing Date, to the foregoing effect.
Section
5.02 Officer's
Certificate.
Finity
shall have been furnished with a certificate dated the Closing Date and signed
by a duly authorized officer of Flagship to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge
of
Flagship threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement, or, to the
extent not disclosed in the Flagship Schedules, by or against Flagship, which
might result in any material adverse change in any of the assets, properties,
business, or operations of Flagship.
Section
5.03 Good
Standing.
Finity
shall have received a certificate of good standing from the State of Delaware,
dated as of a date within ten days prior to the Closing Date certifying that
Flagship is in good standing as a corporation in the State of
Delaware.
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Section
5.04 Approval
by Flagship Shareholders.
The
Exchange shall have been approved, and shares delivered in accordance with
Section 3.01, by the holders of not less than ninety-five percent (95%) of
the
outstanding common stock and preferred stock, including voting power, of
Flagship, unless a lesser number is agreed to by Finity.
Section
5.05 No
Governmental Prohibition.
No
order, statute, rule, regulation, executive order, injunction, stay, decree,
judgment or restraining order shall have been enacted, entered, promulgated
or
enforced by any court or governmental or regulatory authority or instrumentality
which prohibits the consummation of the transactions contemplated
hereby.
Section
5.06 Consents.
All
consents, approvals, waivers or amendments pursuant to all contracts, licenses,
permits, trademarks and other intangibles in connection with the transactions
contemplated herein, or for the continued operation of Flagship after the
Closing Date on the basis as presently operated shall have been
obtained.
Section
5.07 Other
Items.
(a) Finity
shall have received a list of Flagship shareholders containing the name,
address, and number of shares held by each Flagship shareholder as of the date
of Closing, certified by an executive officer of Flagship as being true,
complete and accurate; and
(b) Finity
shall have received such further opinions, documents, certificates or
instruments relating to the transactions contemplated hereby as Finity may
reasonably request.
ARTICLE
VI
CONDITIONS
PRECEDENT TO OBLIGATIONS OF FLAGSHIP
AND
THE FLAGSHIP SHAREHOLDERS
The
obligations of Flagship and the Flagship Shareholders under this Agreement
are
subject to the satisfaction, at or before the Closing Date, of the following
conditions:
Section
6.01 Accuracy
of Representations and Performance of Covenants.
The
representations and warranties made by Finity in this Agreement were true when
made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Additionally, Finity shall have performed and complied with all covenants and
conditions required by this Agreement to be performed or complied with by
Finity.
Section
6.02 Officer's
Certificate.
Flagship
shall have been furnished with certificates dated the Closing Date and signed
by
duly authorized executive officers of Finity, to the effect that no litigation,
proceeding, investigation or inquiry is pending, or to the best knowledge of
Finity threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the Finity Schedules, by or against Finity, which might
result in any material adverse change in any of the assets, properties or
operations of Finity.
-21-
Section
6.03 Good
Standing.
Flagship
shall have received a certificate of good standing from the Secretary of State
of the State of Delaware or other appropriate office, dated as of a date within
ten days prior to the Closing Date certifying that Finity is in good standing
as
a corporation in the State of Delaware and has filed all tax returns required
to
have been filed by it to date and has paid all taxes reported as due
thereon.
Section
6.04 No
Governmental Prohibition.
No
order, statute, rule, regulation, executive order, injunction, stay, decree,
judgment or restraining order shall have been enacted, entered, promulgated
or
enforced by any court or governmental or regulatory authority or instrumentality
which prohibits the consummation of the transactions contemplated
hereby.
Section
6.05 Consents.
All
consents, approvals, waivers or amendments pursuant to all contracts, licenses,
permits, trademarks and other intangibles in connection with the transactions
contemplated herein, or for the continued operation of Finity after the Closing
Date on the basis as presently operated shall have been obtained.
Section
6.06 Other
Items.
Flagship
shall have received further opinions, documents, certificates, or instruments
relating to the transactions contemplated hereby as Flagship may reasonably
request.
ARTICLE
VII
MISCELLANEOUS
Section
7.01 Brokers.
Finity
and Flagship agree that, except as set out on Schedule 7.01 attached hereto,
there were no finders or brokers involved in bringing the parties together
or
who were instrumental in the negotiation, execution or consummation of this
Agreement. Finity and Flagship each agree to indemnify the other against any
claim by any third person other than those described above for any commission,
brokerage, or finder's fee arising from the transactions contemplated hereby
based on any alleged agreement or understanding between the indemnifying party
and such third person, whether express or implied from the actions of the
indemnifying party.
Section
7.02 Governing
Law.
This
Agreement shall be governed by, enforced, and construed under and in accordance
with the laws of the United States of America and, with respect to the matters
of state law, with the laws of the State of Delaware. Venue for all matters
shall be in New York, New York, without giving effect to principles of conflicts
of law thereunder. Each of the parties (a) irrevocably consents and agrees
that
any legal or equitable action or proceedings arising under or in connection
with
this Agreement shall be brought exclusively in the federal courts of the United
States. By execution and delivery of this Agreement, each party hereto
irrevocably submits to and accepts, with respect to any such action or
proceeding, generally and unconditionally, the jurisdiction of the aforesaid
court, and irrevocably waives any and all rights such party may now or hereafter
have to object to such jurisdiction.
-22-
Section
7.03 Notices.
Any
notice or other communications required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered to it or sent
by
telecopy, overnight courier or registered mail or certified mail, postage
prepaid, addressed as follows:
If
to
Flagship, to:
▇▇▇▇
▇▇▇▇▇
Chairman
and Chief Executive Officer
Flagship
Healthcare Management, Inc.
▇▇▇
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇
▇▇▇▇▇
VP
and
Chief Financial Officer
Flagship
Healthcare Management, Inc.
▇▇▇
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
With
copies to:
▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
If
to
Finity, to:
▇▇▇▇▇▇▇
Boss
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
With
copies to:
▇▇▇▇
▇▇▇▇▇▇▇▇▇, Esq.
Vanderkam
& Associates
▇▇▇▇
▇▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
or
such
other addresses as shall be furnished in writing by any party in the manner
for
giving notices hereunder, and any such notice or communication shall be deemed
to have been given (i) upon receipt, if personally delivered, (ii) on the day
after dispatch, if sent by overnight courier, (iii) upon dispatch, if
transmitted by telecopy and receipt is confirmed by telephone and (iv) three
(3)
days after mailing, if sent by registered or certified mail.
-23-
Section
7.04 Attorney's
Fees.
In the
event that either party institutes any action or suit to enforce this Agreement
or to secure relief from any default hereunder or breach hereof, the prevailing
party shall be reimbursed by the losing party for all costs, including
reasonable attorney's fees, incurred in connection therewith and in enforcing
or
collecting any judgment rendered therein.
Section
7.05 Confidentiality.
Each
party hereto agrees with the other that, unless and until the transactions
contemplated by this Agreement have been consummated, it and its representatives
will hold in strict confidence all data and information obtained with respect
to
another party or any subsidiary thereof from any representative, officer,
director or employee, or from any books or records or from personal inspection,
of such other party, and shall not use such data or information or disclose
the
same to others, except (i) to the extent such data or information is published,
is a matter of public knowledge, or is required by law to be published; or
(ii)
to the extent that such data or information must be used or disclosed in order
to consummate the transactions contemplated by this Agreement. In the event
of
the termination of this Agreement, each party shall return to the other party
all documents and other materials obtained by it or on its behalf and shall
destroy all copies, digests, work papers, abstracts or other materials relating
thereto, and each party will continue to comply with the confidentiality
provisions set forth herein.
Section
7.06 Public
Announcements and Filings.
Unless
required by applicable law or regulatory authority, none of the parties will
issue any report, statement or press release to the general public, to the
trade, to the general trade or trade press, or to any third party (other than
its advisors and representatives in connection with the transactions
contemplated hereby) or file any document, relating to this Agreement and the
transactions contemplated hereby, except as may be mutually agreed by the
parties. Copies of any such filings, public announcements or disclosures,
including any announcements or disclosures mandated by law or regulatory
authorities, shall be delivered to each party at least one (1) business day
prior to the release thereof.
Section
7.07 Schedules;
Knowledge.
Each
party is presumed to have full knowledge of all information set forth in the
other party's schedules delivered pursuant to this Agreement.
Section
7.08 Third
Party Beneficiaries.
This
contract is strictly between Finity and Flagship, and, except as specifically
provided, no director, officer, stockholder (other than the Flagship
Shareholders), employee, agent, independent contractor or any other person
or
entity shall be deemed to be a third party beneficiary of this
Agreement.
-24-
Section
7.09 Expenses.
Subject
to Sections 3.05 and 7.04 above, whether or not the Exchange is consummated,
each of Finity and Flagship will bear their own respective expenses, including
legal, accounting and professional fees, incurred in connection with the
Exchange or any of the other transactions contemplated hereby.
Section
7.10 Entire
Agreement.
This
Agreement represents the entire agreement between the parties relating to the
subject matter thereof and supersedes all prior agreements, understandings
and
negotiations, written or oral, with respect to such subject matter.
Section
7.11 Survival;
Termination.
The
representations, warranties, and covenants of the respective parties shall
survive the Closing Date and the consummation of the transactions herein
contemplated for a period of two years.
Section
7.12 Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original and all of which taken together shall be but a single
instrument.
Section
7.13 Amendment
or Waiver.
Every
right and remedy provided herein shall be cumulative with every other right
and
remedy, whether conferred herein, at law, or in equity, and may be enforced
concurrently herewith, and no waiver by any party of the performance of any
obligation by the other shall be construed as a waiver of the same or any other
default then, theretofore, or thereafter occurring or existing. At any time
prior to the Closing Date, this Agreement may by amended by a writing signed
by
all parties hereto, with respect to any of the terms contained herein, and
any
term or condition of this Agreement may be waived or the time for performance
may be extended by a writing signed by the party or parties for whose benefit
the provision is intended.
Section
7.14 Best
Efforts.
Subject
to the terms and conditions herein provided, each party shall use its best
efforts to perform or fulfill all conditions and obligations to be performed
or
fulfilled by it under this Agreement so that the transactions contemplated
hereby shall be consummated as soon as practicable. Each party also agrees
that
it shall use its best efforts to take, or cause to be taken, all actions and
to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective this Agreement
and the transactions contemplated herein.
-25-
IN
WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to
be
executed by their respective officers, hereunto duly authorized, as of the
date
first-above written.
FINITY
HOLDINGS, INC.
By:
/s/
▇▇▇▇▇▇▇ Boss
Name:
▇▇▇▇▇▇▇ Boss
Title:
President
FLAGSHIP
HEALTHCARE MANAGEMENT, INC.
By:
/s/
▇▇▇▇
▇. ▇▇▇▇▇
Name:
▇▇▇▇ ▇▇▇▇▇
Title:
Chairman and Chief Executive Officer
-26-
The
undersigned shareholders of Flagship Healthcare Management, Inc. hereby agree
to
participate in the Exchange on the terms set forth above. Subject to Section
7.11 above, each of the undersigned hereby represents and affirms that he has
read each of the representations and warranties of Flagship Healthcare
Management, Inc. set out in Article I hereof and that, to the best of his
knowledge, all of such representations and warranties are true and
correct.
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Valhalla Investment Partners, LP
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Valhalla
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London
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Pike ▇▇▇▇▇▇▇▇
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Laurus Master Fund, Ltd.
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Laurus
Master Fund, Ltd.
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