1
EXHIBIT 2.1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
dated as of May 5, 2000
by and among
QUADRAMED CORPORATION,
QUADRAMED OPERATING CORPORATION,
Certain Investors
and
CHARTONE, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.......................................................................1
Section 1.1 Certain Defined Terms....................................................1
Section 1.2 Other Definitional Provisions............................................7
Section 1.3 Parent...................................................................7
ARTICLE II PURCHASE AND SALE OF SECURITIES..................................................7
Section 2.1 Authorization of Preferred Stock.........................................7
Section 2.2 Initial Issuance of Preferred Stock......................................8
Section 2.3 Closing..................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY........................................9
Section 3.1 Organization of Company..................................................9
Section 3.2 Capital Stock of Company................................................10
Section 3.3 Authority of Company....................................................10
Section 3.4 No Conflict.............................................................11
Section 3.5 Consents and Approvals..................................................11
Section 3.6 No Business Activities..................................................11
Section 3.7 Subsidiaries............................................................12
Section 3.8 Title...................................................................12
Section 3.9 Material Contracts......................................................13
Section 3.10 Financial Statements...................................................14
Section 3.11 Absence of Certain Changes.............................................15
Section 3.12 Absence of Litigation..................................................16
Section 3.13 Compliance with Laws...................................................16
Section 3.14 Environmental Matters..................................................16
Section 3.15 Brokers................................................................16
Section 3.16 Taxes..................................................................17
Section 3.17 Intellectual Property and Software.....................................17
Section 3.18 Year 2000..............................................................19
Section 3.19 Employee Plans; ERISA..................................................19
Section 3.20 Labor Matters..........................................................19
Section 3.21 Insurance..............................................................20
Section 3.22 Real Estate............................................................21
Section 3.23 Transactions with Directors, Officers and Affiliates...................22
Section 3.24 Disclaimer of Warranties...............................................22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT........................................22
Section 4.1 Organization of Parent..................................................22
Section 4.2 Authority of Parent.....................................................22
Section 4.3 No Conflict.............................................................23
Section 4.4 Consents and Approvals..................................................23
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Section 4.5 Solvency................................................................24
Section 4.6 Asset Contribution......................................................24
Section 4.7 Disclaimer of Warranties................................................24
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE INVESTORS..................................24
Section 5.1 Organization of the Investors...........................................24
Section 5.2 Authority of the Investors..............................................24
Section 5.3 No Conflict.............................................................25
Section 5.4 Consents and Approvals..................................................25
Section 5.5 Absence of Litigation...................................................25
Section 5.6 Financial Ability.......................................................26
Section 5.7 Brokers.................................................................26
Section 5.8 Purchase Entirely for Own Account.......................................26
Section 5.9 Reliance Upon Investors' Representations................................26
Section 5.10 Receipt of Information.................................................26
Section 5.11 Accredited Investor....................................................27
Section 5.12 Disclaimer of Warranties...............................................27
ARTICLE VI ADDITIONAL AGREEMENTS...........................................................27
Section 6.1 Conduct of ROI Business Prior to the Closing Date.......................27
Section 6.2 Taxes...................................................................28
Section 6.3 Regulatory and Other Authorizations; Consents...........................28
Section 6.4 Investigation...........................................................28
Section 6.5 Access to Properties and Records........................................29
Section 6.6 Negotiations............................................................29
Section 6.7 Further Action..........................................................29
Section 6.8 Notice of Breach........................................................29
Section 6.9 Contemplated Transfers..................................................30
Section 6.10 Recapitalization.......................................................30
Section 6.11 Warrant Issuances......................................................30
Section 6.12 Employee Benefits Matters..............................................30
Section 6.13 Guaranty Documentation.................................................31
Section 6.14 Foreign Qualifications.................................................31
ARTICLE VII SURVIVAL; INDEMNIFICATION.....................................................31
Section 7.1 Survival................................................................31
Section 7.2 Indemnification by the Parent and Company...............................32
Section 7.3 Form of Payments Under Section 7.2(a)...................................33
Section 7.4 Procedures for Indemnification..........................................34
Section 7.5 Arbitration.............................................................35
Section 7.6 No Consequential Damages; Exclusive Remedy..............................37
Section 7.7 Tax Benefit.............................................................37
Section 7.8 Mitigation..............................................................37
ARTICLE VIII CONDITIONS TO CLOSING.........................................................37
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Section 8.1 Conditions to Obligations of Company and Parent.........................37
Section 8.2 Conditions to Obligations of the Investors..............................38
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER...............................................40
Section 9.1 Termination.............................................................40
Section 9.2 Effect of Termination...................................................41
Section 9.3 Waiver..................................................................41
ARTICLE X GENERAL PROVISIONS...............................................................41
Section 10.1 Expenses...............................................................41
Section 10.2 Notices................................................................41
Section 10.3 Public Announcements...................................................43
Section 10.4 Headings...............................................................43
Section 10.5 Severability...........................................................43
Section 10.6 Entire Agreement.......................................................43
Section 10.7 Assignment.............................................................43
Section 10.8 No Third-Party Beneficiaries...........................................44
Section 10.9 Waivers and Amendments.................................................44
Section 10.10 Specific Performance..................................................44
Section 10.11 Governing Law.........................................................44
Section 10.12 Counterparts..........................................................44
SCHEDULE I - Series A Investors
DISCLOSURE SCHEDULES
1.1 Permitted Encumbrances
3.5 Required Consents of the Company
3.6 Business Activities
3.7 Subsidiaries
3.9 Material Contracts
3.10(a) Financial Statements
3.10(b) Liabilities
3.11 Absence of Certain Changes
3.12 Absence of Litigation
3.13 Compliance with Laws
3.17(b) Listed Intellectual Property
3.17(c) Licenses
3.17(d) Interests in Intellectual Property
3.17(e) Software & Intellectual Property
3.19 Employee Benefit Plans
3.20 Employees' Identity, Salary & Position; Labor Matters
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3.22(a) Leases; Assignment of any Leases; Legality of Leases
3.22(b) Defects or Inadequacies in Leased Property
3.23 Transactions with Affiliates
4.4 Filings & Notifications of Parent
5.8 Purchase Entirely for Own Account
6.1(b) Permitted Transactions
6.12(c) Transferred Employees
8.2(b) Consents required for Closing
EXHIBITS
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A Amended and Restated Certificate of Incorporation of the Company
B Bylaws of the Company
C Second Amended and Restated Certificate of Incorporation of the
Company
D-1 ▇▇▇▇ ▇▇▇▇▇▇ Employment Agreement
D-2 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Employment Agreement
D-3 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Employment Agreement
D-4 ▇▇▇▇▇▇ ▇▇▇▇▇ Employment Agreement
E Guaranty Documentation
F Registration Rights Agreement
G ROI Business
H Stockholders Agreement
I Durham Subscription Agreement
J Form of Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
K Form of Opinion of Pillsbury Madison and Sutro
L Stock Option Plan
M Company Certification
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of May 5, 2000, by and among
QUADRAMED CORPORATION, a Delaware corporation ("QM"), QUADRAMED OPERATING
CORPORATION, a Delaware corporation and wholly-owned subsidiary of QM ("QMOC,"
and collectively with QM, "Parent"), the investors whose names and addresses are
set forth on Schedule I hereto (the "Investors"), and CHARTONE, INC., a Delaware
corporation ("Company").
RECITALS:
WHEREAS, Company owns and operates release of information, file
management, on-site staffing, and off-site storage businesses based in San Jose,
California; and
WHEREAS, the Company desires to issue, and the Investors desires to
purchase from Company, an aggregate of 2,520,000 shares of Series A Preferred
Stock of Company for an aggregate purchase price of $25,200,000.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the Investors, Parent and
Company hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms
As used in this Agreement, the following terms have the following
meanings:
"Action" means any claim, action, suit, arbitration or proceeding by or
before any Governmental Authority or arbitrator.
"Administrative Services Agreement" means the Administrative Services
Agreement, by and between Parent and Company, dated as of May 3, 2000.
"Affiliate" means, when used with respect to a specified Person, another
Person that, either directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Agreement" means this Securities Purchase Agreement dated as of May 5,
2000 among Parent, the Investors and Company (including the Exhibits and
Disclosure Schedules hereto) and all amendments hereto.
"Arbitrator" has the meaning specified in Section 7.5.
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"Asset Contribution" means the contribution of the assets of the ROI
Business by Parent to Company pursuant to the terms of the Contribution
Agreement.
"Business Day" means any day that is not a Saturday, Sunday or other day
on which banks are required or authorized by law to be closed in the State of
California or the State of New York.
"Business Employee" has the meaning specified in Section 3.20.
"ChartOne Demand Note A" means that certain Demand Promissory Note, made
by Company for the benefit of QMOC on May 3, 2000, in the principal amount of
$9,950,000.
"ChartOne Demand Note B" means that certain Demand Promissory Note, made
by Company for the benefit of QMOC on May 3, 2000, in the principal amount of
$2,000,000.
"ChartOne Demand Notes" means ChartOne Demand Note A and ChartOne Demand
Note B.
"Closing" has the meaning specified in Section 2.3.
"Closing Date" has the meaning specified in Section 2.3.
"Common Stock" means the Common Stock, par value $0.001 per share, of
Company.
"Company Documents" has the meaning specified in Section 3.1.
"Company Event of Breach" has the meaning specified in Section 7.2.
"Contract" means and includes all contracts, subcontracts, agreements,
leases, options, notes, bonds, mortgages, indentures, deeds of trust, collateral
assignments of lease and rights, guarantees, licenses, franchises, purchase
orders, sales orders and commitments of every kind, written or oral.
"Contribution Agreement" means the Asset Contribution Agreement, dated
as of May 3, 2000, by and between Parent and Company.
"Contribution Date" means the date on which the assets of the ROI
Business were contributed by Parent to Company pursuant to the terms of the
Contribution Agreement.
"Disclosure Schedules" means the Disclosure Schedules delivered to the
Investors by Parent pursuant to this Agreement.
"Disputes" has the meaning specified in Section 7.5(a).
"Disputing Person" has the meaning specified in Section 7.5(b).
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"Durham Subscription Agreement" has the meaning specified in Section
2.3(f).
"Escrow Agreement" means an escrow agreement in connection with the
obligations to make payments under the Health+Cast Guaranty, in such form as
shall be reasonably acceptable to the parties hereto.
"Employee Benefit Plan" has the meaning specified in Section 3.19.
"Employment Agreements" means the employment agreements to be entered
into between Company and each of ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇, substantially in the form of ▇▇▇▇▇▇▇▇ ▇-▇, ▇-▇, ▇-▇ and D-4.
"Encumbrance" means any security interest, pledge, mortgage, lien,
charge, adverse claim of ownership or use or other encumbrance of any kind.
"Environmental Claims" means written demands, written claims, notices of
noncompliance, violation or liability, actions, suits, proceedings, consent
orders or consent agreements arising under or relating to Environmental Laws,
Environmental Permits or Hazardous Materials.
"Environmental Law" means any Law relating to pollution, natural
resources or protection of the environment.
"Environmental Permit" means any permit, approval, identification
number, registration, license or other authorization required under any
applicable Environmental Law.
"ERISA" has the meaning specified in Section 3.19.
"Final Determination" has the meaning specified in Section 7.5(e).
"Foreign Qualifications" has the meaning specified in Section 3.1(c).
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means any United States federal, state or local
government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal or judicial or arbitral body.
"Governmental Order" means any order, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority and expressly naming Parent, any of its Affiliates, the ROI Division,
Company, Subsidiary or the ROI Business.
"Guaranty Documentation" means the agreements or other documentation
evidencing (i) assumption by Company of the obligations under the Health+Cast
Guaranty (in no event to exceed $12,500,000) and (ii) the Investors' obligation
to support such guaranty obligations of
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Company, substantially in the form of Exhibit E, or in such other form as shall
be reasonably acceptable to the Investors and Imperial Bank and (iii) the Escrow
Agreement.
"Hazardous Materials" means any chemical, substance or waste regulated
or identified as toxic or hazardous under any Environmental Law or petroleum,
including crude oil or any fraction, or natural gas, including liquids and
synthetic gas usable for fuel.
"Health+Cast" means Health+Cast, L.L.C., a Delaware corporation.
"Health+Cast Guaranty" has the meaning specified in Section 8.1(d).
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"Income Taxes" means all (x) Taxes based upon, measured by, or
calculated with respect to (i) gross or net income or gross or net receipts or
profits (including, but not limited to, any capital gains, minimum taxes and any
Taxes on items of tax preference, but not including sales, use, goods and
services, real or personal property transfer or other similar Taxes) or (ii)
multiple bases (including, but not limited to, corporate franchise, doing
business or occupation Taxes) if one or more of the bases upon which such Tax
may be based upon, measured by, or calculated with respect to, is described in
clause (i) above and (y) withholding taxes measured by, or calculated with
respect to, any payments or distributions.
"Intellectual Property" means: (i) the service ▇▇▇▇ "CHARTONE," (ii) the
domain names listed in Schedule 3.17(b) and (iii) the Software.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Investor Documents" has the meaning specified in Section 5.2.
"Investor Indemnitee" has the meaning specified in Section 7.2.
"Investor Losses" has the meaning specified in Section 7.2.
"IRS" means the United States Internal Revenue Service.
"Knowledge of Company" means the actual knowledge after reasonable
inquiry of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇.
"Law" means any United States federal, state, local statute, law,
ordinance, regulation, rule, code, order or rule of common law.
"Leased Property" has the meaning specified in Section 3.22(a).
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"Leases" has the meaning specified in Section 3.22(a).
"License Agreements" has the meaning specified in the Contribution
Agreement.
"Licenses" means all of the licenses, permits and other governmental
authorizations required for the operation of the ROI Business.
"Material Adverse Effect" means any change, circumstance, or effect that
is materially adverse to the business, assets, condition (financial or
otherwise) or results of operations of Company or the ROI Division, or prospects
of the ROI Business as it is currently being conducted; provided, however, that
any adverse change, circumstance or effect that is primarily caused by
conditions affecting the United States economy as a whole or that affects Parent
but does not directly affect Company or the ROI Division shall not be taken into
account in determining whether there has been or would be a "Material Adverse
Effect".
"Material Leases" means the Leases by and between (i) Parent and ▇▇▇▇▇▇▇
Properties, L.P., dated as of June 23, 1999, (ii) Parent and ▇▇▇▇▇▇/Columbia
Limited Partnership, dated as of December 2, 1999 and (iii) Parent and Principal
Life Insurance Company, dated as of March 10, 1999.
"Multiemployer Plan" has the meaning specified in Section 3.19.
"Notice of Arbitration" has the meaning specified in Section 7.5(b).
"Pension Plan" has the meaning specified in Section 3.19.
"Parent Documents" has the meaning specified in Section 4.2.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable or the validity of which is being contested in
good faith; (b) Encumbrances that arise by operation of law, such as
materialmen's, mechanics', workmen's', repairmen's. warehousemen's and carrier's
liens and other similar liens arising in the ordinary course of business; (c)
pledges or deposits to secure obligations under workers' compensation laws or
similar legislation or to secure public or statutory obligations; (d) the
Encumbrances listed on Schedule 1.1 and (e) Encumbrances arising after the date
hereof in the ordinary course of business.
"Person" means any individual, partnership, firm, corporation,
association, trust, limited liability company, unincorporated organization,
Governmental Authority or other entity, as well as any syndicate or group that
would be deemed to be a person under Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended.
"Preferred Stock" means the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock.
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"Registration Rights Agreement" means the Registration Rights Agreement
with respect to the Series A Preferred Stock, the Series B Preferred Stock and
the Series C Preferred Stock, substantially in the form of Exhibit F.
"Required Consents" has the meaning specified in Section 3.5.
"ROI Business" means the release of information, file management,
on-site staffing, and off-site storage businesses of Company and Subsidiary, all
as more fully described in Exhibit G.
"ROI Division" means the ROI Business, as conducted by Parent prior to
the Contribution Date.
"ROI Division Financial Statements" means the unaudited balance sheet of
the ROI Division as of, and the unaudited statement of income for, (i) the year
ended December 31, 1999 and (ii) the quarter ended March 31, 2000.
"Second Amended and Restated Charter" means the Second Amended and
Restated Certificate of Incorporation of Company, substantially in the form of
Exhibit C.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" has the meaning specified in Section 2.1.
"Series A Purchase Price" has the meaning specified in Section 2.2.
"Series B Preferred Stock" means the Series B Convertible Preferred
Stock, par value $0.01 per share, of Company.
"Series C Preferred Stock" means the Series C Convertible Preferred
Stock, par value $0.01 per share, of Company.
"Software" means the software assigned or licensed to the Company
pursuant to the Software Assignment Agreement and the License Agreements (as
defined in the Contribution Agreement), in source or object code form, including
all corresponding documentation.
"Software Assignment Agreement" means the assignment conveying from
Parent to Company the internally-developed software assets set forth on Schedule
3.17(e).
"Stockholders Agreement" means the Stockholders Agreement, by and among
Parent, the Investors, Company and certain management investors, substantially
in the form of Exhibit H.
"Stock Option Plan" has the meaning specified in Section 3.2.
"Subsidiary" means American ChartGuard Corporation, a Texas corporation
and a wholly-owned subsidiary of Company.
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"Tax" or "Taxes" means all federal, state, local and foreign income,
profits, franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions.
"Tax Return" means all federal, state, local and foreign returns and
reports (including elections, declarations, disclosures, schedules, estimates
and information returns) required to be supplied to a Tax authority relating to
Taxes, including any amendments thereto.
"Transaction Documents" means this Agreement, the Guaranty
Documentation, the Employment Agreements, the Registration Rights Agreement and
the Stockholders Agreement.
"Y2K-Compliant" means able to provide specific dates and calculate spans
of dates, and to record, store, process and provide true and accurate dates and
calculations for dates and spans of dates, in and between the twentieth and
twenty-first centuries, at least as effectively as within the twentieth century.
Section 1.2 Other Definitional Provisions
Unless the context requires otherwise, references to "Articles" and
"Sections" are to the Articles or Sections of this Agreement, and references to
"Exhibits" and "Schedules" are to the Exhibits and Disclosure Schedules annexed
hereto. Any of the terms defined in this Article 1 may, unless the context
requires otherwise, be used in the singular or the plural depending on the
reference. Wherever used herein, the masculine pronoun shall include the
feminine and the neuter, as appropriate in the context. With respect to any
matter or thing, "including" or "includes" means including but not limited to
such matter or thing.
Section 1.3 Parent
"Parent" shall mean QM and QMOC collectively, and any liability assumed
or obligation undertaken by Parent hereunder shall be the joint and several
liability or obligation of QM and QMOC.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
Section 2.1 Authorization of Preferred Stock
Company has authorized and created a series of its Preferred Stock
consisting of 7,500,000 shares, $0.01 par value per share, designated as its
"Series A Convertible Preferred Stock" (the "Series A Preferred Stock"). The
terms, limitations and relative rights and
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preferences of the Series A Preferred Stock are set forth in the Amended and
Restated Certificate of Incorporation of the Company, a copy of which is
attached hereto as Exhibit A, which shall be superseded prior to the Closing
Date by the Second Amended and Restated Charter, a copy of which is attached
hereto as Exhibit C.
Section 2.2 Initial Issuance of Preferred Stock
Subject to the terms and conditions set forth in this Agreement and in
reliance upon the Company's and the Investors' representations set forth below,
on the Closing Date (as defined below) the Company shall sell to the Investors,
and the Investors shall purchase from the Company, the number of shares of
Series A Preferred Stock, and at the aggregate purchase prices (each a "Series A
Purchase Price"), set forth opposite their respective names on Schedule I (such
shares, collectively, the "Shares"). The Series A Purchase Price will be paid in
the form of (i) cash in the amount of $24,950,000, and (ii) satisfaction by the
Investors of an obligation of Company in the amount of $250,000, which to the
extent not used for such purposes will be paid in cash. Such sales and purchases
shall be effected on the Closing Date by the Company executing and delivering to
each of the Investors, duly registered in its name, a duly executed stock
certificate evidencing Shares being purchased by it, against delivery by each of
the Investors to the Company of the Purchase Price by wire transfer of
immediately available funds to such account as the Company shall designate prior
to the Closing Date. The Company's agreements with each of the Investors are
separate agreements, and the sales to each of the Investors are separate sales.
Section 2.3 Closing
Subject to the terms and conditions of this Agreement, the closing of
such sale and purchase (the "Closing") shall take place at 10:00 a.m., New York
time, on the day three (3) Business Days after such time as the conditions to
Closing set forth in Article VIII hereof (other than conditions with respect to
actions the respective parties will take at the Closing itself) are satisfied,
or at such other time or on such other date as Company, Parent and the Investors
may mutually agree upon in writing (the day on which the Closing takes place
being the "Closing Date") at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇. At the Closing:
(a) The Investors shall severally pay the Series A Purchase Price to
Company by wire transfer of immediately available funds to the account
designated at least two Business Days prior to the Closing Date by Company in a
written notice to each of the Investors;
(b) Company shall issue and deliver to each Investor one or more
certificates representing the shares of Series A Preferred Stock to be purchased
by such Investor;
(c) Company shall pay to Parent $9,950,000 (subject to adjustment
pursuant to Section 10.1) in cash in full satisfaction of ChartOne Demand Note
A;
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(d) Company shall pay $2,000,000 in cash in full satisfaction of
ChartOne Demand Note B (the "Note B Payment"); such portion of the Note B
Payment as shall be required by Imperial Bank to be deposited into escrow in
connection with the Guaranty Documentation shall be so deposited, subject to the
terms of the Escrow Agreement and the other Guaranty Documentation; and such
portion of the Note B Payment as shall not be required by Imperial Bank to be
deposited into escrow in connection with the Guaranty Documentation shall be
paid to Company;
(e) Company, Parent and the Investors shall execute and deliver to each
other the Registration Rights Agreement and the Stockholders Agreement;
(f) Company, the Investors and Imperial Bank shall execute and deliver
to each other (or otherwise make effective) the Guaranty Documentation; and
(g) ▇▇▇▇▇ ▇▇▇▇▇▇ and Company shall execute and deliver to each other a
Subscription Agreement for 181,000 shares of Common Stock, substantially in the
form attached hereto as Exhibit I (the "Durham Subscription Agreement").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to the Investors, except as set
forth on the correspondingly numbered Schedule, as follows:
Section 3.1 Organization of Company
(a) Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has all requisite power
and authority to own, operate or lease its properties and assets and to carry on
the ROI Business as now conducted and as proposed to be conducted, to execute
and deliver each of the Transaction Documents to which it is a party (the
"Company Documents"), to issue and sell the Series A Preferred Stock and the
Common Stock issuable upon conversion thereof, and to carry out the provisions
of the Company Documents and the Amended and Restated Certificate of
Incorporation of Company.
(b) Attached hereto as Exhibits A and B, respectively, are true and
complete copies of the Amended and Restated Certificate of Incorporation and
Bylaws of Company, as amended through the date hereof (collectively, the
"Organizational Documents").
(c) Company has filed, or will have filed by the Closing, all necessary
documents to qualify to do business as a foreign corporation (the "Foreign
Qualifications") in, and Company is in good standing under the laws of, each
jurisdiction in which the conduct of Company's business or the nature of the
property owned requires such qualification, except where the failure to so
qualify would not have a Material Adverse Effect.
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Section 3.2 Capital Stock of Company
The authorized capital stock of Company consists of 15,000,000 shares of
Common Stock and 10,830,000 shares of Preferred Stock, of which 7,500,000 shares
have been designated Series A Preferred Stock, 2,130,000 shares have been
designated Series B Preferred Stock and 1,200,000 shares have been designated
Series C Preferred Stock. The rights, privileges and preferences of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are as
stated in the Certificate of Designations. As of the date hereof, one share of
Common Stock, no shares of Series A Preferred Stock, 2,130,000 shares of Series
B Preferred Stock and 1,200,000 shares of Series C Preferred Stock are issued
and outstanding. All the outstanding shares of capital stock of Company have
been duly and validly issued and are fully paid and nonassessable and were
issued in accordance with the registration or qualification provisions of the
Securities Act, and any relevant state securities laws or pursuant to valid
exemptions therefrom. Other than pursuant to the Transaction Documents, the
conversion privileges of the Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock, and, as of the Closing Date, the Durham
Subscription Agreement and exercise privileges under the stock option plan of
Company substantially in the form of Exhibit L hereto (the "Stock Option Plan"),
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character issued or authorized by Company relating to the
issued or unissued capital stock of Company or obligating Company to issue or
sell any shares of capital stock of, or other equity interests in, Company. All
shares of Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
Except pursuant to the Transaction Documents or otherwise contemplated by this
Agreement, there are no outstanding contractual obligations of Company to
repurchase, redeem or otherwise acquire any shares of Common Stock or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Person. When issued in accordance with the terms of this
Agreement, the Shares will be duly authorized, validly issued, fully paid and
nonassessable shares of capital stock of Company, free of any preemptive or
similar rights except as set forth in the Stockholders Agreement. When issued in
accordance with terms of the Certificate of Designations, the shares of Common
Stock issuable upon conversion of the Series A Preferred Stock will be duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
of Company, free of any preemptive or similar rights except as set forth in the
Stockholders Agreement.
Section 3.3 Authority of Company
Company has all necessary power and authority and full legal capacity to
enter into each of the Company Documents, to carry out its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of the Company Documents by Company, the
performance by Company of its obligations hereunder and thereunder, and the
consummation by Company of the transactions contemplated hereby and thereby,
have been duly authorized by all requisite action on the part of Company,
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and no other proceedings on the part of Company are necessary to authorize the
Company Documents or to consummate the transactions contemplated hereby or
thereby. This Agreement has been duly executed and delivered by Company, and
(assuming due authorization, execution and delivery by the other parties hereto)
this Agreement constitutes a legal, valid and binding obligation of Company
enforceable against Company in accordance with its terms, except to the extent
that enforcement hereof may be limited by applicable bankruptcy, moratorium,
insolvency or other similar laws affecting creditors' rights generally and
general equitable principles.
Section 3.4 No Conflict
Assuming all Required Consents have been obtained, and except as may
result from any facts or circumstances relating solely to the Investors, the
execution, delivery and performance of the Company Documents by Company do not
and will not (a) violate or conflict with the organizational or constitutive
documents of Company or Subsidiary, (b) conflict with or violate any Law or
Governmental Order applicable to Company or Subsidiary, or (c) result in any
breach of, or constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of any Encumbrance on any of the assets or properties of Company,
Subsidiary or the ROI Business pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
relating to such assets or properties to which Company or Subsidiary is a party
or by which any of the ROI Business is bound or affected, except for such
breaches or defaults which individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect.
Section 3.5 Consents and Approvals
Except (a) pursuant to applicable requirements of the HSR Act, (b) as
may be necessary as a result of any facts or circumstances relating solely to
the Investors, (c) where the failure to obtain such consents, approvals,
authorizations, licenses, orders or permits, or to make such declarations,
filings, registrations or notifications would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, or (d) for
any filings, consents, approvals, authorizations on other actions set forth in
Schedule 3.5 (the "Required Consents"): no consent, approval, authorization,
license, order or permit of, or declaration, filing or registration with, or
notification to, any Person is required to be made or obtained (i) by Company or
Subsidiary in connection with the execution, delivery and performance by Company
of the Company Documents and the consummation of the transactions contemplated
hereby and thereby or (ii) by Parent in connection with the Asset Contribution
or the execution, delivery and performance by Parent of the Contribution
Agreement, the documents contemplated thereby or consummation of the transaction
contemplated thereby.
Section 3.6 No Business Activities.
Except as set forth in Schedule 3.6, prior to the Contribution Date,
Company did not conduct any activities other than in connection with the
organization of Company, the
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negotiation of the Contribution Agreement and the consummation of the
transactions contemplated thereby. Prior to the Contribution Date, Company had
no liabilities of any kind.
Section 3.7 Subsidiaries
(a) Except for Subsidiary, Company does not own or control, directly or
indirectly, any interest in any other corporation, association or other business
entity. Company is not a participant in any joint venture, partnership or
similar arrangement.
(b) Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. True and complete copies of
the Certificate of Incorporation and Bylaws of Subsidiary, as amended through
the date hereof, and the complete minutes of all meetings of shareholders and
the board of directors of Subsidiary have been provided to the Investors.
Subsidiary has all requisite power and authority to own, operate or lease its
properties and assets and to conduct its business.
(c) Subsidiary has filed all necessary documents to qualify to do
business as a foreign corporation in, and Subsidiary is in good standing under
the laws of, each jurisdiction in which the conduct of Subsidiary's business or
the nature of the property owned requires such qualification, except where the
failure to so qualify would not have a Material Adverse Effect.
(d) The authorized capital stock of Subsidiary consists of 20,000 shares
of common stock, par value $0.01 per share ("Subsidiary Common Stock"). As of
the date hereof, only 1,000 shares of Subsidiary Common Stock were issued and
outstanding. All of the issued and outstanding capital stock of Subsidiary has
been duly authorized and validly issued, is fully paid and non-assessable, was
issued in accordance with the registration or qualification provisions of the
Securities Act, and any relevant state securities laws or pursuant to valid
exemptions therefrom, and is owned by Company free and clear of any mortgage,
pledge, lien, encumbrance, security interest, claim or equity. There are no
options, warrants or other rights, agreements, arrangements or commitments of
any character issued or authorized by Subsidiary relating to the issued or
unissued capital stock of Subsidiary or obligating Subsidiary to issue or sell
any shares of capital stock of, or other equity interests in Subsidiary. There
are no outstanding contractual obligations of Subsidiary to repurchase, redeem
or otherwise acquire any shares of Common Stock or to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in,
any Person.
Section 3.8 Title
Assuming receipt of the Required Consents (except, as of the Closing, as
to the Material Leases), each of Company and Subsidiary has good and marketable
title to its properties and assets and good title to all its leasehold estates,
free and clear of all Encumbrances except for Permitted Encumbrances. Except for
the services to be provided under the Administrative Services Agreement, the
software licensed under the License Agreements, and general management and
administrative support provided by Parent, (a) the assets of Company
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constitute all the assets used to carry on the ROI Business immediately prior to
and as of the date hereof and (b) as of the Closing, the assets of Company will
constitute all of the assets used to carry on the ROI Business immediately prior
to and as of the date thereof, except for assets disposed of in the ordinary
course of business since the date hereof.
Section 3.9 Material Contracts
(a) Schedule 3.9(a) lists each of the following contracts and
agreements, whether oral or written, to which Parent, Company, Subsidiary or any
of their respective Affiliates is a party as of the date hereof and will be a
party as of the Closing Date (except for such Contracts entered into in the
ordinary course of business since the date hereof) and which exclusively relates
to the ROI Business (the "Material Contracts"):
(i) each contract and agreement for the purchase of goods or for
the furnishing of services to Parent or Company under the terms of which
Parent or Company is obligated to pay or otherwise give consideration of
more than $100,000 in any 12 month period;
(ii) each contract and agreement for the sale of goods or
services by Parent or Company which is likely to involve payment to
Parent or Company of more than $100,000 in any twelve (12) month period;
(iii) all contracts and agreements relating to indebtedness for
borrowed money in excess of $100,000 of Parent or Company;
(iv) all contracts and agreements that limit or purport to limit
the ability of Parent or Company to compete in any line of business or
with any Person or in any geographic area or during any period of time;
(v) each lease of real property involving more than 1,000 square
feet;
(vi) each lease of personal property involving more than
$100,000 in the aggregate of rent over any 12 month period;
(vii) [Intentionally Omitted].
(viii) each contract for the employment or engagement as an
independent contractor of any Person on a full-time, part-time,
consulting or other basis requiring Parent or Company to make payments
of more than $75,000 in the aggregate over any 12-month period, other
than any contract that is terminable at will and the Employment
Agreements;
(ix) each contract or indenture mortgaging, pledging or
otherwise placing a material Encumbrance on any of the properties,
assets or leasehold estates of Company with a value in excess of
$25,000;
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(x) any material license agreement, other than any license
agreement for standard office software;
(xi) any other contract which is material to the ROI Business
and obligates Parent or Company to make payments in excess of $100,000
in the aggregate over any twelve (12) month period.
(b) Company has made available to the Investors or their representatives
true and complete originals or copies of all Material Contracts. To the
Knowledge of Company, each Material Contract is valid and binding on the
respective parties thereto and is in full force and effect and, upon
consummation of the transactions contemplated by this Agreement, shall continue
in full force and effect without penalty or other adverse consequence, assuming
all Required Consents are obtained. To the Knowledge of Company, neither Parent,
Company nor Subsidiary is in breach of, or default under, any Material Contract.
(c) Except as set forth in Schedule 3.9(c), to the Knowledge of Company
no other party to any Material Contract is in breach thereof or default
thereunder.
(d) There is no contract, agreement or other arrangement granting any
Person (other than the Investors) any preferential right to purchase, other than
in the ordinary course of business consistent with past practice, any of the
assets of the ROI Business.
Section 3.10 Financial Statements
(a) Except as set forth on Schedule 3.10(a), the ROI Division Financial
Statements included in Schedule 3.10(a) fairly present in all material respects
the financial position of the ROI Division as of December 31, 1999 and as of
March 31, 2000 and the related statements of income for the fiscal period ended
on such dates fairly present in all material respects the results of operations
of the ROI Division for the periods indicated, in each case as the ROI Division
functions as a division within Parent's consolidated group of companies, with
such exclusions and adjustments as are usual and customary in presenting the
financial position and results of operations, respectively, of a division within
a consolidated group of companies, such as exclusions for taxes and sales,
marketing, human resources and general and administrative expenses, subject to
normal year-end adjustments in accordance with the determination of Company's
independent auditors.
(b) Except as and to the extent set forth on the balance sheet dated
March 31, 2000 included in the ROI Division Financial Statements, or disclosed
in Schedule 3.10(b), neither Company nor Subsidiary has any liabilities that are
of a nature that would be required to be disclosed on a balance sheet prepared
in conformity with GAAP, other than liabilities incurred in the ordinary course
of business since March 31, 2000 or any individual liability not in excess of
$50,000.
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Section 3.11 Absence of Certain Changes
(a) Except as set forth in Schedule 3.11, (1) from December 31, 1999 to
the Contribution Date, Parent operated the ROI Business in the ordinary course
of business and consistent with past practice; (2) since the Contribution Date,
Company has operated the ROI Business in the ordinary course of business and
consistent with past practice and (3) since December 31, 1999 neither Parent nor
Company has:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise) relating to the operations
of any of the ROI Business except in the ordinary course of business
consistent with past practice;
(ii) failed to discharge or satisfy any Encumbrance or pay or
satisfy any obligation or liability (whether absolute, accrued,
contingent or otherwise) arising from the operation of the ROI Business,
other than Permitted Encumbrances and except in the ordinary course of
business consistent with past practice;
(iii) sold or transferred any of the assets of the ROI Business
material to the ROI Business or canceled any debts or claims or waived
any rights material to the ROI Business relating to the operations of
the ROI Business, except in the ordinary course of business consistent
with past practice;
(iv) defaulted on any material obligation relating to the
operations of the ROI Business;
(v) written down the value of any inventory or written off as
uncollectible any accounts receivable specifically relating to the ROI
Business or any portion thereof not reflected in the balance sheet
included in the ROI Business Financial Statements, except in the
ordinary course of business consistent with past practice;
(vi) granted any increase in the compensation or benefits of
exempt employees of the ROI Business other than increases in accordance
with past practice not exceeding 8% or entered into any employment or
severance agreement or arrangement with any of them;
(vii) made any single capital expenditure in excess of $50,000,
or additions to property, plant and equipment used in the operations of
the ROI Business other than ordinary repairs and maintenance; or
(viii) entered into any agreement or made any commitment to do
any of the foregoing.
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Section 3.12 Absence of Litigation
Except as set forth in Schedule 3.12 (a) there are no Actions pending
or, to the Knowledge of Company, threatened against Company, Subsidiary or the
ROI Business and (b) neither Company, Subsidiary nor the ROI Business is subject
to any Governmental Order.
Section 3.13 Compliance with Laws
(a) Company, Subsidiary and the ROI Business are in compliance with all
applicable Laws, except as set forth in Schedule 3.13 or where the failure to
comply would not reasonably be expected to have a Material Adverse Effect.
Neither Company, Subsidiary nor Parent have received any written notice to the
effect that Company, Subsidiary or the ROI Business is not in compliance with
any applicable Laws.
(b) Company, Subsidiary and the ROI Business have obtained or filed
timely application for all Licenses and Environmental Permits required under
applicable Laws (other than with respect to the Foreign Qualifications prior to
the Closing). Other than the Foreign Qualifications prior to the Closing, the
Licenses and Environmental Permits are valid, in full force and effect, and
sufficient and adequate in all respects to permit the continued lawful conduct
of the business and operations of Company, Subsidiary and the ROI Business in
the manner now conducted. No License or Environmental Permit of Company,
Subsidiary or the ROI Business will in any way be affected by, or terminate or
lapse by reason of, execution of the Transaction Documents, or performance of
the transactions contemplated thereunder.
Section 3.14 Environmental Matters
There has been no release or threatened release of any Hazardous
Material which would reasonably be expected to result in any material
Environmental Claim or liability against Company, Subsidiary or the ROI
Business. Neither Company, Subsidiary nor the ROI Business is subject to (i) any
material contractual obligations relating to Environmental Laws or (ii) any
material capital expenditures arising under or relating to Environmental Laws.
Company, Subsidiary and the ROI Business are in compliance in all material
respects with all applicable Environmental Laws and all Environmental Permits
and there are no Environmental Claims pending or, to the Knowledge of Company,
threatened against Company, Subsidiary or the ROI Business.
Section 3.15 Brokers
Except for Warburg Dillon Read LLC, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent, Company or Subsidiary. The fees of
Warburg Dillon Read LLC in connection with the transactions contemplated by this
Agreement are payable entirely by Parent.
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Section 3.16 Taxes
(a) Company and Subsidiary have prepared in good faith and timely filed
all Tax Returns required to be filed by any of them, and all such filed Tax
Returns (if any) are complete and accurate in all material respects.
(b) Each of Company and Subsidiary as of the date hereof has, and as of
the Closing Date will have, (x) paid all Taxes that it is required to pay as of
the date hereof or thereof and (y) withheld all federal, state and local income
taxes, FICA, FUTA and other Taxes, including, without limitation, similar
foreign Taxes, required to be withheld as of the date hereof or thereof from
amounts owing to any employee, creditor or other person.
(c) There are no unresolved claims or outstanding proposed or assessed
deficiencies concerning Tax liability of Company or Subsidiary.
(d) None of Company's or Subsidiary's assets is "tax-exempt use
property" within the meaning of section 168(h) of the Internal Revenue Code.
(e) Parent has withheld and (to the extent such withheld amounts are due
to be paid) paid all Taxes related to the ROI Division and required to be
withheld as of the date hereof with respect to amounts paid or owing to any
employee, creditor, independent contractor or other third party.
Section 3.17 Intellectual Property and Software
(a) To the Knowledge of Company, Company and Subsidiary own all right,
title and interest in and to, or have a valid and enforceable license to use all
the Intellectual Property used by the ROI Business, which represents all
intellectual property rights used to carry on the ROI Business (i) immediately
prior to and as of the date hereof and (ii) as of the Closing, immediately prior
to and as of the date thereof, except for intellectual property rights disposed
of in the ordinary course of business since the date hereof. To the Knowledge of
Company, there are no infringements of any Intellectual Property by any third
party and the conduct of the ROI Business as currently conducted does not
infringe any intellectual property or other proprietary right of any third
party. There is no claim, suit, action or proceeding pending or, to the
Knowledge of Company, threatened against Company or Subsidiary: (i) alleging any
infringement with any third party's intellectual property or other proprietary
rights or (ii) challenging Company's or Subsidiary's ownership or use of, or the
validity or enforceability of any Intellectual Property.
(b) Schedule 3.17(b) sets forth a complete and current list of
registrations/patents or applications pertaining to the Intellectual Property
("Listed Intellectual Property") filed by Parent or Company. Except as described
in Schedule 3.17(b) and the domain names listed in Schedule 3.17(b), all Listed
Intellectual Property is owned by or licensed to the Company or Subsidiary, free
and clear of security interests, liens, encumbrances or claims of any nature.
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(c) Schedule 3.17(c) sets forth a complete list of all: (i) licenses,
sublicenses and other agreements in which the Company or Subsidiary has granted
to any person the right to use the Intellectual Property; and (ii) all other
consents, indemnifications, forbearances to ▇▇▇, settlement agreements and
licensing or cross-licensing arrangements to which the Company or Subsidiary is
a party relating to the Intellectual Property or the proprietary rights of any
third party. Except as set forth in Schedule 3.17(c), or as contemplated by this
Agreement, the Company and Subsidiary are not under any obligation to pay
royalties or other payments in excess of $100,000 in any twelve (12) month
period in connection with any license, sublicense or other agreement relating to
the Intellectual Property.
(d) Except as set forth on Schedule 3.17(d), to the Knowledge of Company
no former or present employee, officer or director of Company or Subsidiary, nor
any agent or outside contractor of Parent, holds any right, title or interest,
directly or indirectly, in whole or in part, in or to any Intellectual Property.
(e) The Software used by Company or Subsidiary that is material to the
conduct of the ROI business as now conducted (other than standard office
software) is listed on Schedule 3.17(e). Except as set forth on Schedule
3.17(e), Company or Subsidiary owns or holds valid licenses to use, such
Software and except as listed on Schedule 3.17(e) of the Disclosure Schedule,
Company and Subsidiary have not sold, licensed, leased or otherwise transferred
or granted any interest or rights in or to any portion thereof. To the Knowledge
of Company, none of the Software used by Company, nor any use thereof, conflicts
with, infringes upon or violates any intellectual property or other proprietary
right of any other Person and, to the Knowledge of Company, no claim, suit,
action or other proceeding with respect to any such infringement or violation is
threatened or pending.
Upon consummation of the transactions contemplated by this Agreement,
Company or Subsidiary's ownership of the Software owned by it will not be
impaired and be free and clear of all claims, liens and encumbrances and, with
respect to all agreements for the lease or license of Software which require
consents or other actions as a result of the consummation of the transactions
contemplated by this Agreement in order for Company or Subsidiary to continue to
use and operate such Software after the Closing Date, Company or Subsidiary will
have obtained such consents or taken such other actions so required.
Any programs, modifications, enhancements or other inventions,
improvements, discoveries, methods or works of authorship ("Works") that were
created by employees of the ROI Division, of Company or of Subsidiary were made
in the regular course of such employees' employment or service relationships
with the ROI Division, Company or its Subsidiary using the ROI Division's,
Company's or Subsidiary's facilities and resources and, as such, constitute
works made for hire or made by contractors that will, as of the Closing Date, be
subject to a written agreement under which such contractors assigned such Works
to the Company. Each such employee who has created Works or any employee who in
the regular course of his employment may create Works and all consultants will,
as of the Closing Date, have signed an assignment or similar agreement with
Company or Subsidiary confirming Company's ownership
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or, in the alternate, transferring and assigning to the Company all right, title
and interest in and to such programs, modifications, enhancements or other
inventions including copyright and other intellectual property rights therein.
Section 3.18 Year 2000
To the Knowledge of Company with due inquiry, all items, products,
Software, components and systems used in the operation of the ROI Business,
which incorporate the processing of dates or date-related data (including, but
not limited to, representing, calculating, comparing and sequencing), including,
but not limited to, computer systems, infrastructure items, software
applications, hardware and related equipment and utilities ("Components"), are
in all material respect Y2K-Compliant. To date, there have been no instances in
which any Components have failed in any material respect to be Y2K-Compliant.
Section 3.19 Employee Plans; ERISA
Schedule 3.19 sets forth all "employee benefit plans", as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all other material employee benefit arrangements or payroll
practices, including, without limitation, any such arrangements or payroll
practices providing severance pay, sick leave, vacation pay, salary continuation
for disability, retirement benefits, deferred compensation, bonus pay, incentive
pay, stock options, hospitalization insurance, medical insurance, life
insurance, scholarships or tuition reimbursements, maintained by Company or any
Affiliate or that Company or any Affiliate is obligated to contribute thereunder
for current or former employees of the ROI Business (the "Employee Benefit
Plans"). None of the Employee Benefit Plans are sponsored or administered by
Company. The Employee Benefit Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA and
the Internal Revenue Code (including rules and regulations thereunder) and other
applicable federal and state laws and regulations. Other than the pension and
welfare plans maintained for the benefit of the employees of the ROI Business
who are members of the 1199, National Health and Human Service Employees Union
(the "Union Plans"), (i) none of the Employee Benefit Plans is a multiemployer
plan, as defined in Section 3(37) of ERISA ("Multiemployer Plan"), or a single
employer defined benefit pension plan that is subject to Title IV of ERISA
("Pension Plan"), and (ii) neither Company, Parent nor any trade or business
(whether or not incorporated) which is or has ever been under control or treated
as a single employer with Company or Parent under Section 414(b), (c), (m), or
(o) of the Internal Revenue Code (an "ERISA Affiliate") has, or could reasonably
be expected to have, any liability in respect of any Multiemployer Plan or
Pension Plan.
Section 3.20 Labor Matters
(a) Schedule 3.20(a) sets forth the number of persons employed by
Company, Subsidiary and the ROI Business as of March 31, 2000 (each, a "Business
Employee"), along
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with each such employee's job category and job location. Prior to the
Contribution Date, Company did not employ any employees.
(b) No Business Employee is represented by any labor organization and
there are no labor or collective bargaining agreements that pertain to the
Business Employees except as set forth in Schedule 3.20(b). No labor
organization or group of Business Employees has made a pending demand for
recognition or certification, and there are no representation or certification
proceedings presently pending or, to the Knowledge of Company, threatened to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority.
(c) There are no strikes, work stoppages, slowdowns, lockouts,
arbitrations or similar labor disputes pending or, to the Knowledge of Company,
threatened against or involving the Business Employees. There are no unfair
labor practice charges, grievances or complaints pending or, to the Knowledge of
Company, threatened by or on behalf of any Business Employee which, either
individually or collectively, would reasonably be expected to be in excess of
Seventy Five Thousand Dollars ($75,000). Except as set forth in Schedule
3.20(c), there are no complaints, charges or claims against Company that are
pending or, to the Knowledge of Company, threatened to be brought or filed with
any public or governmental authority, arbitrator or court based on, arising out
of, in connection with, or otherwise relating to the employment or termination
of employment by Company of any Business Employee in which the liability, either
individually or collectively, of Company would reasonably be expected to be in
excess of Seventy Five Thousand Dollars ($75,000).
(d) To the Knowledge of Company, Company and its Affiliates are in
compliance with all laws, regulations and orders relating to the employment of
labor, including all such laws, regulations and orders relating to wages, hours,
collective bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar employment tax.
Section 3.21 Insurance
Company and Subsidiary and their respective properties are insured in
such amounts, against such losses and with such insurers as are prudent and
adequate when considered in light of the nature of the properties and businesses
of Company and Subsidiary. Company and Subsidiary have made available a true,
complete and accurate copy of all such policies to the Investors. As of the date
hereof, all such policies are in full force and effect, underwritten by
financially sound and reputable insurers and sufficient for all applicable
requirements of law. Company and Subsidiary shall maintain the coverage under
all such policies in full force and effect through the Closing Date, or shall
have replaced such policies with policies of comparable or greater coverage.
Company and its Subsidiary are not in default under any provisions of any such
policy of insurance that is reasonably likely to result in cancellation of such
policy of insurance nor have received notice of cancellation or threatened
cancellation of any such insurance. As of the date hereof, there is no claim
pending by Company under any of such
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policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds.
Section 3.22 Real Estate
(a) Schedule 3.22(a) contains a true and correct description, including,
to the Knowledge of Company, the correct name, address and telephone number of
the respective landlord, of all real property leases, subleases, and occupancy
agreements, together with any amendments thereto (the "Leases"), with respect to
(i) all of the real property leased by Company, or leased by Parent and used or
occupied in connection with the ROI Business (collectively, the "Leased
Property"), and (ii) all real property leased or subleased by Company, as lessor
or sublessor, to third parties. True, complete and accurate copies of the Leases
have been delivered to the Investors. Each of the Leases is in full force and
effect without modification or amendment from the form delivered and is valid,
binding and enforceable against the lessee in accordance with their respective
terms. Except as disclosed on Schedule 3.22(a), neither Parent nor Company has
assigned its interest under any Lease, or subleased all or any part of the space
demised thereby, to any third party. No option has been exercised under any of
such Leases, except any option whose exercise has been documented by a written
document, a true, complete and accurate copy of which has been delivered to the
Investors with the corresponding Lease. Neither Parent nor Company nor, to the
Knowledge of Company, any of the other parties to the Leases, is in default
under any of the Leases, and no amount due under the Leases remains unpaid; to
the Knowledge of Company, (i) no controversy, claim dispute or disagreement
exists between the parties to the Leases, and (ii) no event has occurred which
with the passage of time or giving of notice, or both, would constitute a
default thereunder. The lessor under each Lease has completed all tenant
improvement work and other alterations required to be performed by the lessor
pursuant to the Lease. Except as otherwise set forth in Schedule 3.22(a),
assuming receipt of all Required Consents no Lease or sublease will cease to be
legal, valid, binding, enforceable and in full force and effect on terms
identical to those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation of such
transactions constitute a breach or default under such Lease or sublease or
otherwise give the landlord the right to terminate such Lease or sublease.
(b) Except as set forth in Schedule 3.22(b), neither Parent nor Company
has received any written notice from any insurance carrier regarding defects or
inadequacies in the Leased Property which, if not corrected, would result in the
termination in the insurance coverage thereof or an increase in the cost
thereof.
(c) All brokerage commissions and other compensation and fees payable by
Company or Parent and relating to the Leases have been paid in full.
(d) To the Knowledge of Company, all improvements on the Leased Property
conform in all material respects to all applicable federal, state and local
laws, zoning, land use and building ordinances and health and safety ordinances
(including, without limitation, the Americans with Disabilities Act), and
neither Parent nor Company has received written notice of
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any violations of such laws or ordinances. All improvements on the Leased
Property are in good condition and repair and have not suffered any casualty or
other material damage that has not been repaired in all material respects. To
the Knowledge of Company, there is no material latent or patent structural,
mechanical or other significant defect, soil condition or deficiency in the
improvements located on the Leased Property.
(e) Parent does not hold fee title to any real property used in the ROI
Business, and Company does not hold fee title to any real property.
Section 3.23 Transactions with Directors, Officers and Affiliates
Except as set forth on Schedule 3.23, to the Knowledge of Company, (a)
since the Contribution Date, none of the officers or directors of Company or its
Subsidiary, or any spouse or relative of any of such persons, has been a
director or officer of, or has had more than a 10% direct or indirect interest
in, any firm, corporation, association or business enterprise which during such
period has been a supplier, customer or sales agent of the Company or has
competed with or been engaged in any business of the kind being conducted by the
Company, and (b) no Affiliate of Company or Subsidiary owns or has any rights in
or to any of the assets, properties or rights used by Company or Subsidiary in
the ordinary course of its business.
Section 3.24 Disclaimer of Warranties
Other than as specifically set forth in this Agreement, Company makes no
representation or warranty. EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT,
ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY
EXPRESSLY DISCLAIMED.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Investors, except as set forth on
the correspondingly numbered Schedule, as follows:
Section 4.1 Organization of Parent
Parent is duly organized, validly existing and in good standing under
the laws of the State of Delaware.
Section 4.2 Authority of Parent
Parent has all necessary power and authority and full legal capacity to
enter into each of the Company Documents, to carry out its obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of
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each of the Transaction Documents to which it is a party (the "Parent
Documents") by Parent, the performance by Parent of its obligations hereunder
and thereunder, and the consummation by Company of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate action
on the part of Parent. This Agreement has been duly executed and delivered by
Parent, and (assuming due authorization, execution and delivery by the other
parties hereto) this Agreement constitutes a legal, valid and binding obligation
of Parent enforceable against Parent in accordance with its terms, except to the
extent that enforcement hereof may be limited by applicable bankruptcy,
moratorium, insolvency or other similar laws affecting creditors' rights
generally and general equitable principles.
Section 4.3 No Conflict
Assuming all consents, approvals, authorizations and other actions
described in Section 4.4 have been obtained and all filings and notifications
listed in Schedule 4.4 have been made, and except as may result from any facts
or circumstances relating solely to the Investors, the execution, delivery and
performance of each of the Parent Documents by Parent do not and will not (a)
violate or conflict with the Certificate of Incorporation, Certificate of
Designations or Bylaws of Parent, (b) conflict with or violate any Law or
Governmental Order applicable to Parent or its assets or (c) assuming receipt of
all Required Consents, result in any breach of, or constitute a default (or
event which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of Parent or the ROI Business pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which
Parent is a party or by which any of such assets or properties is bound or
affected, except as would not, in the case of either (b) or (c) above,
individually or in the aggregate, delay the consummation of the transactions
contemplated by this Agreement or have a Material Adverse Effect.
Section 4.4 Consents and Approvals
No consent, approval, authorization, license, order or permit of, or
declaration, filing or registration with, or notification to, any Person is
required to be made or obtained by Parent in connection with the execution,
delivery and performance of the Parent Documents and the consummation of the
transactions contemplated hereby and thereby, except: (a) pursuant to applicable
requirements of the HSR Act; (b) as set forth in Schedule 4.4; (c) where the
failure to obtain such consents, approvals, authorizations, licenses, orders or
permits, or to make such declarations, filings or registrations or notifications
would not individually or in the aggregate, prevent Parent from performing its
obligations under this Agreement or have a Material Adverse Effect (d) as may be
necessary as a result of any facts or circumstances relating solely to
Investors; and (e) the Required Consents.
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Section 4.5 Solvency
Parent is not, and has not been at any time since January 1, 2000,
insolvent. Parent will not be made insolvent as a result of consummation of the
transactions contemplated by this Agreement.
Section 4.6 Asset Contribution
Except for Required Consents, at the time of the Asset Contribution,
Parent had good and marketable title to each item comprising the assets of the
ROI Business, and on the Contribution Date, Parent transferred to Company good
and marketable title to or a valid leasehold interest in all such assets, free
and clear of all Encumbrances except for Permitted Encumbrances.
Section 4.7 Disclaimer of Warranties
Other than as specifically set forth in this Agreement, Parent makes no
representation or warranty. EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT,
ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY
EXPRESSLY DISCLAIMED.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS Each
Investor severally represents and warrants to Company as follows:
Section 5.1 Organization of the Investors
Such Investor is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization.
Section 5.2 Authority of the Investors
Such Investor has all necessary power and authority to enter into each
of the Transaction Documents to which it is a party (the "Investor Documents"),
to carry out its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of each
of the Investor Documents by such Investor, the performance by the Investor of
its obligations hereunder and thereunder, and the consummation by the Investor
of the transactions contemplated hereby and thereby, have been duly authorized
by all requisite corporate or partnership action on the part of the Investor.
This Agreement has been duly executed and delivered by the Investor and
(assuming due authorization, execution and delivery by the other parties hereto)
constitutes a legal, valid and binding obligation of the Investor enforceable
against the Investor in accordance with its terms, except to the extent that
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enforcement hereof may be limited by applicable bankruptcy, moratorium,
insolvency or other similar laws affecting creditors' rights generally and
general equitable principles.
Section 5.3 No Conflict
Assuming all consents, approvals, authorizations and other actions
described in Section 5.4 have been obtained and all filings and notifications
listed in Section 5.4 have been made, and except as may result from any facts or
circumstances relating solely to Company or Parent, the execution, delivery and
performance of each of the Investor Documents by the Investor does not and will
not (a) violate or conflict with the Certificate of Incorporation or Bylaws,
Partnership Agreement or other organizational instruments of the Investor, (b)
conflict with or violate any Law or Governmental Order applicable to the
Investor or (c) result in any breach of, or constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of the Investor pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument relating to such assets or properties to which the Investor is a
party or by which any of such assets or properties is bound or affected, except
as would not, in the case of either (b) or (c) above, individually or in the
aggregate, delay the consummation of the transactions contemplated by this
Agreement or have a material adverse effect on the ability of the Investor to
consummate the transactions contemplated hereby.
Section 5.4 Consents and Approvals
No consent, approval, authorization, license, order or permit of, or
declaration, filing or registration with, or notification to, any Person is
required to be made or obtained by the Investor or any of its Affiliates in
connection with the execution, delivery and performance of the Investor
Documents and the consummation of the transactions contemplated hereby and
thereby except: (a) applicable requirements of the HSR Act; (b) where failure to
obtain such consents, approvals, authorizations, licenses, orders or permits, or
to make such declarations, filings or registrations or notifications would not,
(i) individually or in the aggregate, delay the consummation of the transactions
contemplated hereby or (ii) have an adverse effect on the ability of the
Investor to consummate the transactions contemplated hereby and (c) as may be
necessary as a result of any facts or circumstances relating solely to Company
or Parent.
Section 5.5 Absence of Litigation
No Action is pending or, to the knowledge of the Investor, threatened
against the Investor or any of the assets or properties of the Investor that
would, individually or in the aggregate, reasonably be expected to prevent or
delay the consummation of the transactions contemplated by this Agreement or
have an adverse effect on the ability of Investor to consummate the transactions
contemplated by this Agreement.
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Section 5.6 Financial Ability
The Investor has adequate financial resources in order to pay the Series
A Purchase Price to be paid by it.
Section 5.7 Brokers
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Investor.
Section 5.8 Purchase Entirely for Own Account
Except as provided in Schedule 5.8:
This Agreement is made with the Investor in reliance upon the Investor's
representation to Company, which by Investor's execution of this Agreement the
Investor hereby confirms, that the Series A Preferred Stock to be purchased by
the Investor and the Common Stock issuable upon conversion thereof will be
acquired for investment for the Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Investor further represents that the Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any shares of such Series A Preferred Stock or Common Stock.
Section 5.9 Reliance Upon Investors' Representations
The Investor understands that the Series A Preferred Stock is not, and
any Common Stock acquired on conversion thereof at the time of issuance may not
be, registered under the Securities Act on the ground that the sale provided for
in this Agreement and the issuance of securities hereunder is exempt from
registration under the Securities Act pursuant to section 4(2) thereof, and that
Company's reliance on such exemption is based on the Investor's representations
set forth herein.
Section 5.10 Receipt of Information
The Investor has had an opportunity to ask questions and receive answers
from Parent and Company regarding the terms and conditions of the offering of
the Series A Preferred Stock and the business, properties, prospects and
financial condition of Company and the ROI Business and to obtain additional
information (to the extent Company or Parent possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access. The
foregoing, however, does not limit or modify the representations and warranties
of Company or Parent in Articles III and IV hereof or the right of the Investor
to rely thereon.
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Section 5.11 Accredited Investor
The Investor is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated under the Securities Act.
Section 5.12 Disclaimer of Warranties
Other than as specifically set forth in this Agreement, Investors make
no representation or warranty. EXCEPT AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT, ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE
HEREBY EXPRESSLY DISCLAIMED.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Conduct of ROI Business Prior to the Closing Date
(a) Parent and Company agree that from the date hereof until the Closing
Date, Parent and Company shall use their reasonable best efforts to (i) preserve
intact the ROI Business, (ii) keep available the services of the employees
engaged in the ROI Business, and (iii) preserve their current relationships with
customers of, and suppliers to, the ROI Business.
(b) Parent and Company agree that, except as described in Schedule
6.1(b), from the date hereof until the Closing Date, Company will not, and
Parent will not permit Company to, without the prior written consent of the
Investors:
(i) permit or allow any of the assets of Company or Subsidiary (whether
tangible or intangible) to be subjected to any Encumbrance, other than
Permitted Encumbrances and Encumbrances that will be released at or
prior to the Closing, other than in the ordinary course of business
consistent with past practice;
(ii) sell, transfer, lease, sublease, license or otherwise dispose of any of
the assets of Company or Subsidiary, other than sales of inventory or
obsolete equipment or machinery in the ordinary course of business
consistent with past practice;
(iii) enter into any agreement with Parent or any of Parent's, Company's or
Subsidiary's directors, officers, employees (or with any relative,
beneficiary, spouse or Affiliate of such Person);
(iv) amend or restate the Amended and Restated Certificate of Incorporation
(except by filing the Second Amended and Restated Charter) or Bylaws of
Company; or
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(v) terminate, discontinue, close or dispose of any facility or
other business operation of the ROI Division;
(vi) take any action which would result in any of the
representations or warranties contained in this Agreement not being true
at and as of the time immediately after such action, or in any of the
covenants contained in this Agreement becoming incapable of performance;
or
(vii) agree, whether in writing or otherwise, to take any of the
actions specified in this Section 6.1, except as expressly contemplated
by this Agreement.
Section 6.2 Taxes
(a) Any sales, use or transfer taxes payable by reason of the sale and
transfer of any of the Shares hereunder (other than income taxes) shall be borne
by Parent.
(b) Parent agrees to timely file all Tax Returns relating to the Taxes
referred to in subsection (a) above, after the review and consent of Company,
such consent not to be unreasonably withheld, and shall timely remit on behalf
of itself and Company all such taxes reported on such Tax Returns or otherwise
due.
Section 6.3 Regulatory and Other Authorizations; Consents
Company, Parent and each Investor shall each use all reasonable efforts
to cause the satisfaction of the conditions precedent contained in Sections 8.1
and 8.2 and obtain all Required Consents and all authorizations, consents,
orders and approvals of all federal, state, local and foreign regulatory bodies
and officials that may be or become necessary for its execution and delivery of,
and the performance of their obligations pursuant to, this Agreement and each
shall cooperate fully with the other party in promptly seeking to obtain all
such authorizations, consents, orders and approvals.
Section 6.4 Investigation
(a) Each of the Investors acknowledges that it (i) has made its own
inquiry and investigation into, and, based thereon, has formed an independent
judgment concerning, Company and the ROI Business and (ii) has been furnished
with or given adequate access to such information about Company and the ROI
Business as it has requested, provided, however, that such acknowledgment shall
in no way affect the Investors' reliance on the representation and warranties in
Article III and IV hereof, or Parent's and Company's indemnification obligations
under Article VII hereof.
(b) Certain information set forth in the Disclosure Schedules is
included solely for informational purposes and may not be required to be
disclosed pursuant to this Agreement. The disclosure of any information shall
not be deemed to constitute an acknowledgment that such information is required
to be disclosed in connection with the representations and warranties
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made by Company in this Agreement, nor shall such information be deemed to
establish a standard of materiality.
Section 6.5 Access to Properties and Records
Parent shall afford to the Investors, and to the accountants, counsel
and representatives of the Investors, reasonable access during normal business
hours throughout the period prior to the Closing Date (or the earlier
termination of this Agreement pursuant to the terms hereof) to all properties,
books, contracts, commitments, and records of Parent relating to the ROI
Business and, during such period, shall furnish promptly to the Investors all
other information concerning the ROI Business, its properties and its personnel
as the Investors may reasonably request, provided that no investigation or
receipt of information pursuant to this Section 6.6 shall qualify any
representation or warranty of Parent or Company or the conditions to the
obligations of the Investors.
Section 6.6 Negotiations
From and after the date hereof, neither Parent, Company, Subsidiary, any
Affiliate, nor any of their respective officers or directors nor anyone acting
on behalf of Parent, Company, Subsidiary or such persons shall, directly or
indirectly, encourage, solicit, engage in discussions or negotiations with, or
provide any information to, any Person, firm, or other entity or group (other
than the Investors or their representatives) concerning any merger, sale of
substantial assets, purchase or sale of shares of capital stock or similar
transaction involving Company, Subsidiary, the ROI Business or the ROI Division
or any other transaction inconsistent with the transactions contemplated hereby.
Parent or Company shall promptly communicate to the Investors any inquiries or
communications concerning any such transaction which they may receive or of
which they may become aware.
Section 6.7 Further Action
Subject to the terms and conditions herein provided, each of the parties
hereto covenants and agrees to use its reasonable efforts to deliver or cause to
be delivered such documents and other papers and to take or cause to be taken
such further actions as may be necessary, proper or advisable under applicable
Laws to consummate and make effective the transactions contemplated hereby.
Section 6.8 Notice of Breach
Through the Closing Date, Parent and the Investors shall each give each
other written notice with particularity upon having knowledge of any fact or
condition that may constitute a breach of any representation, warranty,
agreement or covenant contained in this Agreement or that may constitute a
breach of any representation or warranty in this Agreement if such
representation or warranty had been made as of the time of occurrence or
discovery of such fact or condition.
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Section 6.9 Contemplated Transfers
Notwithstanding anything herein or in the Stockholders Agreement to the
contrary, Parent and Company agree to permit (i) Prudential Securities Group,
Inc. ("PSGI") to transfer its right, title and interest in, and all of its
obligations under, this Agreement as provided in Schedule 5.8, and (ii) such
transferees hereof at any time or times prior to December 31, 2000, to transfer
to certain of their Affiliates all or any portion of the Shares purchased by
them hereunder, provided that PSGI or such transferee provides to Company an
opinion of counsel in form and substance reasonably satisfactory to Company that
such assignment or transfer will not violate any applicable federal or state
securities laws or regulations or violate any other federal, state or local
laws. From and after any such transfer, such transferee shall be deemed an
"Investor" for all purposes of this Agreement.
Section 6.10 Recapitalization
Each of the parties hereto shall use its reasonable best efforts to
cause the transactions contemplated by this Agreement to be accounted for as a
recapitalization.
Section 6.11 Warrant Issuances
Parent and the Investors agree that from and after the Closing, Company
may issue debt to third parties with attached warrants to purchase an aggregate
amount of the Company's Common Stock equal to up to five percent (5%) of the
total outstanding shares of Common Stock of the Company, calculated on a fully
diluted basis, at the time of such issuance.
Section 6.12 Employee Benefits Matters
(a) Except as otherwise provided in Section 6.12(b), effective as of the
Closing Date Parent and Company shall take all such actions as are necessary to
cause Company to withdraw from the Parent sponsored Employee Benefit Plans that
Company adopted, as a participating employer, for the benefit of its employees
on the Contribution Date. As of the Closing Date, Parent shall cause its 401(k)
plan to be amended to provide that each person who is employed by Company on the
Closing Date shall be fully vested with respect to all benefits accrued by such
employee under such plan as of the Closing Date.
(b) As of the Closing Date, Parent agrees to continue (i) to provide
certain administrative services in respect of the employees of Company as
reasonably necessary for Company to conduct the ROI Business, which shall be
limited to payroll services, record keeping services and claims processing
services and (ii) to cover the employees of Company under the "welfare plans,"
within the meaning of Section 3(1) ERISA, that are sponsored by Parent and which
provide for insurance coverage (whether or not self-insured), and to provide
claims processing services in respect of such employees in both cases for the
period ending on the last day of the month in which the 90th day after the
Closing Date falls, or, in either case, until such earlier time as Company can
assume responsibility for such insurance and administrative services
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in an orderly manner. Company agrees, within thirty (30) days after its receipt
from Parent of a valid invoice with respect to such services, and within seven
(7) Business Days of its verification thereof, to reimburse Parent for any and
all of Parent's costs and all other expenses reasonably incurred in continuing
to provide such insurance and administrative services, including, without
limitation, insurance premiums, cost of direct claims reimbursement under any
self-insured plans and a reasonable share of all other related administrative
and other costs and expenses of any nature whatsoever. Company shall use all
reasonable efforts to arrange for such insurance and administrative services as
promptly as possible in order to avoid using Parent's services under this
Section 6.12(b); and Parent shall use all reasonable efforts to provide Company,
as promptly as possible, with computer tapes, data or other payroll or other
information necessary for Company to assume responsibility for such insurance
and administrative services.
(c) On or prior to the Closing Date, Company shall offer employment,
effective as of the Closing Date, to each individual listed on Schedule 6.12(c)
at the same rate of salary or base hourly wage as paid by Parent or its
Affiliates immediately prior to the Closing Date. Each such individual who
accepts employment with Company on or after the Closing Date shall be a
"Transferred Employee" for purposes of the Contribution Agreement.
(d) Parent and Company agree to cooperate with each other in good faith
in effectuating the provisions of this Section 6.12, and to furnish each other
promptly with such information concerning employees and employee benefit plans,
arrangements or policies as is necessary and appropriate to carry out the terms
hereof.
Section 6.13 Guaranty Documentation
The Investors will use reasonable efforts to implement the Guaranty
Documentation prior to the Closing Date. Parent will use reasonable efforts to
cooperate with the Investors in relation thereto.
Section 6.14 Foreign Qualifications
Company will use reasonable efforts to file Foreign Qualifications in
each jurisdiction in which the conduct of Company's business or the nature of
the property owned requires such qualification, except where the failure to so
qualify would not have a Material Adverse Effect.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1 Survival
All representations and warranties contained in this Agreement or in any
certificate delivered pursuant to this Agreement shall survive until March 31,
2002, except for Sections 3.1
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(Organization), 3.2 (Capitalization), 3.3 (Authority), 3.14 (Environmental) and
3.16 (Tax), which shall survive until the expiration of the applicable statute
of limitations.
Section 7.2 Indemnification by the Parent and Company
Notwithstanding the Closing or the delivery of the ROI Business and
regardless of any investigation at any time made by or on behalf of any Investor
or of any knowledge or information that the Investors may have, Parent and
Company shall jointly and severally indemnify and fully defend, save and hold
the Investors and their respective Affiliates, directors, officers and employees
(the "Investor Indemnitees"), harmless if any Investor Indemnitee shall at any
time or from time to time suffer any damage, liability, loss, cost, expense
(including all reasonable attorneys' fees incurred by the Investor Indemnitees
in any action or proceeding between Parent or Company and the Investor
Indemnitees or between the Investor Indemnitees and any third party or
otherwise), deficiency, interest, penalty, impositions, assessments or fines
(collectively, "Investor Losses") arising out of or resulting from, or shall pay
or become obliged to pay any sum on account of, any and all the Company Events
of Breach. Notwithstanding any other provision of this Agreement, in the event a
claim is brought by the Investor Indemnitees against Parent pursuant to this
Article VII, Parent shall not be entitled to seek reimbursement from Company in
connection therewith. As used herein, "Company Events of Breach" shall be and
mean any one or more of the following:
(a) any untruth or inaccuracy in any representation of Parent or
Company or the breach of any warranty of Parent or Company contained in
the Transaction Documents;
(b) any failure of Parent or Company duly to perform or observe
any term, provision, covenant, agreement contained herein on the part of
Parent or Company to be performed or observed, prior, in the case of
Company, to the Closing Date; or
(c) except to the extent of obligations undertaken by Company
and the Investors pursuant to the Guaranty Documentation, any claim or
cause of action by any party in connection with any transaction,
agreement or business relationship between Parent and Health+Cast, or
between the ROI Division and Health+Cast,
provided, however, that Parent shall have no obligation to make any payment
under Section 7.2(a) hereof with respect to any representation or warranty
unless and until the Investor Indemnitees have suffered aggregate Investor
Losses in excess of One Hundred Thousand Dollars ($100,000), it being understood
that once such amount is exceeded, the aggregate of all such claims, from and
after the first dollar, shall be jointly and severally payable by Parent and
Company on demand by the Investor Indemnitees. In no event shall Parent and
Company have any obligation to make any payment under Section 7.2(a) hereof with
respect to any representation or warranty in excess of the Cap. For purposes of
determining whether a Company Event of Breach has occurred pursuant to Section
7.2(a) or the amount of any Investor Losses pursuant to Section 7.2(a), any
reference to materiality or "Material Adverse Effect" in
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any representation in Article III or Article IV (other than the representations
in Section 3.10) shall be construed to designate a materiality threshold of
$10,000. The "Cap" means (i) until the first anniversary of the Closing Date,
$25,200,000; and (ii) from and after the first anniversary of the Closing Date,
the lesser of (A) $25,200,000 or (B) $12,200,000, plus the amount payable by
Parent with respect to any claims for indemnification already made pursuant to
Section 7.2(a) prior to the first anniversary of the Closing Date.
Notwithstanding the foregoing, Parent shall not be obligated to indemnify the
Investor Indemnitees under this Section 7.2 for Investor Losses that have
previously been reimbursed, in the form of payments by Parent to Company,
pursuant to Parent's indemnification obligations for Company Losses (as defined
in Contribution Agreement) under Section 5.2 of the Contribution Agreement.
Section 7.3 Form of Payments Under Section 7.2(a)
(a) Payments under Section 7.2(a) shall be payable as follows: the first
$12,200,000 shall be payable in cash; all amounts in excess thereof shall be
payable, at the option of Parent, in (i) cash or (ii) in the form of Preferred
Stock held by Parent, valued at fair market value at the time of final
determination of the applicable Investor Losses (the "Valuation Date"), to be
determined as set forth in Section 7.3(b) below; provided that indemnification
amounts in excess of the first $12,200,000 shall first be applied pro rata
against the Series B Preferred Stock and the Series C Preferred Stock held by
Parent.
(b) For purposes of payment under Section 7.2(a), the fair market value
of the Preferred Stock shall be determined as follows:
(i) If the Investors and Parent cannot agree on such valuation within
ten (10) days after the Valuation Date, either Investor or Parent may, by three
(3) days' written notice to the other, initiate appraisal proceedings under
Section 7.3(b)(ii) for determination of the fair market value.
(ii) Appraisal Procedure. If any party shall initiate an appraisal
procedure to determine the fair market value of the Preferred Stock for purposes
of payment under Section 7.2(a), then the Investors, on the one hand, and
Parent, on the other hand, shall each promptly appoint as an appraiser an
individual who shall be a member of a nationally-recognized investment banking
firm. Each appraiser shall, within thirty (30) days of appointment, separately
investigate the fair market value of the Preferred Stock as of the Valuation
Date and shall submit a notice of an appraisal of that value to each party. Each
appraiser shall be instructed to determine such value without regard to income
tax consequences to the parties. If the appraised values of such consideration
(the "Earlier Appraisals") vary by less than ten percent (10%), the average of
the two appraisals on a per share basis shall be controlling as the amount of
the cash equivalent. If the appraised values vary by more than ten percent
(10%), the appraisers, within ten (10) days of the submission of the last
appraisal, shall appoint a third appraiser who shall be member of a nationally
recognized investment banking firm. The third appraiser shall, within thirty
(30) days of his appointment, appraise the fair market value of the Preferred
Stock (without regard to the income tax consequences to the parties) as of the
Valuation Date and submit notice of his appraisal to each party. The value
determined by the third appraiser shall be controlling as the
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amount of the cash equivalent unless the value is greater than the two Earlier
Appraisals, in which case the higher of the two Earlier Appraisals will control,
and unless that value is lower than the two Earlier Appraisals, in which case
the lower of the two Earlier Appraisals will control. If any party fails to
appoint an appraiser or if one of the two initial appraisers fails after
appointment to submit his appraisal within the required period, the appraisal
submitted by the remaining appraiser shall be controlling. The Investors, on the
one hand, and Parent, on the other hand, shall each bear the cost of its
respective appointed appraiser. The cost of the third appraisal shall be shared
one-half by the Investors and one-half by Parent.
Section 7.4 Procedures for Indemnification
If a party entitled to indemnification pursuant to this Article VII (an
"Indemnified Party") becomes aware of any liability, loss, damage, claim, cost
or expense with respect to which a claim for indemnification may be asserted
pursuant to this Article VII, or if any claim is made by a third Person or any
suit, action, investigation, claim or proceeding (a "Proceeding") commenced for
which the Indemnified Party shall seek indemnity from the Indemnifying Party,
the Indemnified Party shall, with reasonable promptness, give to such
Indemnifying Party written notice of such Proceeding and request the
Indemnifying Party to defend the same, provided, however, that the failure of an
Indemnified Party to deliver such written notice with reasonable promptness
shall not be deemed to bar or otherwise limit the rights of the Indemnified
Party hereunder unless such failure materially prejudices the rights or defenses
of the Indemnifying Party. The Indemnifying Party agrees to defend such claim,
action or proceeding at its own expense, and shall give written notice to the
Indemnified Party of the commencement of such defense with reasonable promptness
after the giving of the written notice of the claim by the Indemnified Party.
The Indemnified Party shall have the right, but not the obligation, to
participate at its own expense with the Indemnifying Party in such defense
(subject to the right of the Indemnifying Party to control such defense), but
shall not be entitled in any way to release, waive, settle, modify or pay such
claim, action or proceeding without the written consent of the Indemnifying
Party, if the Indemnifying Party has assumed such defense. The Indemnified Party
shall, in any case, fully cooperate with and assist the Indemnifying Party to
the extent reasonably possible. If the Indemnifying Party fails to timely
defend, contest or otherwise protect against such Proceeding, the Indemnified
Party shall have the full right to defend against such claim, action or
proceeding in such manner as it may deem appropriate, including, without
limitation, the right to make any compromise or settlement thereof (subject to
the consent of the Indemnifying Party, which consent shall not be unreasonably
withheld), and the Indemnified Party shall be entitled to recover the entire
cost thereof from the Indemnifying Party, including, without limitation,
reasonable attorneys' fees, disbursements and amounts paid as the result of such
Proceeding, and the Indemnifying Party shall be bound by any determination made
in such Proceeding or (subject to the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld) any compromise or settlement
effected by the Indemnified Party. In the event the Indemnifying Party shall
assume the defense, no compromise or settlement of such claims may be effected
by the Indemnifying Party without the Indemnified Party's consent (which consent
shall not be unreasonably withheld, provided, however that the Indemnified Party
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may withhold such consent at its discretion if, in its judgment, such compromise
or settlement would have an adverse impact on the future operations of the
Indemnified Party or Company).
Section 7.5 Arbitration
(a) Company, Parent and the Investors agree that the arbitration
procedure set forth below shall be the sole and exclusive method for resolving
and remedying claims for money damages arising out of the provisions of this
Agreement (the "Disputes"). Nothing in this Section 7.5 shall prohibit any party
hereto from instituting litigation to enforce any Final Determination (as
defined below). The parties hereby agree and acknowledge that, except as
otherwise provided in this Section 7.5 or in the Commercial Arbitration Rules of
the American Arbitration Association as in effect from time to time, the
arbitration procedures and any Final Determination hereunder shall be governed
by, and shall be enforced pursuant to applicable Delaware law.
(b) In the event that any party hereto asserts that there exists a
Dispute, such party shall deliver a written notice to each other party involved
therein specifying the nature of the asserted Dispute and requesting a meeting
to attempt to resolve the same. If no such resolution is reached within ten
Business Days after such delivery of such notice, the party delivering such
notice of Dispute (the "Disputing Person") may, within 45 Business Days after
delivery of such notice, commence arbitration hereunder by delivering to each
other party involved therein a notice of arbitration (a "Notice of
Arbitration"). Such Notice of Arbitration shall specify the matters as to which
arbitration is sought, the nature of any Dispute, the claims of each party to
the arbitration and shall specify the amount and nature of any damages, if any,
sought to be recovered as a result of any alleged claim, and any other matters
required by the Commercial Arbitration Rules of the American Arbitration
Association in effect from time to time to be included therein, if any.
(c) In the event of a Dispute, the parties engaged therein each shall
select one arbitrator expert in the subject matter of the Dispute (the
arbitrators so selected shall be referred to herein as the "Arbitrators"). In
the event that either party fails to select an Arbitrator as set forth herein
within 20 calendar days from the delivery of a Notice of Arbitration, then the
matter shall be resolved by the Arbitrator selected by the other party. The
Arbitrators shall select a third independent, neutral arbitrator expert in the
subject matter of the dispute, and the three arbitrators so selected shall
resolve the matter according to the procedures set forth in this Section 7.5. If
the Arbitrators are unable to agree on a third arbitrator within 20 calendar
days after their selection, the Arbitrators shall each prepare a list of three
independent arbitrators. The Arbitrators shall each have the opportunity to
designate as objectionable and eliminate one arbitrator from the other
Arbitrator's list within seven calendar days after submission thereof, and the
third arbitrator shall then be selected by lot from the arbitrators remaining on
the lists submitted by the Arbitrators.
(d) The arbitrator(s) selected pursuant to Section 7.5(c) above will
determine the allocation of the costs and expenses of arbitration based upon the
percentage which the portion of
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the contested amount not awarded to each party bears to the amount actually
contested by such party. For example, if the Investors submit a claim for $1,000
and if Company contests only $500 of the amount claimed by the Investors, and if
the arbitrator(s) ultimately resolves the dispute by awarding the Investors $300
of the $500 contested, then the costs and expenses of arbitration will be
allocated 60% (that is, 300 divided by 500) to Company and 40% (that is, 200
divided by 500) to the Investors.
(e) The arbitration shall be conducted in the State of Delaware under
the Commercial Arbitration Rules of the American Arbitration Association as in
effect from time to time, except as modified by the agreement of all of the
parties to this Agreement. The arbitrator(s) shall so conduct the arbitration
that a final result, determination, finding, judgment and/or award (the "Final
Determination") is made or rendered as soon as practicable, but in no event
later than 90 Business Days after the delivery of the Notice of Arbitration nor
later than 10 calendar days following completion of the arbitration. The Final
Determination must be agreed upon and signed by the sole arbitrator or by at
least two of the three arbitrators (as the case may be). The Final Determination
shall be final and binding on all parties and there shall be no appeal from or
reexamination of the Final Determination, except for fraud, perjury, evident
partiality or misconduct by an arbitrator prejudicing the rights of any party
and to correct manifest clerical errors.
(f) The Parties hereto may enforce any Final Determination in any state
or federal court located in the State of Delaware. For the purpose of any action
or proceeding instituted with respect to any Final Determination, each party
hereto hereby irrevocably submits to the jurisdiction of such courts,
irrevocably consents to the service of process by registered mail or personal
service and hereby irrevocably waives, to the fullest extent permitted by law,
any objection which it may have or hereafter have as to personal jurisdiction,
the laying of the venue of any such action or proceeding brought in any such
court and any claim that any such action or proceeding brought in any court has
been brought in an inconvenient forum.
(g) Any party required to make a payment pursuant to this Section 7.5
shall pay the party entitled to receive such payment within ten calendar days of
the delivery of the Final Determination to such responsible party. If any party
shall fail to pay the amount of any damages, if any, assessed against it within
such ten calendar day period, the unpaid amount shall bear interest from the
date of such delivery at the lesser of (i) the prime rate of interest published
by the Board of Governors of the Federal Reserve System as the "Bank Prime Loan"
rate, in effect from time to time (which rate shall be adjusted on the effective
date of each change in such prime rate) plus 2.00% and (ii) the maximum rate
permitted by applicable usury laws. Interest on any such unpaid amount shall be
compounded semi-annually, computed on the basis of a 360-day year consisting of
twelve 30-day months and shall be payable on demand. In addition, such party
shall promptly reimburse the other party for any and all costs and expenses of
any nature or kind whatsoever (including but not limited to all attorney's fees)
incurred in seeking to collect such damages or to enforce any Final
Determination.
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Section 7.6 No Consequential Damages; Exclusive Remedy
No party hereto shall have any liability for loss of profit or
consequential damages with respect to this Agreement or the transactions
contemplated hereby. Absent fraud, the indemnification provided by this Article
VII shall be the sole and exclusive remedy available to the parties hereto with
respect to any claim or cause of action based upon, relating to or arising out
of this Agreement or otherwise in respect of the transactions contemplated
hereby, whether such claim or cause of action arises out of any contract, tort
or otherwise.
Section 7.7 Tax Benefit
Notwithstanding the above, if losses, damages, claims, costs or expenses
are incurred by any party which are indemnifiable under this Article VII, and if
indemnification of any losses, damages, claims, costs or expenses would result
in a deduction, credit or other tax benefit to the Indemnified Party under
federal or state laws, the amount indemnifiable under this Article VII shall be
reduced to reflect such tax benefit.
Section 7.8 Mitigation
Each Indemnified Party shall use reasonable efforts to mitigate any
liabilities and damages for which it may claim indemnification under this
Article VII. To the extent that the operations of Company at any time that
Company is not under the control of Parent contribute to or aggravate any
liabilities or damages as to which indemnification is available under Section
7.2, Parent's indemnification obligation will be reduced by such contribution or
aggravation.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions to Obligations of Company and Parent
The obligations of Company and Parent to consummate the transactions
contemplated by Article II hereof shall be subject to the fulfillment or waiver,
at or prior to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants (i) The representations
and warranties of the Investors contained in this Agreement shall be true and
correct in all material respects at and as of the Closing Date, with the same
force and effect as though made at and as of the Closing Date, except for
changes permitted or contemplated by this Agreement and except to the extent
that any representation or warranty is made as of a specified date, in which
case such representation or warranty shall be true and correct in all respects
as of such date; (ii) the Investors shall have performed and complied in all
material respects with all of the covenants and agreements required by this
Agreement to be performed or complied with by the Investors prior to or at the
Closing; and (iii) Parent and Company shall each have received a certificate of
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each of the Investors as to the matters set forth in clauses (i) and (ii) above
signed by a duly authorized officer of each of the Investors.
(b) Consents and HSR The Investors shall have delivered to Parent and
Company any consents specified in Schedule 5.4 of the Disclosure Schedule. The
waiting period under the HSR Act with respect to the transactions contemplated
by this Agreement shall have expired or been earlier terminated.
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Governmental Order which is in effect and
has the effect of making the transactions contemplated by this Agreement illegal
or otherwise prohibiting consummation of such transactions.
(d) Release of Guaranty. Imperial Bank shall have agreed to release
Parent upon the Closing from obligations in an amount equal to at least
$12,500,000 under or with respect to the Commercial Guaranty, dated September
29, 1998, issued by Parent to Imperial Bank in the principal amount of Twelve
Million Five Hundred Dollars ($12,500,000) securing the obligations of
Health+Cast to Imperial Bank (the "Health+Cast Guaranty").
(e) Opinion. Parent shall have received the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, substantially in the form of Exhibit J hereto.
(f) Closing Documentation. Parent and Company shall have received (i)
recently dated good standing certificates with respect to each of the Investors,
from their respective states of organization and (ii) a certificate of each
Investor, signed by such Investor's duly appointed representative, as attested
and certified by the secretary, general counsel or other appropriate
representative of such Investor, as to such Investor's authority to enter into,
and fulfill its obligations under this Agreement and the Transaction Documents
the transactions contemplated hereby and thereby.
Section 8.2 Conditions to Obligations of the Investors
The obligations of the Investors to consummate the transactions
contemplated by Article II shall be subject to the fulfillment or waiver, at or
prior to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The representations
and warranties of Company and Parent contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date, with the
same force and effect as though made at and as of the Closing Date, except for
changes permitted or contemplated by this Agreement and except to the extent
that any representation or warranty is made as of a specified date, in which
case such representation or warranty shall be true and correct in all respects
as of such date; (ii) Company and Parent shall have performed and complied in
all respects with all of their respective covenants and agreements required by
this Agreement to be performed or complied
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with by it or them prior to or at the Closing; and (iii) the Investors shall
have received a certificate of each of Company and Parent as to the matters set
forth in clauses (i) and (ii) above signed by a duly authorized officer of
Company and by a duly authorized officer of Parent, respectively.
(b) Consents and HSR. Company shall have delivered to the Investors the
consents specified in Schedule 8.2(b), and such consents shall be in full force
and effect. The waiting period under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or been earlier
terminated.
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other Governmental Order which is in effect and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise prohibiting
consummation of such transactions.
(d) No Material Adverse Change. Since March 31, 2000, there shall not
have occurred any event which has had or is reasonably likely to have a Material
Adverse Effect on Company or the ROI Business.
(e) Insurance. On the Closing Date, Company shall certify that (i) as of
the date thereof, it has furnished a true, complete and accurate copy of all
policies of title, liability, fire, casualty, business interruption, workers'
compensation and other forms of insurance insuring the Company to the Investors,
(ii) as of the date thereof, all such policies are in full force and effect,
underwritten by financially sound and reputable insurers and sufficient for all
applicable requirements of law and are prudent and adequate for the conduct of
the ROI Business, (iii) there were no gaps in insurance coverage from the date
hereof until the Closing Date, (iv) Company is not, and has not been, in
material default under any provisions of any such policy of insurance nor has
Company received notice of cancellation or threatened cancellation of any such
insurance and (v) there is no claim pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds.
(f) Opinion. The Investors shall have received the opinion of Pillsbury
Madison and Sutro, substantially in the form of Exhibit K hereto.
(g) Ordinary Course of Business. From and after the date of this
Agreement, Company shall have operated the ROI Business in the ordinary course
and consistent with past practice.
(h) Second Amended and Restated Charter. The Second Amended and Restated
Charter shall have been filed with the Secretary of State of the State of
Delaware and shall be in full force and effect.
(i) Closing Documentation. The Investors shall have received (i)
recently-dated good standing certificates with respect to Parent and Company,
from the State of Delaware and
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each state in which Parent or Company is qualified to do business as a foreign
corporation, and (ii) a certificate of each of Company and Parent, signed by
their respective duly appointed or elected secretaries, as to their
organizational documents and the full force and effect of the resolutions of
their respective Boards of Directors authorizing the transactions contemplated
by this Agreement and the other Transaction Documents.
(j) Other Documents. Company shall have received (x) an estoppel from
each lessor or sublessor under the Material Leases, (y) a subordination and
non-disturbance agreement from each mortgagee with respect to the Material
Leases, if any, and (z) the consent of the lessor under each of the Material
Leases, and in each case under clauses (x), (y) and (z) above, in form and
substance reasonably satisfactory to the Investors. With respect to (x) and (y),
the parties hereto agree that such documents must only be delivered with respect
to those Leases which require same to be delivered at the request of the lessor
or lessee thereunder pursuant to their terms.
(k) Intellectual Property Matters. Each employee or contractor of the
ROI Division, of Company or of Subsidiary who has created or may create any
Works in such capacity shall have confirmed Company's ownership in such Works,
or assigned such Works to the Company, in either case pursuant to a written
agreement.
(l) Certification. Prudential Securities Group, Inc. shall have received
a certification from Company in the form of Exhibit M hereto.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination
This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual written consent of the Investors and Parent;
(b) by the Investors or Parent, if any Governmental Authority with
jurisdiction over such matters shall have issued a Governmental Order
restraining, enjoining or otherwise prohibiting any of the transactions
contemplated by Article II hereof, and such order, decree, ruling or other
action shall have become final and unappealable;
(c) by Parent, if there has been a material breach of the
representations, warranties or covenants made by the Investors in this Agreement
which would cause the conditions in Section 8.1 not to be satisfied and such
breach is not capable of being cured or if capable of being cured, shall not
have been cured prior to July 30, 2000; or
(d) by the Investors, if there has been a material breach of the
representations, warranties or covenants made by Company or Parent in this
Agreement which would cause the
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conditions in Section 8.2 not to be satisfied and such breach is not capable of
being cured or if capable of being cured, shall not have been cured prior to
July 30, 2000.
Section 9.2 Effect of Termination
In the event of termination of this Agreement as provided in Section
9.1, there shall be no liability on the part of any party hereto except as set
forth in Section 10.1, provided that nothing herein shall relieve any party from
liability for any breach hereof prior to the date of such termination.
Section 9.3 Waiver
At any time prior to the Closing, Company, the Investors or Parent may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto or
(c) waive compliance with any of the agreements or conditions contained herein.
Any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Expenses
Except as otherwise provided herein, all costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors (it
being understood that the fees of Warburg Dillon Read LLC in connection with the
transactions contemplated by this Agreement are entirely the obligation of
Parent) and accountants, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses; provided, however, that all such costs and expenses incurred by
Parent shall, at the option of Parent, be borne by Company and the cash payment
by Company to Parent provided for in Section 2.3(c) shall be reduced by the
amount of such costs and expenses. Parent shall give the Investors and Company
notice of its election to have such costs and expenses borne in such manner at
least two days prior to the Closing Date.
Section 10.2 Notices
All notices, requests, claims, demands and other. communications
hereunder shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by delivery in person, by courier
service, by cable, by telecopy, by telegram, by telex or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.2):
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(a) if to Company or Parent:
ChartOne, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, President
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
and
QuadraMed Corporation
▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Pillsbury Madison & Sutro LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Investors, to the address or facsimile number listed below
each Investor's name on Schedule I hereto;
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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Section 10.3 Public Announcements
Parent shall use reasonable efforts to consult with the Investors before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby, unless otherwise
required by applicable law or by obligation pursuant to any listing agreement
with or rules of any securities exchange. Except as otherwise provided in this
Section 10.3 or required by Law, no party to this Agreement shall make any
public announcements in respect of this Agreement or the transactions
contemplated hereby, or use the name of any other party hereto in any public
announcement, without the prior written consent of the other parties hereto,
which consent shall not be unreasonably withheld or delayed.
Section 10.4 Headings
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
Section 10.5 Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
Section 10.6 Entire Agreement
This Agreement (including the Schedules and Exhibits) constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements (except the Confidentiality Agreement, which
shall survive) and undertakings, both written and oral between Company, Parent
and the Investors with respect to the subject matter hereof and except as
otherwise expressly provided herein.
Section 10.7 Assignment
Except as provided in Schedule 5.8 or in Section 6.9: Neither this
Agreement nor any of the rights and obligations of the parties hereunder may be
assigned by any of the parties hereto without the prior consent of each other
parties hereto. Notwithstanding the foregoing, any party assigning its rights or
obligations hereunder shall remain liable for all of its respective obligations
under this Agreement. Subject to the preceding sentence, this Agreement shall be
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binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns and no other Person shall have any right, obligation or
benefit hereunder.
Section 10.8 No Third-Party Beneficiaries
This Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 10.9 Waivers and Amendments
This Agreement may be amended or modified, and the terms and conditions
hereof may be waived, only by a written instrument signed by the parties hereto
or, in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any right, power or privilege hereunder, nor any single or partial exercise of
any other right, power or privilege hereunder, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which any party may otherwise have at law or
in equity.
Section 10.10 Specific Performance
The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement required to be performed prior to the
Closing was not performed in accordance with the terms hereof and that, prior to
the Closing, the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or in equity.
Section 10.11 Governing Law
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware applicable to contracts executed in and to be
performed in that State.
Section 10.12 Counterparts
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be executed as of the date first written above by their
respective officers.
QUADRAMED CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
QUADRAMED OPERATING CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
CHARTONE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name:
Title:
WARBURG, ▇▇▇▇▇▇ EQUITY PARTNERS, L.P.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
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▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ EQUITY
PARTNERS I, C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY
PARTNERS II, C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY
PARTNERS III, C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
PRUDENTIAL SECURITIES GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇
Title: Vice President
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