EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 20, 2002,
among Kroll Background America Inc. ("PARENT"), a Tennessee corporation and a
party to this Agreement but not a constituent corporation in the Merger (as
hereinafter defined), Accufacts Acquisition Corp. ("MERGER SUB"), a Delaware
corporation and wholly-owned subsidiary of Parent, and Accufacts Pre-Employment
Screening, Inc. (the "COMPANY"), a Delaware corporation.
WHEREAS, Parent, Merger Sub and the Company intend to effect a
merger of Merger Sub with and into the Company (the "MERGER") in accordance with
this Agreement and the General Corporation Law of the State of Delaware (the
"DGCL"); and
WHEREAS, upon consummation of the Merger, Merger Sub will
cease to exist, and the Company will become a wholly-owned subsidiary of Parent;
and
WHEREAS, a special committee of the Board of Directors of the
Company constituted in connection with the Merger unanimously determined to
recommend to the Board of Directors of the Company and to all of the Company's
stockholders that the Merger and this Agreement be approved and adopted; and
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company, declaring it advisable and for the respective benefit of Parent, Merger
Sub and the Company, have approved the merger of Merger Sub with and into the
Company on the terms and conditions hereinafter set forth, and have approved
this Agreement and authorized the transactions contemplated hereby; and
WHEREAS, contemporaneous with the execution and delivery of
this Agreement, the holder of capital stock of the Company representing
approximately fifty-eight percent (58%) of the voting capital stock of the
Company is executing and delivering to Parent and Merger Sub a voting agreement
of even date herewith (the "VOTING AGREEMENT") substantially in the form
attached hereto as EXHIBIT A; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE"--as defined in Section 4.7.
"ACQUISITION OFFER"--as defined in Section 6.9(a).
"AFFILIATE"--with respect to any Person, any Person directly
or indirectly controlling, controlled by or under common control with such other
Person.
"AGREEMENT"--this Agreement and Plan of Merger by and among
Parent, Merger Sub and the Company.
"BUSINESS DAY"--any day other than a Saturday or Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law to be closed.
"CERTIFICATE"--as defined in Section 2.7(c).
"CERTIFICATE OF MERGER"--as defined in Section 2.2.
"CLOSING"--as defined in Section 2.1(b).
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"CODE"--the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder and successor laws or regulations.
"COMPANY"--as defined in the first paragraph of this
Agreement.
"COMPANY COMMON STOCK"--as defined in Section 2.7(a).
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"CONTRACT"--any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"CONVERTIBLE SECURITIES"--as defined in Section 4.3.
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"COPYRIGHTS"--as defined in Section 4.21(a).
"DGCL"--as defined in the first paragraph of this Agreement.
"DISCLOSURE SCHEDULE"--the disclosure schedule to this
Agreement delivered by the Company to Parent and Merger Sub concurrently with
the execution and delivery of this Agreement.
"DISSENTING STOCKHOLDERS"--as defined in Section 2.7(g).
"EFFECTIVE TIME"--as defined in Section 2.2.
"EMPLOYEE BENEFIT PLAN"--as defined in Section 4.12(a).
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"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
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"ENVIRONMENTAL CLAIMS"--as defined in Section 4.18.
"ENVIRONMENTAL LAWS"--as defined in Section 4.18.
"ENVIRONMENTAL PERMITS"-- as defined in Section 4.18.
"ERISA"--the Employee Retirement Income Security Act of 1974,
as amended, or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"ERISA AFFILIATE"--as defined in Section 4.12(a).
"EXCHANGE ACT"--the Securities Exchange Act of 1934, as
amended, or any successor law.
"FINANCIAL STATEMENTS"--as defined in Section 4.4(a).
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Financial
Statements were prepared.
"GOVERNMENTAL AUTHORITY"--any court, tribunal, authority,
agency, commission, bureau, department, official or other instrumentality of the
United States, any foreign country or any domestic, foreign, state, local,
county, city or other political subdivision.
"GOVERNMENTAL ORDER"--any order, ordinance, injunction,
judgment, decree or writ issued by any Governmental Authority.
"INDEMNIFIED PARTY"--as defined in Section 11.1(b).
"INTELLECTUAL PROPERTY ASSETS"--as defined in Section 4.21(a).
"INTERIM FINANCIAL STATEMENTS"--as defined in Section 4.4(a).
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"IRS"--the United States Internal Revenue Service or any
successor agency and, to the extent relevant, the United States Department of
the Treasury.
"MARKS"--as defined in Section 4.21(a).
"MATERIAL ADVERSE EFFECT"--as defined in Section 4.8.
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"MERGER"--as defined in the first paragraph of this Agreement.
"MERGER CONSIDERATION"--as defined in Section 2.9(a).
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"MERGER SUB"--as defined in the first paragraph of this
Agreement.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any legal or
governmental requirement or obligation relating to safe and healthful working
conditions and to reduce occupational safety and health hazards, and any
program, whether governmental or private (including those promulgated or
sponsored by industry associations and insurance companies), designed to provide
safe and healthful working conditions.
"OPTION"--as defined in Section 2.8.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws or code of regulations of a corporation; (b) the
certificate of formation and operating agreement of a limited liability company;
(c) the partnership agreement of a partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of any other Person; and (e) any amendment to any of the foregoing.
"PARENT"-- as defined in the first paragraph of this
Agreement.
"PATENTS"--as defined in Section 4.21(a).
"PAYING AGENT"--as defined in Section 2.9(a).
"PERMITTED ENCUMBRANCES"-- all (a) liens for current taxes not
yet due, (b) ▇▇▇▇▇▇▇'▇, common carrier and other similar liens arising in the
ordinary course of business, and (c) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of the Company or the appropriate Subsidiary,
and (ii) zoning laws and other land use restrictions that do not impair the
present or anticipated use of the property subject thereto.
"PERSON"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union or
other entity or governmental body.
"PRICE PER SHARE"--as defined in Section 2.7(a).
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"PROCEEDING"--as defined in Section 4.14.
"PROXY STATEMENT"--as defined in Section 6.3(a).
"RELATED PERSON"--as defined in Section 4.23.
"SEC"--the United States Securities and Exchange Commission.
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"SECURITIES ACT"--the Securities Act of 1933, as amended, or
any successor law.
"SPECIAL COMMITTEE"--as defined in Section 4.2(a).
"SUBSIDIARY"--means any corporation, joint venture, limited
liability company, partnership, association or other business entity of which
more than 50% of the total voting power of stock or other equity entitled to
vote in the election of directors or managers thereof is owned or controlled,
directly or indirectly, by the Company or Parent, as the case may be.
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"SUPERIOR PROPOSAL"--as defined in Section 6.9(a).
"SURVIVING CORPORATION"--as defined in Section 2.1(a). "TAX"
--as defined in Section 4.6.
"TERMINATION EXPENSES"--as defined in Section 10.3(b).
"TRADE SECRETS"--as defined in Section 4.21(a).
"VOTING AGREEMENT"--as defined in the first paragraph of this
Agreement.
2. THE MERGER; CLOSING
2.1. THE MERGER
(a) Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the DGCL, Merger Sub shall be merged with and into the
Company at the Effective Time. Following the Merger, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation (the "SURVIVING CORPORATION").
(b) Unless this Agreement shall have been terminated and the transactions herein
contemplated shall have been abandoned pursuant to Section 10.1 and subject to
the satisfaction or waiver of the conditions set forth in Sections 8 and 9, the
consummation of the Merger will take place as promptly as practicable (and in
any event within two Business Days) after stockholder approval pursuant to
Section 6.3(d) and satisfaction or waiver of the conditions set forth in
Sections 8 and 9 at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (the "CLOSING"), unless another date, time or
place is agreed to in writing by the parties hereto.
2.2. EFFECTIVE TIME
As soon as practicable following the Closing, the parties
shall (i) file a certificate of merger (the "CERTIFICATE OF MERGER") in such
form as is required by and executed in accordance with the relevant provisions
of the DGCL, and (ii) make all other filings or recordings required under the
DGCL. The Merger shall become effective at such time as the Certificate of
Merger is filed with the Secretary of State of the State of Delaware pursuant to
Section 103 of the DGCL or at such subsequent time as the Company and Parent
shall agree and be specified in the Certificate of Merger (the date and time the
Merger becomes effective being the "EFFECTIVE TIME").
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2.3. EFFECTS OF THE MERGER
At and after the Effective Time, the Merger will have the
effects set forth in the DGCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, the Surviving Corporation shall
thereupon and thereafter possess all the rights, privileges, powers and
franchises as well of a public as of a private nature, and being subject to all
the restrictions, disabilities and duties of each of the Company and Merger Sub;
and all and singular, the rights, privileges, powers and franchises of each of
the Company and Merger Sub on whatever account, as well for stock subscriptions
as all other things in action or belonging to each of the Company and Merger Sub
shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and Merger Sub, and the title to any real estate vested by deed
or otherwise, under the laws of the State of Delaware, in the Company or Merger
Sub, shall not revert or be in any way impaired by reason of the Merger, but all
rights of creditors and all liens upon any property of the Company or Merger Sub
shall be preserved unimpaired, and all debts, liabilities and duties of the
Company and Merger Sub shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
2.4. CERTIFICATE OF INCORPORATION
The certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law, except that Article I thereof shall be
amended in its entirety to read as follows: "The name of the corporation is
Kroll Accufacts Pre-Employment Screening, Inc. (hereinafter called the
"Corporation")."
2.5. BY-LAWS
The by-laws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
2.6. OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
The officers and directors of Merger Sub immediately prior to
the Effective Time shall become, from and after the Effective Time, the officers
and directors of the Surviving Corporation, until the earlier of their
resignation or removal or otherwise ceasing to be an officer or director or
until their respective successors are duly elected and qualified.
2.7. CONVERSION OR CANCELLATION OF SECURITIES
At the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of any holder thereof:
(a) Subject to the provisions of Section 2.7(g), each share of the Company's
Common Stock, par value $0.01 per share (the "COMPANY COMMON STOCK"), issued and
outstanding immediately prior to the Effective Time (other than shares canceled
in accordance with Section 2.7(d)) shall be converted into the right to receive
an amount in cash equal to $0.47 per share (the "PRICE PER SHARE") payable to
the holder thereof, without interest thereon, upon surrender of the certificate
formerly representing such share of Company Common Stock.
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(b) [RESERVED]
(c) If any certificate (a "CERTIFICATE") formerly representing shares of Company
Common Stock converted into the right to receive cash in an amount per share
equal to the Price Per Share pursuant to Section 2.7(a) shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such Person of a bond, in such reasonable amount as
Parent may direct, as indemnity against any claim that may be made against it
with respect to such Certificate, Parent will pay, in exchange for such lost,
stolen or destroyed Certificate, the Price Per Share to be paid in respect of
the shares represented by such Certificate pursuant to Section 2.7(a).
(d) Each share of Company Common Stock held in the Company's treasury
immediately prior to the Effective Time, if any, shall, by virtue of the Merger,
automatically be canceled and retired and cease to exist and no consideration
shall be delivered in exchange therefor.
(e) Each authorized but unissued share of Company Common Stock shall be canceled
and retired and shall cease to exist.
(f) Each share of common stock of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common stock,
par value $0.01 per share, of the Surviving Corporation, which shares of the
common stock of the Surviving Corporation shall constitute all of the issued and
outstanding capital stock of the Surviving Corporation and shall be owned by
Parent.
(g) Shares of Company Common Stock owned by a holder who (i) shall not have
voted in favor of the Merger, and (ii) shall have delivered to the Company a
written notice of his, her or its intent to demand payment for his, her or its
shares if the Merger is effectuated in the manner provided in Section 262 of the
DGCL (collectively, the "DISSENTING STOCKHOLDERS"), shall not be converted into
or exchangeable for the right to receive the Price Per Share but shall be
entitled to receive such consideration as shall be determined pursuant to
Section 262 of the DGCL, except that shares of any Dissenting Stockholder who
shall thereafter not perfect his, her or its right to appraisal as provided in
Section 262 of the DGCL shall thereupon be deemed to have been converted, as of
the Effective Time of the Merger, into and to have become exchangeable for the
right to receive from Parent, the Price Per Share pursuant to Section 2.7(a).
The Company shall notify Parent in writing of the details of the Dissenting
Stockholders and the number of shares of Company Common Stock that they own. The
Company shall not enter into any agreement or settlement with any Dissenting
Stockholder without the prior written consent of Parent.
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2.8. PURCHASE OF OPTIONS.
At the Effective Time, by virtue of the Merger and without any
further action on the part of the holders thereof, each option (each, an
"OPTION") set forth in Schedule 2.8 which is outstanding immediately prior to
the Effective Time, whether then vested or unvested, shall automatically become
vested and exercisable and shall be entitled to receive from the Surviving
Corporation as soon as practical following the Effective Time (and in any event
not later than 30 days following the Effective Time), in settlement and
cancellation of such Option, an amount in cash equal to the product of (i) the
excess of the Price Per Share over the exercise price of each such Option,
multiplied by (ii) the number of shares of Company Common Stock covered by such
Option, subject to any applicable federal, state and local withholding taxes in
connection with the cash payments made in settlement and cancellation of such
Option. After the Effective Time, the Surviving Corporation shall pay all
applicable federal, state and local withholding taxes due in connection with the
settlement and cancellation of all such Options.
2.9. EXCHANGE OF COMPANY CAPITAL
(a) Prior to the Closing Date, Parent shall designate a bank or trust company
reasonably acceptable to the Company to act as agent (the "PAYING AGENT") for
the payment of all amounts payable as a result of the Merger to the holders of
Certificates (the aggregate amount payable to holders of Certificates is
referred to as the "MERGER CONSIDERATION"). On the Closing Date, Parent or its
Affiliate shall transfer by wire transfer of immediately available funds to an
account or accounts established by the Paying Agent for the purposes of paying
the Merger Consideration, an amount equal to all Merger Consideration which will
be payable following the Effective Time to the holders of Certificates pursuant
to Section 2.7(a). Any and all interest or income earned on funds made available
to the Paying Agent pursuant to this Agreement shall be turned over to Parent.
Parent shall pay the fees and expenses of the Paying Agent.
(b) As soon as reasonably practicable after the Effective Time, the Paying Agent
shall mail to each holder of record of a Certificate (i) a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates held by such person shall pass, only upon
proper delivery of the Certificates to the Paying Agent and shall be in
customary form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed, and such other documents as may reasonably be required by
the Paying Agent or Parent, the holder of such Certificate shall be entitled to
receive in exchange therefor the amount of cash into which the shares formerly
represented by such Certificate shall have been converted pursuant to Section
2.7(a) into the right to receive, and the Certificate so surrendered shall
forthwith be cancelled.
(c) Promptly following the date which is twelve (12) months after the Effective
Time, the Paying Agent shall deliver to Parent the remaining amount of the
Merger Consideration, Certificates and other documents in its possession
relating to the conversion of Certificates pursuant to Section 2.7(a), and
Paying Agent's duties shall terminate as to such conversion of Certificates and
the payment of the Merger Consideration. Thereafter, each holder of a
Certificate not yet surrendered may surrender the same to the Surviving
Corporation and upon such surrender (subject to any applicable abandoned
property, escheat or similar law) shall receive in consideration therefor that
portion of the Merger Consideration entitled to such Holder pursuant to Section
2.7(a), without any interest thereon.
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(d) [RESERVED]
(e) In the event of a transfer of ownership of Company Common Stock pursuant to
Section 2.9(b) that is not registered in the stock transfer books of the
Company, the proper amount of cash may be paid in exchange therefor to a Person
other than the Person in whose name the Certificate so surrendered is registered
if such Certificate shall be properly endorsed or otherwise be in proper form
for transfer and the Person requesting such payment shall pay any transfer or
other Taxes required by reason of the payment to a Person other than the
registered holder of such Certificate or establish to the satisfaction of Parent
that such Tax has been paid or is not applicable. No interest shall be paid or
shall accrue on the cash payable upon surrender of any Certificate.
2.10. NO FURTHER RIGHTS; STOCK TRANSFER BOOKS
All cash paid upon the surrender of a Certificate in
accordance with Section 2.9 shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
formerly represented by such Certificate. At the close of business on the day
prior to the Effective Time, the stock transfer books of the Company shall be
closed and no transfer of Company Common Stock shall thereafter be made on such
stock transfer books.
2.11. NO LIABILITY
None of Parent, Merger Sub, the Company or the Paying Agent
shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
2.12. WITHHOLDING RIGHTS
Subject to applicable law, Parent, the Surviving Corporation
or the Paying Agent shall be entitled to deduct and withhold any applicable
taxes from the consideration otherwise payable pursuant to this Agreement to any
holder of Certificates or to any holder of Options.
3. [RESERVED]
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Merger Sub as follows.
4.1. ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company has full corporate
power and authority to own its properties and to carry on its business as it is
now being conducted. The Company is duly qualified to transact business and is
in good standing in each jurisdiction wherein the nature of the business done or
the property owned, leased or operated by it requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect.
True, correct and complete copies of the certificate of incorporation and
by-laws of the Company and all amendments thereto have been delivered to Parent
and Merger Sub. The corporate minutes and corporate records of the Company that
have been made available to Parent and Merger Sub and are true, correct and
complete in all material respects. Except for its Subsidiaries, listed in
Section 4.1(b) of the Disclosure Schedule, the Company does not own any equity
interest in any Person whatsoever.
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(b) Section 4.1(b) of the Disclosure Schedule sets forth a true, correct and
complete list of each Subsidiary of the Company. Each Subsidiary is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization
indicated in Section 4.1(b) of the Disclosure Schedule. Each such Subsidiary has
full corporate or other power and authority to own its properties and to carry
on its business as it is now being conducted. Each Subsidiary is duly qualified
to transact business and is in good standing in each jurisdiction wherein the
nature of the business done or the property owned, leased or operated by it
requires such qualification, except where the failure to be so qualified would
not have a Material Adverse Effect. True, correct and complete copies of the
certificate of incorporation and by-laws (or other Organizational Documents) of
each such Subsidiary and all amendments thereto have been delivered to Parent
and Merger Sub. The corporate minutes, corporate records and stock register and
transfer records of each Subsidiary of the Company have been made available to
Parent and Merger Sub and are true, correct and complete in all material
respects.
4.2. AUTHORITY; NO CONFLICT
(a) The Company has the right, power, authority and capacity to execute and
deliver this Agreement, to consummate the Merger and to perform its obligations
under this Agreement. The Board of Directors of the Company has appointed a
special committee consisting of independent directors (the "SPECIAL COMMITTEE").
The Special Committee has unanimously recommended to the Board of Directors and
the stockholders the approval and adoption of this Agreement and the
consummation of the Merger. The Board of Directors of the Company has
unanimously (after giving effect to any director who may have recused himself
from such discussions and approval) approved the execution and delivery of this
Agreement and the consummation of the Merger and has unanimously (after giving
effect to any director who may have recused himself from such discussions and
approval) approved the Voting Agreement with the intent that Parent shall not
become an "interested stockholder" within the meaning of Section 203 of the
DGCL. This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(b) Neither the execution, delivery or performance of this Agreement by the
Company nor the consummation by the Company of the Merger or any of the other
transactions contemplated hereby will, directly or indirectly (with or without
notice or lapse of time or both):
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(i) contravene, conflict with or result in a violation or breach of (A) any
provision of the Organizational Documents of the Company or any of its
Subsidiaries, (B) any resolution adopted by the Board of Directors, or any
committee thereof, or the stockholders of the Company, (C) any legal requirement
or any Governmental Order to which the Company or any of its Subsidiaries or any
of the properties or assets owned or used by the Company or any of its
Subsidiaries may be subject, or (D) any authorization, license or permit of any
Governmental Authority, including any private investigatory license or other
similar license, which is held by the Company or any of its Subsidiaries or that
otherwise relates to the business of, or any of the assets owned or used by, the
Company or any of its Subsidiaries;
(ii) result in a violation or breach of or constitute a default, give rise to a
right of termination, cancellation or acceleration, create any entitlement to
any payment or benefit or require the consent or approval of or any notice to or
filing with any third party under any Contract to which the Company or any of
its Subsidiaries is a party or to which they or their respective properties or
assets may be bound, or require the consent or approval of or any notice to or
filing with any Governmental Authority to which either the Company or any of its
Subsidiaries or their respective properties or assets may be subject; or
(iii) result in the imposition or creation of any Encumbrance (other than
Permitted Encumbrances) upon or with respect to any of the properties or assets
owned or used by the Company or any of its Subsidiaries;
except, with respect to clauses (i)(C) or (D), (ii) or (iii) of this Section
4.2, where any such contravention, conflict, violation, breach, default,
termination right, cancellation or acceleration right or Encumbrance would not
have a Material Adverse Effect or would not adversely affect the ability of the
Company to consummate the Merger or the other transactions contemplated by this
Agreement.
4.3. CAPITALIZATION
The authorized equity securities of the Company consist solely
of 50,000,000 shares of common stock, par value $0.01 per share, of which
6,627,471 shares are issued and outstanding, and 5,000,000 shares of preferred
stock, par value $0.01 per share, none of which shares are issued and
outstanding. All of the outstanding equity securities of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. The
authorized, issued and outstanding shares of each class of capital stock or
other ownership or equity interests of each Subsidiary of the Company are
accurately and completely set forth in Section 4.3(a) of the Disclosure
Schedule. All of the outstanding shares of capital stock or other ownership or
equity interests of each such Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable and owned beneficially and of record
by the Company free and clear of any and all Encumbrances. Section 4.3(b) of the
Disclosure Schedule sets forth a complete and correct list of all Options,
including as to each holder thereof, the number of shares of Company Common
Stock subject thereto and the exercisability, exercise price and termination
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date thereof. Except as set forth in Section 4.3(c) of the Disclosure Schedule,
there are no voting trusts or other agreements or understandings to which the
Company or any of its Subsidiaries is a party with respect to the transfer,
voting, issuance, purchase, redemption, repurchase or registration of the
capital stock of the Company or any such Subsidiary. There are no Contracts
relating to the issuance, sale or transfer of any equity securities or other
securities of the Company or any of its Subsidiaries, and there are not
outstanding any options, warrants or other securities exercisable or
exchangeable for or convertible into any shares of equity securities of the
Company or any of its Subsidiaries ("CONVERTIBLE SECURITIES"). None of the
outstanding equity securities or other securities of the Company or any of its
Subsidiaries that was issued since May 1, 1998 was issued in violation of the
Securities Act or any other legal requirement. Neither the Company nor any of
its Subsidiaries owns or has any Contract to acquire, any equity securities or
other securities of any Person (other than a Subsidiary) or any, direct or
indirect, equity or ownership interest in any other business. No Person has any
pre-emptive rights with respect to any security of the Company or any Subsidiary
of the Company.
4.4. FINANCIAL STATEMENTS
(a) For purposes of this Agreement: "FINANCIAL STATEMENTS" shall mean the
audited consolidated balance sheets of the Company and its Subsidiaries as of
December 31, 1999, December 31, 2000 and December 31, 2001, and the audited
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1999, December 31, 2000 and December 31, 2001,
and the unaudited consolidated balance sheet of the Company and its Subsidiaries
dated as of September 30, 2002 and the related unaudited consolidated statements
of income, stockholders' equity and cash flows for the nine months then ended
(the "INTERIM FINANCIAL STATEMENTS"). The Company has delivered to Parent true,
correct and complete copies of the Financial Statements and the Interim
Financial Statements.
(b) The Financial Statements (i) have been prepared from the books and records
of the Company and its Subsidiaries in accordance with GAAP, (ii) fully reflect
all liabilities and contingent liabilities of the Company and its Subsidiaries
required to be reflected therein on such basis as at the date thereof, and (iii)
fairly present in all material respects the consolidated financial position of
the Company and its Subsidiaries as of the dates of the balance sheets included
in the Financial Statements and the consolidated results of its operations and
cash flows for the periods indicated. The Interim Financial Statements for the
nine months ended September 30, 2002, (i) have been prepared from the books and
records of the Company and its Subsidiaries in accordance with GAAP, on a basis
consistent with the Financial Statements, for the nine months ended September
30, 2002, and (ii) fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of the date of the
balance sheet included therein and the consolidated results of its operations
and cash flows for the period indicated; PROVIDED, HOWEVER, the Interim
Financial Statements (x) are subject to normal year-end adjustments and (y) do
not include all footnotes required by GAAP.
4.5. NO UNDISCLOSED LIABILITIES
Except as set forth in Section 4.5 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has any material liabilities or
obligations of any nature (whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected or reserved against in the
Financial Statements and the Interim Financial Statements and current
liabilities incurred in the ordinary course of business since the date of the
Interim Financial Statements, which current liabilities are consistent with the
representations and warranties contained in this Agreement and will not,
individually or in the aggregate, have a Material Adverse Effect.
-12-
4.6. TAXES
The Company and each of its Subsidiaries has properly and
timely filed all federal, state and local Tax returns and has paid all Taxes,
assessments and penalties due and payable. All such Tax returns were complete
and correct in all respects as filed, and no claims have been assessed with
respect to such returns, except as set forth in Section 4.6 of the Disclosure
Schedule. The provisions made for Taxes on the balance sheets of the Company and
its Subsidiaries included in the Financial Statements and the Interim Financial
Statements are sufficient in all respects for the payment of all Taxes whether
disputed or not that are due or are hereafter found to have been due with
respect to the conduct of the business of the Company and its Subsidiaries up to
and through the date of such Financial Statements or Interim Financial
Statements, respectively. There are no present, pending, or threatened audit,
investigations, assessments or disputes as to Taxes of any nature payable by the
Company or any of its Subsidiaries, nor any Tax liens whether existing or
inchoate on any of the assets of the Company or any of its Subsidiaries, except
for current year Taxes not presently due and payable. The federal income Tax
returns of the Company and its Subsidiaries have never been audited. No IRS or
foreign, state, county or local Tax audit is currently in progress. Neither the
Company nor any of its Subsidiaries has waived the expiration of the statute of
limitations with respect to any Taxes. There are no outstanding requests by the
Company or any of its Subsidiaries for any extension of time within which to
file any Tax return or to pay Taxes shown to be due on any Tax return. Other
than with respect to the Company and its Subsidiaries, neither the Company nor
any of its Subsidiaries is liable for Taxes of any other Person or is currently
under any contractual obligation to indemnify any Person with respect to Taxes
or is a party to any Tax sharing agreement or any other agreement providing for
payments by the Company or any of its Subsidiaries with respect to Taxes.
For purposes of this Agreement, the term "TAX" shall mean any
United States federal, national, state, provincial, local or other
jurisdictional income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, estimated, alternative or add-on minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge imposed by any Governmental Authority,
together with any interest or penalty imposed thereon.
4.7. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE
(a) All accounts receivable of the Company and its Subsidiaries that
are reflected on the Financial Statements, the Interim Financial Statements or
on the accounts receivable ledgers of the Company and its Subsidiaries
(collectively, the "ACCOUNTS RECEIVABLE") represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. All of the Accounts Receivable are or will be current and
collectible at the full recorded amount thereof, less any applicable reserves
established in accordance with GAAP, in the ordinary course of business without
resort to litigation, except for such Accounts Receivable, the failure of which
to collect would not have a Material Adverse Effect.
-13-
(b) All accounts payable of the Company and its Subsidiaries that are
reflected on the Financial Statements, the Interim Financial Statements or on
the accounts payable ledgers of the Company and its Subsidiaries arose in the
ordinary course of business. All material items which are required by GAAP to be
reflected as payables on the Financial Statements and on the Interim Financial
Statements and in the books and records of the Company and its Subsidiaries are
so reflected and have been recorded in accordance with GAAP in a manner
consistent with past practice. There has been no adverse change since the date
of the Interim Financial Statements in the amount or delinquency of accounts
payable of the Company and its Subsidiaries (either individually or in the
aggregate) which would have a Material Adverse Effect.
4.8. NO MATERIAL ADVERSE CHANGE
Since the date of the Interim Financial Statements, there has
not been any material adverse change in the business, operations, properties,
prospects, liabilities, results of operations, assets or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole (a "MATERIAL
ADVERSE EFFECT") and no event has occurred or circumstance exists that may
result in a Material Adverse Effect.
4.9. BOOKS AND RECORDS
Except as disclosed in Section 4.9 of the Disclosure Schedule,
the books of account and other records of the Company and its Subsidiaries, all
of which have been made available to Parent, are true, correct and complete.
Except as disclosed in Section 4.9 of the Disclosure Schedule, the minute books
of the Company and its Subsidiaries contain true, correct and complete records
of all meetings held of, and corporate action taken by, the stockholders, the
Boards of Directors, and committees of the Boards of Directors of the Company
and its Subsidiaries. The stock books of the Company are true, correct and
complete. At the Closing, all of those books and records will be in the
possession of the Company.
4.10. TITLE TO PROPERTIES; ENCUMBRANCES
Section 4.10 of the Disclosure Schedule contains a complete
and accurate list of all real property leaseholds or other interests therein
held by the Company and its Subsidiaries. Neither the Company nor any of its
Subsidiaries owns, or has owned, any real property. The Company has delivered or
made available to Parent true, correct and complete copies of the real property
leases to which the Company or any of its Subsidiaries is a party or pursuant to
which any of them uses or occupies any real property. Section 4.10 of the
Disclosure Schedule also contains a complete and accurate list of all licensed
vehicles owned or leased by the Company or any of its Subsidiaries and the fixed
assets used in the business of the Company or any of its Subsidiaries and
carried on their books for tax purposes. Except as set forth in Section 4.10 of
the Disclosure Schedule, the Company and each of its Subsidiaries has good title
to, or a valid leasehold, license or other interest in, all of the real and
personal properties and assets, tangible and intangible, they own or purport to
own, hold or use in their respective businesses, including those reflected on
their books and records and in the Financial Statements and Interim Financial
Statements (except for accounts receivable collected and materials and supplies
used or disposed of in the ordinary course of business consistent with past
practice after the date of the Interim Financial Statements), free and clear of
all Encumbrances, except Permitted Encumbrances.
-14-
4.11. CONDITION AND SUFFICIENCY OF ASSETS
The buildings, vehicles, furniture, fixtures and equipment and
other personal property owned, held or used by the Company and its Subsidiaries
are structurally sound, are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such buildings,
vehicles, furniture, fixtures or equipment or other personal property is in need
of maintenance or repairs except for ordinary, routine maintenance and repairs
that are not material in nature or cost. The buildings, vehicles, furniture,
fixtures and equipment or other personal property of the Company and its
Subsidiaries are sufficient for the continued conduct of their respective
businesses after the Closing in substantially the same manner as conducted prior
to the Closing.
4.12. EMPLOYEE BENEFITS
(a) Neither the Company nor any ERISA Affiliate maintains any Employee Benefit
Plans. "EMPLOYEE BENEFIT Plan" means (other than workers' compensation required
by any state or subdivision thereof) any "employee benefit plan" as defined in
Section 3(3) of ERISA and any other plan, policy, program, practice, agreement,
understanding or arrangement (whether written or oral) providing benefits to any
current or former director, employee or independent contractor (or to any
dependent or beneficiary thereof) of the Company or any ERISA Affiliate, which
are now or have ever been maintained by the Company or any ERISA Affiliate or
under which the Company or any ERISA Affiliate has any obligation or liability,
whether actual or contingent, including all incentive, bonus, deferred
compensation, vacation, holiday, medical, disability, stock appreciation rights,
stock option, stock purchase or other similar plans, policies, programs,
practices, agreements, understandings or arrangements. "ERISA AFFILIATE" means
any entity (whether or not incorporated) other than the Company that, together
with the Company, is or was a member of (i) a controlled group of corporations
within the meaning of Section 414(b) of the Code, (ii) a group of trades or
businesses under common control within the meaning of Section 414(c), or (iii)
an affiliated service group within the meaning of Section 414(m) of the Code.
(b) Neither the Company nor any ERISA Affiliate has proposed or agreed to the
creation of any new Employee Benefit Plan.
4.13. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
(a) To the best of the Company's knowledge, the Company and its Subsidiaries are
in compliance with all federal, state and local laws, authorizations, licenses
and permits of any Governmental Authority and all Governmental Orders affecting
the business, operations, properties or assets of the Company and its
Subsidiaries, including, federal, state and local: (i) Occupational Safety and
Health Laws; (ii) private investigatory and other similar laws; (iii) securities
laws; (iv) the Fair Credit Reporting Act and similar state and local laws; and
(v) laws regarding or relating to trespass or violation of privacy rights.
Neither the Company nor any of its Subsidiaries has been charged with violating,
nor to the knowledge of the Company, threatened with a charge of violating, nor,
to the knowledge of the Company, is the Company or any of its Subsidiaries under
investigation with respect to a possible violation of, any provision of any
federal, state or local law relating to any of their respective businesses,
operations, properties or assets.
-15-
(b) Section 4.13 of the Disclosure Schedule contains a complete and accurate
list of each governmental authorization, license or permit that is held by the
Company or any of its Subsidiaries or that otherwise relates to the business of,
or to any of the properties or assets owned or used by, the Company or any of
its Subsidiaries. Each governmental authorization, license or permit listed in
Section 4.13 of the Disclosure Schedule is valid and in full force and effect.
4.14. LEGAL PROCEEDINGS
Except as set forth in Section 4.14 of the Disclosure
Schedule, there is no pending claim, action, investigation, arbitration,
litigation, suit or other proceeding ("PROCEEDING"):
(i) that has been commenced by or against the Company or any of its Subsidiaries
or that otherwise relates to or may affect the business of, or any of the
properties or assets owned, held or used by, the Company or its Subsidiaries; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the transactions
contemplated hereby.
To the knowledge of the Company, (A) no such Proceeding has
been threatened, and (B) no event has occurred or circumstance exists that may
give rise to or serve as a basis for the commencement of any such Proceeding.
The Company has made available to Parent true, correct and complete copies of
all pleadings, correspondence and other documents relating to each Proceeding
listed in Section 4.14 of the Disclosure Schedule. The Proceedings listed in
Section 4.14 of the Disclosure Schedule, if decided adversely to the Company or
any Subsidiary, individually or in the aggregate, would not have a Material
Adverse Effect, except as described in Section 4.14 of the Disclosure Schedule.
4.15. ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Section 4.15 of the Disclosure
Schedule, since the date of the Interim Financial Statements, the Company and
its Subsidiaries have conducted their respective businesses only in the ordinary
course of business consistent with past practice. Without limiting the
generality of the immediately preceding sentence, since September 30, 2002,
there has not been any of the following on the part of the Company or any of its
Subsidiaries:
(a) declaration or payment of any dividend or other distribution or redemption
or repurchase or other acquisition, directly or indirectly, in respect of shares
of capital stock or Convertible Securities;
(b) issuance or sale or authorization for issuance or sale, or grant of any
options or other agreements with respect to, any shares of its capital stock or
Convertible Securities, or any change in its outstanding shares of capital stock
or other ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
-16-
(c) payment or increase of any bonuses, salaries or other compensation to any
stockholder, director, officer, consultant or employee except for increases in
bonus compensation to employees (other than ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇) in
the ordinary course of business or entry into any employment, severance or
similar Contract with any director, officer or employee;
(d) adoption of, or increase in the payments to or benefits under, any profit
sharing, bonus, deferred compensation, severance, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees;
(e) damage to or destruction or loss of any property or asset, whether or not
covered by insurance, which may have a Material Adverse Effect;
(f) entry into, termination of, or receipt of notice of termination of, any
Contract or transaction involving a total remaining commitment by or to the
Company or any Subsidiary of at least $25,000, including the entry into (i) any
document evidencing any indebtedness; (ii) any capital or other lease; or (iii)
any guaranty (including "take-or-pay" or "keepwell" agreements);
(g) sale, lease or other disposition (other than in the ordinary course of
business consistent with past practice) of any asset or property or mortgage,
pledge, or imposition of any Encumbrance (other than Permitted Encumbrances) on
any material property or asset;
(h) cancellation, compromise or waiver of any claims or rights with a value to
the Company or any Subsidiary in excess of $25,000;
(i) material change in the method of accounting of the accounting principles or
practices used by the Company in the preparation of the Financial Statements or
the Interim Financial Statements, except as required by GAAP;
(j) amendment or other modification of its respective Organizational Documents;
(k) loss of services of any key employee or consultant or any loss of a material
client;
(l) loan or advance to any Person other than travel and other similar routine
advances to employees in the ordinary course of business consistent with past
practice; or
(m) agreement or commitment, whether oral or written, by the Company to do any
of the foregoing.
4.16. CONTRACTS; NO DEFAULTS
(a) Section 4.16(a) of the Disclosure Schedule contains a complete and accurate
list, and the Company has delivered to Parent true, correct and complete copies,
of:
-17-
(i) each Contract that involves performance of services or delivery of goods or
materials by the Company or any Subsidiary of the Company of an amount or value
in excess of $25,000;
(ii) each Contract that involves performance of services or delivery of goods or
materials to the Company or any Subsidiary of the Company of an amount or value
in excess of $25,000;
(iii) each lease, license and other Contract affecting any leasehold or other
interest in, any real or personal property;
(iv) each licensing Contract with respect to Patents, Marks, Copyrights, trade
secrets or other Intellectual Property Assets, including Contracts with current
or former employees, consultants or contractors regarding the appropriation or
the non-disclosure of any Intellectual Property Assets;
(v) each collective bargaining Contract to or with any labor union or other
employee representative of a group of employees;
(vi) each joint venture, partnership and other Contract involving a sharing of
profits, losses, costs or liabilities by the Company or any of its Subsidiaries
with any other Person or requiring the Company or any of its Subsidiaries to
make a capital contribution;
(vii) each Contract containing covenants that in any way purport to restrict the
business activity of the Company or any of its Subsidiaries or limit the freedom
of the Company or any of its Subsidiaries to engage in any line of business or
to compete with any Person or hire any Person;
(viii) each employment Contract providing for compensation, severance or a fixed
term of employment in respect of services performed by any employees of the
Company or any of its Subsidiaries and each consulting Contract with an
independent contractor;
(ix) each stock option, purchase or benefit plan for employees;
(x) each power of attorney that is currently effective and outstanding;
(xi) each Contract for capital expenditures in excess of $25,000;
(xii) each Contract with an officer or director of the Company or any of its
Subsidiaries or with any Affiliate of any of the foregoing;
(xiii) each Contract under which any money has been or may be borrowed or loaned
or any note, bond, factoring agreement, indenture or other evidence of
indebtedness has been issued or assumed (other than those under which there
remain no ongoing obligations of the Company or any Subsidiary), and each
guaranty (including "take-or-pay" and "keepwell" agreements) of any evidence of
indebtedness or other obligation, or of the net worth, of any Person (other than
endorsements for the purpose of collection in the ordinary course of business);
-18-
(xiv) each Contract containing restrictions with respect to the payment of
dividends or other distributions in respect of the Company's or any Subsidiary's
capital stock;
(xv) each Contract containing a change of control provision;
(xvi) each other Contract having an indefinite term or a fixed term of more than
one (1) year (other than those that are terminable at will or upon not more than
thirty (30) days' notice by the Company or any of its Subsidiaries without
penalty) or requiring payments by the Company or any of the Company's
Subsidiaries of more than $25,000 per year; and
(xvii) each standard form of Contract pursuant to which the Company or any
Subsidiary provides services to clients.
(b) Except as set forth in Section 4.16(b) of the Disclosure Schedule, each
Contract identified or required to be identified in Section 4.16(a) of the
Disclosure Schedule is in full force and effect and is valid and enforceable
against the Company or a Subsidiary of the Company and, to the knowledge of the
Company, against the other parties thereto in accordance with its terms.
(c) Except as set forth in Section 4.16(c) of the Disclosure Schedule:
(i) the Company and its Subsidiaries are in full compliance with all applicable
terms and requirements of each Contract under which the Company and its
Subsidiaries have any obligation or liability or by which the Company or any of
its Subsidiaries or any of the properties or assets owned, held or used by the
Company or any of its Subsidiaries is bound, except for such noncompliance that
would not have a Material Adverse Effect;
(ii) to the knowledge of the Company, each other Person that has or had any
obligation or liability under any Contract under which the Company or any of its
Subsidiaries has any rights is in compliance in all material respects with all
applicable terms and requirements of such Contract; and
(iii) no event has occurred or, to the knowledge of the Company, circumstance
exists that (with or without notice or lapse of time or both) may result in a
violation or breach of any Contract, which violation or breach would have a
Material Adverse Effect.
4.17. INSURANCE
Section 4.17 of the Disclosure Schedule sets forth the premium
payments and describes all the insurance policies of the Company and its
Subsidiaries, which policies are now in full force and effect in accordance with
their terms and expire on the dates shown on Section 4.17 of the Disclosure
Schedule. Such insurance policies comply in all respects with the requirements
of any leases to which the Company is a party, including, real property leases.
There has been no default in the payment of premiums on any of such policies,
and, to the knowledge of the Company, there is no ground for cancellation or
avoidance of any such policies, or any increase in the premiums thereof, or for
reduction of the coverage provided thereby. Such policies insure the Company and
its Subsidiaries in amounts and against losses and risks customary and
sufficient for businesses similar to that of the Company and its Subsidiaries,
and, to the knowledge of the Company, such policies shall continue in full force
and effect until the expiration dates shown in Section 4.17 of the Disclosure
Schedule. There are no pending claims with respect to the Company or any
Subsidiary or their properties or assets under any such insurance policy. True,
correct and complete copies of all insurance policies listed in Section 4.17
have been previously furnished to Parent.
-19-
4.18. ENVIRONMENTAL MATTERS
The Company and its Subsidiaries have at all times operated their
businesses in material compliance with all Environmental Laws and all permits,
licenses and registrations required under applicable Environmental Laws
("ENVIRONMENTAL PERMITS") and, to the Company's knowledge, no material
expenditures are or will be required by the Company or its Subsidiaries in order
to comply with such Environmental Laws. Neither the Company nor any of its
Subsidiaries has received any written communication from any Governmental
Authority or other Person that alleges that the Company or its Subsidiaries has
violated or is, or may be, liable under any Environmental Law. There are no
material Environmental Claims pending or, to the knowledge of the Company,
threatened (a) against the Company or any of its Subsidiaries, or (b) against
any Person whose liability for any Environmental Claim the Company or any of its
Subsidiaries has retained or assumed, either contractually or by operation of
law. Neither the Company nor any of its Subsidiaries has contractually retained
or assumed any liabilities or obligations that could reasonably be expected to
provide the basis for any material Environmental Claim.
"ENVIRONMENTAL LAWS" means-all applicable statutes, rules,
regulations, ordinances, orders, decrees, judgments, permits, licenses,
consents, approvals, authorizations, and governmental requirements or directives
or other obligations lawfully imposed by governmental authority under federal,
state or local law pertaining to the protection of the environment, protection
of public health, protection of worker health and safety, the treatment,
emission and/or discharge of gaseous, particulate and/or effluent pollutants,
and/or the handling of hazardous materials including without limitation, the
Clean Air Act, 42 U.S.C. ss. 7401, et seq., the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. ss. 9601,
et seq., the Federal Water Pollution Control Act, 33 U.S.C. ss. 1321, et seq.,
the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq. ("RCRA"),
and the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq. "ENVIRONMENTAL
CLAIMS" means any and all, actions, orders, decrees, suits, demands, directives,
claims, liens, investigations, proceedings or notices of violation by any
Governmental Authority or other Person alleging potential responsibility or
liability arising out of, based on or related to (a) the presence, release or
threatened release of, or exposure to, any Hazardous Materials (as defined under
applicable Environmental Laws) or (b) circumstances forming the basis of any
violation or alleged violation of any Environmental Law.
-20-
4.19. EMPLOYEES
(a) Section 4.19 of the Disclosure Schedule contains a complete and accurate
list of the following information for each employee of the Company and its
Subsidiaries: name; job title; current compensation; vacation accrued; and
service credited for purposes of vesting and eligibility to participate under
any employee benefit plan of any nature.
(b) No employee or director of the Company or any of its Subsidiaries is a party
to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition or proprietary rights agreement, between such
employee or director and any other Person that in any way adversely affects or
will affect (i) the performance of his or her duties as an employee or officer
of the Company or any of its Subsidiaries, or (ii) the ability of the Company or
any of its Subsidiaries to conduct its business. To the knowledge of the
Company, no officer or other key employee of the Company or any of its
Subsidiaries intends to terminate his or her employment with the Company.
4.20. LABOR RELATIONS
Except as set forth in Section 4.20 of the Disclosure Schedule:
(a) The Company and its Subsidiaries have satisfactory relationships with their
respective employees.
(b) No condition or state of facts or circumstances exists which could
materially adversely affect the Company's or any of the Subsidiary's relations
with its employees, including, to the best of the Company's knowledge, the
consummation of the transactions contemplated by this Agreement.
(c) The Company and its Subsidiaries are in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours and none of them is engaged in
any unfair labor practice.
(d) No collective bargaining agreement with respect to the business of the
Company or any of its Subsidiaries is currently in effect or being negotiated.
Neither the Company nor any of its Subsidiaries has encountered any labor union
or collective bargaining organizing activity with respect to its employees.
Neither the Company nor any of its Subsidiaries has any obligation to negotiate
any such collective bargaining agreement, and, to the knowledge of the Company,
there is no indication that the employees of the Company or any of its
Subsidiaries desire to be covered by a collective bargaining agreement.
(e) There are no strikes, slowdowns, work stoppages or other labor trouble
pending or, to the knowledge of the Company, threatened with respect to the
employees of the Company or any of its Subsidiaries, nor has any or the above
occurred or, to the knowledge of the Company, been threatened.
(f) There is no representation claim or petition pending before the National
Labor Relations Board or any state or local labor agency and, to the knowledge
of the Company, no question concerning representation has been raised or
threatened respecting the employees of the Company or any of its Subsidiaries.
(g) There are no complaints or charges against the Company or any of its
Subsidiaries pending before the National Labor Relations Board or any state or
local labor agency and, to the knowledge of the Company, no complaints or
charges have been filed or threatened to be filed against the Company or any of
its Subsidiaries with any such board or agency.
-21-
(h) To the knowledge of the Company, no charges with respect to or relating to
the business of the Company or any of its Subsidiaries are pending before the
Equal Employment Opportunity Commission or any state or local agency responsible
for the prevention of unlawful employment practices.
(i) Section 4.20 of the Disclosure Schedule accurately sets forth all unpaid
severance which, as of the date hereof, is due or claimed, in writing, to be due
from the Company or any Subsidiary to any Person whose employment with the
Company or any of its Subsidiaries was terminated.
(j) Neither the Company nor any of its Subsidiaries has received notice of the
intent of any Governmental Authority responsible for the enforcement of labor or
employment laws to conduct an investigation of the Company or any of its
Subsidiaries and no such investigation is in progress.
(k) Neither the Company nor any of its Subsidiaries, or to the knowledge of the
Company, any employee of the Company or any of its Subsidiaries, is in violation
of any term of any employment agreement, non-disclosure agreement, non-compete
agreement or any other Contract regarding an employee's employment with the
Company or any of its Subsidiaries.
(l) The Company and its Subsidiaries have paid all wages which are due and
payable to each employee and each independent contractor.
4.21. INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS--The term "INTELLECTUAL PROPERTY ASSETS"
includes: (i) the name "Accufacts Pre-Employment Screening, Inc.," all fictional
business names, trade names, registered and unregistered trademarks, service
marks and applications (collectively, "MARKS"); (ii) all patents, patent
applications and inventions and discoveries that may be patentable
(collectively, "PATENTS"); (iii) all copyrights in both published works and
unpublished works, including software, training manuals and videos
(collectively, "Copyrights"); and (iv) all know-how, trade secrets, confidential
information, client lists, software, technical information, data, plans,
drawings and blue prints (collectively, "TRADE SECRETS") owned, used or licensed
by the Company and its Subsidiaries as licensee or licensor.
(b) AGREEMENTS--Section 4.21(b) of the Disclosure Schedule contains a true,
correct and complete list and summary description, including any royalties paid
or received by the Company and its Subsidiaries, of all Contracts relating to
the Intellectual Property Assets to which the Company and its Subsidiaries are a
party or by which the Company and its Subsidiaries are bound.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS--The Intellectual Property Assets are
all those used in, or related to, the operation of the business of the Company
and its Subsidiaries as it is currently conducted and proposed to be conducted.
The Company and its Subsidiaries are the owners of all right, title and interest
-22-
in and to the Intellectual Property Assets, free and clear of all Encumbrances
and have the right to use without payment to a third party all of the
Intellectual Property Assets. The Company and its Subsidiaries are the owners of
all right, title and interest in and to any (i) business application software
and (ii) proprietary management information systems used in, or related to, the
operation of the business of the Company and its Subsidiaries as it is currently
conducted and proposed to be conducted, free and clear of all Encumbrances, and
have a right to use such software and systems without payment to a third party.
(d) TRADEMARKS--(i) Section 4.21(d) of the Disclosure Schedule contains a true,
correct and complete list of all Marks; (ii) the Company and its Subsidiaries
are the owners of all right, title and interest in and to the Marks, free and
clear of all Encumbrances; (iii) all Marks that have been registered with the
United States Patent and Trademark Office are currently in compliance with all
formal legal requirements and are valid and enforceable; (iv) no ▇▇▇▇ is
infringed or, to the knowledge of the Company, has been challenged or threatened
in any way. None of the Marks used by the Company or any of its Subsidiaries
infringes or is alleged to infringe any trade name, trademark or service ▇▇▇▇ of
any Person.
(e) COPYRIGHTS--(i) Section 4.21(e) of the Disclosure Schedule contains a true,
correct and complete list of all Copyrights; (ii) the Company and its
Subsidiaries are the owners of all right, title and interest in and to the
Copyrights, free and clear of all Encumbrances; (iii) all the Copyrights have
been registered and are currently in compliance with formal legal requirements,
and are valid and enforceable; (iv) no Copyright is infringed or, to the
knowledge of the Company, has been challenged or threatened in any way; (v) none
of the subject matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any Person or is a derivative work based on the work
of a third Person; and (vi) all works encompassed by the Copyrights have been
marked with the proper copyright notice.
(f) TRADE SECRETS--(i) The Company and its Subsidiaries have taken all
reasonable precautions to protect the secrecy, confidentiality and value of
their Trade Secrets; and (ii) the Company and its Subsidiaries have good title
and an absolute right to use the Trade Secrets. The Trade Secrets, to the
knowledge of the Company, have not been used, divulged or appropriated either
for the benefit of any Person (other than the Company and its Subsidiaries) or
to the detriment of the Company. No Trade Secret is subject to any adverse claim
or has been challenged or threatened in any way.
4.22. ABSENCE OF CERTAIN PAYMENTS
Neither the Company or any of its Subsidiaries nor any
director, officer, agent or employee of the Company or any of its Subsidiaries
or, to the knowledge of the Company, any other Person associated with or acting
for or on behalf of the Company or any of its Subsidiaries, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Affiliate of the Company, or
(iv) in violation of any legal requirement, or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
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4.23. RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Section 4.23 of the Disclosure
Schedule, no officer, director or employee of the Company or any Subsidiary, nor
any spouse or child of any of them or any Affiliate of, or any Person associated
with, any of them ("RELATED PERSON"), has any interest in any property or asset
used in or pertaining to the business of the Company or any of its Subsidiaries.
Except as set forth in Section 4.23 of the Disclosure Schedule, no Related
Person has owned or presently owns an equity interest or any other financial or
profit interest in a Person that has (i) had business dealings with the Company
or any of its Subsidiaries, or (ii) engaged in competition with the Company or
any of its Subsidiaries. Except as set forth in Section 4.23 of the Disclosure
Schedule, no Related Person is a party to any Contract with, or has any claim or
right against, the Company or any of its Subsidiaries, except for employment
agreements listed in Section 4.16 of the Disclosure Schedule.
4.24. BROKERS OR FINDERS
Neither the Company nor any Subsidiary nor any of their
respective directors, officers or agents on their behalf has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or financial advisory services or other similar payment
in connection with this Agreement, except as listed in Section 4.24 of the
Disclosure Schedule.
4.25. DEPOSIT ACCOUNTS
Section 4.25 of the Disclosure Schedule contains a true,
correct and complete list of (a) the name of each financial institution in which
the Company has an account or safe deposit box, (b) the names in which each
account or box is held, (c) the type of account, and (d) the name of each Person
authorized to draw on or have access to each account or box. No Person holds any
power of attorney from the Company or any Subsidiary, except as listed in
Section 4.25 of the Disclosure Schedule.
4.26. CONDUCT OF BUSINESS; USE OF NAME
The business carried on by the Company and its Subsidiaries
has been conducted by the Company or such Subsidiary directly and not through
any Affiliate or associate of any stockholder, officer, director or employee of
the Company or through any other Person. To the best of the Company's knowledge,
the Company owns and has the exclusive right, title and interest in and to the
name "Accufacts Pre-Employment Screening, Inc." and no other Person has the
right to use the same, or any confusing derivative thereof, as its corporate
name or otherwise in connection with the operation of any business similar or
related to the business conducted by the Company.
4.27. RESTRICTIONS ON BUSINESS ACTIVITIES
There is no Contract or Governmental Order binding upon the
Company or any Subsidiary or, to the knowledge of the Company, threatened that
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any Subsidiary or
the Company (either individually or in the aggregate), any acquisition of
property by the Company or any Subsidiary or the Company (either individually or
in the aggregate), providing of any service by the Company or any Subsidiary of
the Company or the hiring of employees or the conduct of business by the Company
or any Subsidiary of the Company (either individually or in the aggregate) as
currently conducted or proposed to be conducted.
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4.28. OUTSTANDING INDEBTEDNESS
Section 4.28 of the Disclosure Schedule sets forth as of a
date no earlier than three (3) days prior to the date hereof (a) the amount of
all indebtedness of the Company and its Subsidiaries then outstanding and the
interest rate applicable thereto, (b) any Encumbrances which relate to such
indebtedness, and (c) the name of the lender or the other payee of each such
indebtedness.
4.29. CLIENTS AND CONTRACTORS
Section 4.29 of the Company Disclosure Schedule contains a
complete list of all the material clients of the Company and its Subsidiaries,
including the amounts they paid to the Company and its Subsidiaries in each of
the last three years. Section 4.29 of the Disclosure Schedule contains a
complete list of all material contractors and subcontractors used by the Company
and its Subsidiaries. To the knowledge of the Company, there are no facts or
circumstances, including the consummation of the transactions contemplated by
this Agreement, that are likely to result in the loss of any material client of
the Company or a material change in the relationship of the Company with such a
client.
4.30. FAIRNESS OPINION
The Company's Board of Directors has received a true, correct
and complete copy of an opinion from Stratus Valuations, dated as of the date
hereof, to the effect that, as of the date hereof, the transactions contemplated
by this Agreement and the consideration to be received by the Company's
stockholders in the Merger is fair to the Company's stockholders, including from
a financial point of view.
4.31. VOTING REQUIREMENTS
The affirmative vote or consent of a majority of the
outstanding shares of Company Common Stock is the only vote or consent of the
holders of any class or series of equity securities of the Company necessary to
adopt this Agreement and approve the Merger and the other transactions
contemplated by this Agreement.
4.32. EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of the Company has passed and not
rescinded resolutions amending the Company's 2001 Employee Stock Purchase Plan
such that the last offering period under Section 5 of such Employee Stock
Purchase Plan shall be that 3-month period commencing September 20, 2002 and
ending December 20, 2002.
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4.33. DISCLOSURE
No representation or warranty by the Company in this
Agreement, nor in any certificate, schedule or exhibit delivered or to be
delivered pursuant to this Agreement, and no statement in the Disclosure
Schedule, contains or will contain any untrue statement of material fact, or
omits or will omit to state a material fact necessary to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading.
5. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each represents and warrants to Seller as
follows:
5.1. ORGANIZATION AND GOOD STANDING
Parent is a corporation duly organized, validly existing and
in good standing under the laws of the State of Tennessee, and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Parent and Merger Sub has full corporate power
and authority to conduct its business as it is now being conducted and to own or
use the properties and assets that it purports to own or use in its business.
5.2. AUTHORITY
Each of Parent and Merger Sub has the right, power, authority
and capacity to execute and deliver this Agreement, to consummate the Merger and
to perform their respective obligations under this Agreement. This Agreement has
been duly executed and delivered by Parent and Merger Sub and constitutes the
legal, valid and binding obligation of Parent and Merger Sub, enforcement
against each in accordance with its terms.
5.3. LEGAL PROCEEDINGS
There is no Proceeding pending against Parent or Merger Sub
that challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions contemplated
hereby.
5.4. BROKERS OR FINDERS
Neither Parent nor Merger Sub nor any of their respective
directors, officers or agents has incurred on their behalf any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or financial advisory services or other similar payment in
connection with this Agreement.
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6. COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
6.1. NORMAL COURSE
From the date hereof until the Closing, the Company and each
of its Subsidiaries will: (a) maintain its corporate existence in good standing;
(b) maintain the general character of its business; (c) use all reasonable best
efforts to maintain in effect all of its presently existing insurance coverage
(or substantially equivalent insurance coverage), preserve its business
organization substantially intact, keep the services of its present principal
employees and preserve its present business relationships with its material
suppliers and clients; (d) permit Parent, its accountants, its legal counsel and
its other representatives full access to its management, minute books and stock
transfer records, other books and records, Contracts, properties and operations
at all reasonable times and upon reasonable notice; and (e) in all respects
conduct its business in the usual and ordinary manner consistent with past
practice and perform in all material respects all Contracts with banks, clients,
suppliers, employees and others.
6.2. CONDUCT OF BUSINESS
Without limiting the provisions of Section 6.1, from the date
hereof until the Closing, neither the Company nor any of its Subsidiaries will,
without the prior written consent of Parent, which consent shall not be
unreasonably withheld:
(a) amend or otherwise modify its Organizational Documents;
(b) issue or sell or authorize for issuance or sale, or grant any options or
make other agreements of the type referred to in Section 4.3 with respect to,
any shares of its capital stock or Convertible Securities, or alter any term of
any of its outstanding securities or make any change in its outstanding shares
of capital stock, Convertible Securities or other ownership interests or its
capitalization, whether by reason of a reclassification, recapitalization, stock
split or combination, exchange or readjustment of shares, stock dividend or
otherwise;
(c) mortgage, pledge or grant any security interest in any of its assets, except
security interests solely in tangible personal property granted pursuant to any
purchase money agreement, conditional sales contract or capital lease under
which there exists an aggregate future liability not in excess of $25,000 (which
amount is not more than the purchase price for such personal property and which
security interest does not extend to any other item or items of personal
property);
(d) declare, set aside, make or pay any dividend or other distribution to any
stockholder with respect to its capital stock;
(e) redeem, purchase or otherwise acquire, directly or indirectly, any capital
stock;
(f) increase the bonus, salary or other compensation of any of its employees who
hold management positions or any director or consultant, except for amounts
accrued as of September 30, 2002 and reflected in the Interim Financial
Statements and except for increases in the ordinary course of business,
consistent with past practice, for employees other than ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇;
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(g) adopt or (except as otherwise required by law) amend any employee benefit
plan or severance plan or enter into any collective bargaining agreement;
(h) terminate or modify any Contract, except for terminations of Contracts upon
their expiration during such period in accordance with their terms;
(i) incur or assume any indebtedness for borrowed money or guarantee any
obligation or the net worth (either directly or through a "take-or-pay" or
"keepwell" agreement) of any Person in an aggregate amount in excess of $25,000,
except for endorsements of negotiable instruments for collection in the ordinary
course of business;
(j) discharge or satisfy any Encumbrance other than those which are required to
be discharged or satisfied during such period in accordance with their original
terms;
(k) pay any material obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, except for any current liabilities, and
the current portion of any long term liabilities, shown on the Financial
Statements (or not required as of the date thereof to be shown thereon in
accordance with GAAP) or incurred since September 30, 2002 in the ordinary
course of business consistent with past practice;
(l) sell, transfer, lease to others or otherwise dispose of any of its
properties or assets having a fair market value in the aggregate in excess of
$25,000, except in the ordinary course of business consistent with past
practice;
(m) cancel, compromise or waive any material debt or claim;
(n) make any loan or advance to any Person other than travel and other similar
routine advances in the ordinary course of business consistent with past
practice, or acquire any capital stock or other securities of any other
corporation or any ownership interest in any other business enterprise;
(o) make any capital expenditure or capital addition or betterment in amounts
which exceed $25,000 in the aggregate, except as contemplated in capital budgets
in effect on the date of this Agreement;
(p) change its method of accounting or the accounting principles or practices
utilized in the preparation of the Financial Statements, other than as required
by GAAP;
(q) institute or settle any litigation or any legal, administrative or
arbitration action or proceeding before any Governmental Authority relating to
it or its property;
(r) except in the ordinary course of business consistent with past practice,
commit to provide services for an indefinite period or a period of more than
twelve months; or
(s) make any tax election inconsistent with past practice or settle or
compromise any material Tax liability, except to discharge any Tax liabilities
set forth in Section 4.6 of the Disclosure Schedule.
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(t) enter into any Contract that would have been required to be disclosed
pursuant to Section 4.16 if it had existed on the date hereof; or
(u) enter into any commitment to do any of the foregoing.
6.3. PREPARATION OF THE PROXY STATEMENT
(a) As promptly as practicable following the execution of this Agreement, the
Company shall prepare and file with the SEC a proxy statement meeting the
requirements of Section 14A under the Exchange Act relating to a meeting of the
holders of Company Common Stock to adopt this Agreement and to approve the
Merger (such proxy statement as amended or supplemented from time to time being
hereafter referred to as the "PROXY STATEMENT"). The Company, acting through its
Board of Directors, or the Special Committee, shall include in the Proxy
Statement the recommendation of its Board of Directors, or the Special
Committee, that the stockholders of the Company vote in favor of the adoption of
this Agreement and the approval of the Merger. Notwithstanding the foregoing,
the obligation set forth in the foregoing sentence shall not apply (and the
Board of Directors, or the Special Committee, shall be permitted to modify or
withdraw any such recommendation previously made) if the Board of Directors, or
the Special Committee, concludes in good faith, after consultation with its
outside legal counsel, that fulfilling the obligations in the foregoing sentence
would violate the fiduciary duties of the Board of Directors or the Special
Committee, under applicable law; PROVIDED, HOWEVER, that nothing shall limit the
obligation of the Company to use its reasonable best efforts to fulfill all of
its obligations under this Agreement.
(b) The Company shall use its best efforts to respond to all SEC comments with
respect to the Proxy Statement and to cause the Proxy Statement to be mailed to
the Company's stockholders at the earliest practicable date. The Company shall
promptly notify Parent of the receipt of any SEC comments or any request from
the SEC for amendments or supplements to the Proxy Statement and shall promptly
provide Parent with copies of all correspondence between it and its
representatives, on the one hand, and the SEC and its staff, on the other hand.
(c) Notwithstanding the foregoing, prior to filing or mailing the Proxy
Statement (or any amendment or supplement thereto) or responding to any comments
of the SEC with respect thereto, the Company (i) shall provide Parent with a
reasonable opportunity to review and comment on such document or response, (ii)
shall include in such document or response all comments reasonably proposed by
Parent, and (iii) shall not file or mail such document or respond to the SEC
prior to receiving approval of Parent, which approval shall not be unreasonably
withheld or delayed.
(d) The Company shall ensure that the Proxy Statement does not contain an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statement made, under the
circumstances under which it is made, not misleading. If at any time prior to
the Effective Time any event or information should be discovered by the Company
that should be set forth in an amendment or a supplement to the Proxy Statement,
the Company shall promptly inform Parent of such discovery.
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(e) The Company shall use its reasonable best efforts to obtain the requisite
approval of the stockholders of the Company, which approval shall be in
accordance with the applicable requirements of the DGCL and the Organizational
Documents of the Company, to enable the Merger to be effective on the Closing
Date (determined without regard to the condition to closing in the first
sentence of Section 8.8) by holding a special meeting of stockholders as
promptly as practicable, but in no event later than four (4) weeks following the
final review and clearance by the SEC of the Proxy Statement.
(f) Without limiting the generality of Section 12.1, the Company agrees that it
shall bear all expenses incurred in connection with the preparation of the Proxy
Statement, including all fees and expenses of agents, representatives, counsel
and accountants.
6.4. CERTAIN FILINGS
The Company agrees to cooperate with Parent with respect to
all filings with regulatory authorities that are required to be made by the
Company to carry out the transactions contemplated by this Agreement, including
the timely filing of the Notice and FIRPTA certificate as set forth in Section
8.11, with the IRS pursuant to Treasury Regulation section 1.897-2(h)(2).
6.5. CONSENTS AND APPROVALS
The Company shall use its reasonable best efforts to obtain as
promptly as practicable all consents, authorizations, approvals and waivers
required in connection with the consummation of the transactions contemplated by
this Agreement.
6.6. BEST EFFORTS TO SATISFY CONDITIONS
The Company shall use its reasonable best efforts to cooperate
with Parent for purposes of satisfying the conditions set forth in Sections 8
and 9 that are within its control.
6.7. INTERCOMPANY PAYMENTS
All loans, payables and other amounts due to or from the
Company and its Affiliates as listed in Section 6.7 of the Disclosure Schedule
shall be paid in full, written off or adjusted to zero balances at or prior to
the Closing.
6.8. NOTIFICATION OF CERTAIN MATTERS
From the date hereof until the Closing, the Company shall
promptly notify Parent of (a) the occurrence or non-occurrence of any fact or
event of which the Company has knowledge which would be reasonably likely (i) to
cause any representation or warranty of the Company contained in this Agreement
to be untrue or inaccurate in any material respect at any time from the date
hereof to the Closing Date or (ii) to cause any covenant, condition or agreement
of the Company in this Agreement not to be complied with or satisfied in any
material respect and (b) any failure of the Company to comply with or satisfy
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any covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect; PROVIDED, HOWEVER, that no such notification
shall affect the other representations or warranties of the Company, or the
right of Parent to rely thereon, or the conditions to the obligations of Parent.
The Company shall give prompt notice to Parent of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
6.9. NO SOLICITATION
(a) The Company, its Affiliates and their respective officers, directors,
employees, representatives and agents shall immediately terminate any
discussions or negotiations with any third party concerning an Acquisition
Offer. The Company and its Affiliates shall not, directly or indirectly, through
any officer, director, employee, stockholder, financial advisor, attorney,
representative, subsidiary or agent of such Person (i) take any action to
solicit, initiate, facilitate, continue or encourage any inquiries or proposals
that constitute, or could reasonably be expected to lead to, a proposal or offer
for a merger, consolidation, business combination, sale of substantial assets,
sale of shares of capital stock or other securities (including by way of a
tender offer) or similar transaction involving the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement (any of
the foregoing inquiries or proposals being referred to as an "ACQUISITION
OFFER"), (ii) engage in discussions or negotiations (whether such discussions or
negotiations are initiated by the Company, such other Person or otherwise)
concerning, or provide any non-public information to any Person relating to, any
possible Acquisition Offer, or (iii) agree to, enter into a letter of intent or
similar document or recommend any Acquisition Offer; PROVIDED, HOWEVER, that
nothing contained in this Agreement shall prevent the Company, or its Board of
Directors, to the extent such Board of Directors determines, in good faith and
on a reasonable basis by a majority vote (after consultation with independent
legal advisors), that such Board of Directors' fiduciary duties under applicable
law require it to do so, from (A) furnishing non-public information to, or
entering into discussions or negotiations with, any Person in connection with an
unsolicited, bona fide, written Acquisition Offer by such Person or recommending
an unsolicited, bona fide, written Acquisition Offer by such Person to the
stockholders of the Company, if and only to the extent that (1) the Board of
Directors of the Company determines in good faith and on a reasonable basis by
majority vote (after consultation with independent financial and legal advisors)
that such Acquisition Offer is reasonably capable of being completed on the
terms proposed and would, if consummated, result in a transaction more favorable
to the Company's stockholders from a financial point of view than the Merger and
the transactions contemplated by this Agreement (any such more favorable
Acquisition Proposal being referred to in this Agreement as a "SUPERIOR
PROPOSAL") and the Board of Directors of the Company determines in good faith
and on a reasonable basis by majority vote (after consultation with independent
legal advisors) that such action is necessary for such Board of Directors to
comply with its fiduciary duties to stockholders under applicable law and (2)
prior to furnishing such non-public information to, or entering into discussions
or negotiations with, such Person, (x) such Board of Directors receives form
such Person an executed confidentiality agreement, (y) such non-public
information has been previously delivered to Parent, and (z) the Company advises
Parent in writing of such disclosure or discussions or negotiations, including
the Person to whom disclosed or with whom discussions or negotiations will
occur; or (B) complying with Rules 14d-9 and 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Offer. The Company shall use its best
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efforts to ensure that the officers, directors, and Affiliates of the Company
and its subsidiaries and any investment banker or other financial advisor or
representative retained by the Company or any of its subsidiaries are aware of
the restrictions described in this Section 6.9. Without limiting the foregoing,
it is understood that any violations of the restrictions set forth in this
Section 6.9 by any officer, director, employee, financial advisor, attorney,
representative, subsidiary, agent or Affiliate of the Company, when acting on
behalf of the Company or any of its subsidiaries, shall be deemed to be a breach
of this Section 6.9 by the Company.
(b) The Company shall notify Parent immediately after receipt by the Company (or
its advisors) of any Acquisition Offer or any request for non-public information
in connection with an Acquisition Offer or for access to the properties, books
or records of the Company or any of its subsidiaries by any Person that informs
such party that it is considering making, or has made, an Acquisition Offer.
Such notice shall be made orally and in writing and shall indicate in reasonable
detail the identity of the Person and the terms and conditions of such proposal,
inquiry or contact. The Company shall continue to keep Parent informed, on a
current basis, of the status of any such discussions or negotiations and the
terms being discussed or negotiated.
(c) In addition to the foregoing, the Company shall not accept or enter into any
agreement, letter of intent or similar document concerning an Acquisition Offer
for a period of not less than seventy-two (72) hours after Parent's receipt of a
notice of the material terms of such Acquisition Offer and the identity of the
Person making such Acquisition Offer, and during such seventy-two (72) hour
period the Company shall negotiate with Parent in good faith any proposal
submitted to the Company by Parent which addresses such Acquisition Offer.
6.10. TERMINATION OF STOCK OPTIONS
The Company shall use its best efforts to obtain the written
consent or agreement of each holder of options to purchase capital stock of the
Company as follows:
(a) Each holder of issued and outstanding options to purchase capital stock of
the Company with an exercise price per share greater than or equal to the Price
Per Share shall agree that all such stock options shall terminate as of the
Effective Time at no cost or expense to the Company, and that the Company shall
thereafter have no further obligation or liability whatsoever to such holder in
respect of any such options; and
(b) Each holder of issued and outstanding options to purchase capital stock of
the Company with an exercise price per share less than the Price Per Share shall
agree to the provisions of Section 2.8 and shall further agree that at and after
the Effective Time, the Company shall have no further obligation or liability
whatsoever to such holder in respect of any such options.
7. COVENANTS OF PARENT AND MERGER SUB
Each of Parent and Merger Sub, jointly and severally, hereby
covenants and agrees as follows:
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7.1. CERTAIN FILINGS
Parent and Merger Sub agree to make or cause to be made all
filings with regulatory authorities that are required to be made by Parent and
Merger Sub or their respective Affiliates to carry out the transactions
contemplated by this Agreement.
7.2. BEST EFFORTS TO SATISFY CONDITIONS
Each of Parent and Merger Sub agrees to use its reasonable
best efforts to satisfy the conditions set forth in Sections 8 and 9 that are
within their control.
7.3. NOTIFICATION OF CERTAIN MATTERS
From the date hereof until the Closing, Parent and Merger Sub
shall promptly notify the Company of (a) the occurrence or non-occurrence of any
fact or event of which Parent or Merger Sub has knowledge which would be
reasonably likely (i) to cause any representation or warranty of Parent or
Merger Sub contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Closing Date or (ii) to
cause any covenant, condition or agreement of Parent or Merger Sub in this
Agreement not to be complied with or satisfied in any material respect and (b)
any failure of Parent or Merger Sub to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder in any
material respect; PROVIDED, HOWEVER, that no such notification shall affect the
representations or warranties of Parent or Merger Sub, or the right of the
Company to rely thereon, or the conditions to the obligations of the Company.
Parent and Merger Sub shall give prompt notice to the Company of any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement.
8. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub under this Agreement
to consummate the Merger shall be subject to the satisfaction, on or before the
Closing Date, of each of the following conditions, any of which may be waived by
Parent in its sole discretion:
8.1. REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company and its
Subsidiaries contained in this Agreement or in the Disclosure Schedule or any
certificate delivered pursuant hereto which are not qualified as to materiality
shall be complete and correct as of the date when made, shall be deemed repeated
at and as of the Closing Date as if made on the Closing Date and, shall then be
complete and correct in all material respects. The representations and
warranties of the Company and its Subsidiaries contained in this Agreement or in
the Disclosure Schedule or any certificate delivered pursuant hereto which are
qualified as to materiality shall be complete and correct as of the date when
made, shall be deemed repeated at and as of the Closing Date as if made on the
Closing Date and shall then be complete and correct in all respects.
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8.2. PERFORMANCE OF COVENANTS
The Company shall have performed and complied in all material
respects with each covenant, agreement and condition required by this Agreement
to be performed or complied with by it prior to or on the Closing Date.
8.3. LACK OF ADVERSE CHANGE
There shall not have occurred any event or circumstance which,
individually or in the aggregate, has had or may result in a Material Adverse
Effect, including the loss of significant business from any of clients of the
Company or any of its Subsidiaries or the loss of any significant clients of the
Company or any of its Subsidiaries.
8.4. UPDATE CERTIFICATE
Parent and Merger Sub shall have received favorable
certificates, dated the Closing Date, signed by the president and chief
executive officer of the Company as to the matters set forth in Sections 8.1,
8.2 and 8.3.
8.5. NO PROCEEDING
No order of any Governmental Authority shall be in effect that
restrains or prohibits any transaction contemplated hereby or that would limit
or affect Parent's ownership or operation of the business of the Company; no
Proceeding by any Governmental Authority or any other Person shall be pending or
threatened against Parent, Merger Sub or the Company that challenges the
validity or legality, or that seeks to restrain the consummation, of the
transactions contemplated hereby or that seeks to limit or otherwise affect
Parent, Merger Sub or the Company's right to own or operate the business of the
Company; and no written advice shall have been received by Parent, Merger Sub or
the Company or by any of their respective counsel from any Governmental
Authority, and remain in effect, stating that a Proceeding will, if the Merger
is consummated or sought to be consummated, be filed seeking to invalidate or
restrain the Merger or limit or otherwise affect Parent's ownership or operation
of the business of the Company.
8.6. APPROVALS AND CONSENTS
All material consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by the
Company for the authorization, execution and delivery of this Agreement, the
consummation by it of the transactions contemplated hereby and the continuation
in full force and effect of any and all material rights, documents, agreements
or instruments of the Company shall have been obtained and made by the Company,
except where the failure to receive such consents, waivers, approvals,
authorizations or orders would not reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of the foregoing, Parent and
Merger Sub shall have obtained the written consent of CB Sanlando Center, Inc.
under that certain Lease Agreement, dated as of August 28, 1998, by and between
CB Sanlando Center, Inc. and ▇▇▇▇▇▇, Inc.
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8.7. OPINION OF COUNSEL
The Company shall have delivered to Parent and Merger Sub (i)
an opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, dated the Closing Date and addressed to
Parent and Merger Sub, as to the matters set forth on Exhibit 8.7 hereto, and
(ii) such other additional opinions as to Delaware law that Parent may
reasonably request.
8.8. STOCKHOLDER APPROVAL; DISSENTERS
This Agreement shall have been duly adopted at or prior to the
Effective Time by the requisite vote of the holders of Company Common Stock
entitled to vote thereon. Holders of not more than ten percent (10%) of the
issued and outstanding Company Common Stock shall have exercised appraisal
rights with respect to the Merger.
8.9. RESIGNATIONS
Parent and Merger Sub shall have received form the Company the
resignations of all officers and directors of the Company and its Subsidiaries
from their positions with the Company and its Subsidiaries.
8.10. EFFECTIVENESS OF AGREEMENTS
The Non-Compete Agreement, dated as of the date hereof, by and
between Parent and ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Employment Agreement, dated as of the
date hereof, by and between Parent and ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall each be in full force
and effect.
8.11. FIRPTA CERTIFICATE
Parent shall have received from the Company an executed copy
of a certification and notice, meeting the requirements of Sections 897 and 1445
of the Code and the treasury regulations promulgated thereunder, substantially
in the form attached hereto as EXHIBIT 8.11, dated as of the Closing Date, that
the Company has not been a United States real property holding corporation at
any time during the five year period prior to the Closing Date, and the stock of
the Company is not a United States real property interest.
8.12. TERMINATION OF EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of the Company shall have passed and
not rescinded resolutions effectively terminating the Company's 2001 Employee
Stock Purchase Plan prior to the Closing, and Parent shall have been furnished
evidence of such termination.
8.13. TERMINATION OF SHAREHOLDER RIGHTS AND REGISTRATION RIGHTS AGREEMENT
Subject to completion of the transactions contemplated by this
Agreement, that certain Shareholder Rights and Registration Rights Agreement,
dated as of October 11, 1999, by and between the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
shall have been terminated at no cost or expense to the Company, and the Company
shall have no further obligation or liability thereunder. Parent shall have been
furnished evidence of such termination.
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8.14. TERMINATION OF EMPLOYMENT AGREEMENTS
Effective as of the Closing Date, that certain Employment
Agreement, dated as of September 1, 1998, by and between the Company and ▇▇▇▇▇▇
▇▇▇▇▇▇, as amended October 5, 1999, and that certain Employment Agreement, dated
as of September 1, 1998, by and between the Company and ▇▇▇▇ ▇▇▇▇▇▇▇, shall each
have been terminated at no cost or expense to the Company, and the Company shall
have no further obligation or liability under either such agreement. Parent
shall have been furnished evidence of each such termination.
8.15. TERMINATION OF STOCK OPTIONS
The Company shall have satisfied in full its obligations under
Section 6.10, and Parent shall have been furnished evidence of such
satisfaction.
8.16. DISCHARGE OF INDEBTEDNESS
The Company shall have satisfied in full its obligations under
Section 6.7, and Parent shall have been furnished evidence of such satisfaction.
9. CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement to
consummate the Merger shall be subject to the satisfaction, on or before the
Closing Date, of each of the following conditions, any of which may be waived by
the Company in its sole discretion:
9.1. REPRESENTATIONS AND WARRANTIES
The representations and warranties of Parent and Merger Sub
contained in this Agreement or in the Disclosure Schedule or any certificate
delivered pursuant hereto which are not qualified as to materiality shall be
complete and correct as of the date when made, shall be deemed repeated at and
as of the Closing Date as if made on the Closing Date and shall then be complete
and correct in all material respects. The representations and warranties of
Parent and Merger Sub contained in this Agreement or in the Disclosure Schedule
or any certificate delivered pursuant hereto which are qualified as to
materiality shall be complete and correct as of the date when made, shall be
deemed repeated at and as of the Closing Date as if made on the Closing Date and
shall then be complete and correct in all respects.
9.2. PERFORMANCE OF COVENANTS
Parent and Merger Sub shall have performed and complied in all
material respects with each covenant, agreement and condition required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date.
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9.3. UPDATE CERTIFICATE
The Company shall have received favorable certificates, dated
the Closing Date, signed by an officer of each of Parent and Merger Sub as to
the matters set forth in Sections 9.1 and 9.2.
9.4. NO PROCEEDING
No order of any Governmental Authority shall be in effect that
restrains or prohibits the Merger; and no written advice shall have been
received by Parent, Merger Sub or the Company or by any of their respective
counsel from any Governmental Authority, and remain in effect, stating that a
Proceeding will, if the Merger is consummated or sought to be consummated, be
filed seeking to invalidate or restrain the Merger.
10. TERMINATION
10.1. TERMINATION OF AGREEMENT
This Agreement may be terminated:
(a) At any time prior to the Effective Time, by mutual consent of Parent and the
Company.
(b) By Parent or Merger Sub or the Company if the Effective Time shall not have
occurred by February 28, 2003, unless such failure shall be due to a material
breach of any representation or warranty, or the nonfulfillment in a material
respect, and failure to cure such nonfulfillment within five (5) Business Days
following receipt by such party of notice of such breach or nonfulfillment, of
any covenant or agreement contained herein on the part of the party or parties
seeking to terminate this Agreement.
(c) By Parent alone, by means of a written notice to the Company, if there has
been a material misrepresentation by the Company, or a material breach on the
part of the Company of any of its warranties, covenants or agreements set forth
herein, or a material failure on the part of the Company to comply with any of
its other obligations hereunder. By the Company alone, by means of a written
notice to Parent if there has been a material misrepresentation by Parent or
Merger Sub, or a material breach on the part of Parent or Merger Sub of any of
their warranties, covenants or agreements set forth herein, or a material
failure on the part of Parent or Merger Sub to comply with any of their other
obligations hereunder. No such termination shall relieve any party of the
consequences of any such misrepresentation, breach or failure.
(d) By either Parent or the Company if a Governmental Authority shall have
issued a nonappealable final order, decree or ruling or taken any other
nonappealable final action, in any case, having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger.
(e) By either Parent or the Company if the requisite vote of the stockholders of
the Company as set forth in Section 6.3(d), in favor of the Merger shall not
have been obtained; PROVIDED, THAT, the right to terminate this Agreement under
this Section 10.1(e) shall not be available to the Company where the failure to
obtain such stockholder approval shall have been caused by the action or failure
to act of the Company and such action or failure to act constitutes a material
breach by the Company of this Agreement.
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(f) By the Company if it proposes to accept a Superior Proposal; PROVIDED, THAT,
simultaneously with such termination the Company complies with Section 10.3(a).
(g) By Parent if the Board of Directors, or the Special Committee, of the
Company shall have withdrawn or modified its approval or recommendation of the
Merger or the adoption of this Agreement.
10.2. EFFECT OF TERMINATION
In the event of termination of this Agreement as provided in
Section 10.1, this Agreement shall forthwith become void, the Merger shall be
abandoned and there shall be no liability or obligation on the part of Parent,
Merger Sub or the Company or their respective officers, directors, stockholders
or Affiliates, except as otherwise set forth in Section 10.3 and except to the
extent that such termination results from the breach by a party hereto of any of
its representations, warranties, covenants or agreements set forth in this
Agreement or in the Disclosure Schedule (in which case the nonbreaching party
may seek any and all remedies available to it under applicable law); PROVIDED,
THAT, the provision of Sections 10.3, 12.1, 12.2, 12.3, 12.4 and 12.11 and this
Section 10.2 shall remain in full force and effect and survive any termination
of this Agreement.
10.3. TERMINATION FEES
(a) The Company shall pay Parent a termination fee of $200,000 in immediately
available funds simultaneously with the termination of this Agreement pursuant
to Section 10.1(f) or (g).
(b) The Company shall pay Parent's and Merger Sub's out-of-pocket expenses
incurred in connection with this Agreement (and the transactions contemplated
hereby), including the fees and expenses of financial advisors, accountants and
legal counsel and printing and filing and mailing fees and expenses
(collectively, "TERMINATION EXPENSES"), in immediately available funds within
five (5) Business Days following termination of this agreement by Parent
pursuant to Section 10.1(e), (f) or (g) or the first sentence of Section
10.1(c). Parent shall pay the Company's Termination Expenses, in immediately
available funds within five (5) Business Days following termination of this
Agreement by the Company pursuant to the second sentence of Section 10.1(c).
Notwithstanding the foregoing, in no event shall either the Company or Parent be
obligated to pay the other party Termination Expenses pursuant to this Section
10.1(b) in an amount exceeding $100,000.
(c) The provisions of this Section 10.3 are not exclusive and shall be
in addition to any other rights or remedies available to Parent or the Company
as a result of a breach by the other of any representation, warranty, covenant
or agreement set forth in this Agreement or in the Disclosure Schedule.
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11. INDEMNIFICATION OF DIRECTORS, OFFICERS AND STOCKHOLDERS
11.1. RIGHT TO INDEMNIFICATION
(a) The Bylaws and Certificate of Incorporation of the Surviving Corporation
shall contain the same provisions with respect to indemnification of present and
former directors, officers and employees of the Company as those set forth in
the Company's Bylaws and Certificate of Incorporation on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of three (3) years from the Effective Time in any manner that would
adversely affect the rights thereunder as of the Effective Time of individuals
who at the Effective Time are present or former directors, officers or employees
of the Company, unless such modification is required after the Effective Time by
applicable law.
(b) On and after the Effective Time, Parent hereby indemnifies each Person that
holds, in the aggregate, immediately prior to the Closing, more than 2,000,000
shares of Company Common Stock (each, an "INDEMNIFIED Party") against and agrees
to hold each such Person harmless from any and all damage, loss, liability and
expense (including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
proceeding) incurred or suffered by each Indemnified Party arising out of an
allegation by a former stockholder of the Company that such Indemnified Party
breached his fiduciary duties to the other former stockholders of the Company in
connection with this Agreement or the transactions contemplated hereby. The
within indemnification is in addition to Parent's obligation to maintain tail
insurance for a period of three (3) years following the Effective Time pursuant
to Section 11.1(a).
(c) Each Indemnified Party agrees to give prompt notice to Parent of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under Section 11.1(b); PROVIDED, that
the failure to give such notice shall not affect the Indemnified Party's rights
hereunder except to the extent Parent is materially prejudiced as a result of
such failure. Parent may, and at the request of the Indemnified Party shall,
participate in and control the defense of any such third party suit, action or
proceeding at its own expense. Parent shall not be liable under Section 11.1(b)
for any settlement effected without its prior consent of any claim, suit, action
or proceeding in respect of which indemnity may be sought hereunder. After the
Effective Time, Section 11.1(b) will provide the exclusive remedy for any claim
arising out of an allegation by a former stockholder of the Company that any
Indemnified Party breached his fiduciary duties to the other former stockholders
of the Company in connection with this Agreement or the transactions
contemplated hereby.
11.2. INSURANCE
For a period of three (3) years after the Effective Time,
Parent and the Surviving Corporation shall use commercially reasonable efforts
to cause to be maintained in effect directors and officers liability insurance
covering those persons who are on the date hereof covered by directors and
officers liability insurance policies maintained by the Company on terms
substantially similar to those applicable under such current policies with
respect to claims arising from and related to facts or events which occurred at
or before the Effective Time; PROVIDED, HOWEVER, that in no event will Parent or
the Surviving Corporation be required to expend in excess of $64,500 in the
aggregate (i.e. for three years coverage) for such coverage (or such coverage as
is available for such $64,500. Notwithstanding the foregoing, Parent may
substitute therefore policies of substantially the same coverage containing
terms and conditions which are no less advantageous, in any material respect, to
the Indemnified Parties.
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11.3. SUCCESSORS
In the event Parent, the Surviving Corporation or any
successor to Parent or the Surviving Corporation (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving corporation
or entity in such consolidation or merger or (ii) transfers all or substantially
all of its properties or assets to any Person, then, and in each case, proper
provision shall be made so that the successors of the Parent or the Surviving
Corporation honor the obligations of the Parent and the Surviving Corporation
set forth in this Section 11.
11.4. SURVIVAL
The provisions of this Section 11 shall survive the
consummation of the Merger and expressly are intended to benefit each director,
officer or employee of the Company contemplated by this Section 11.
12. GENERAL PROVISIONS
12.1. EXPENSES
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution and performance of this Agreement, including all
fees and expenses of agents, representatives, counsel and accountants.
12.2. PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to
this Agreement, the Closing or the transactions contemplated hereby will be
issued at such time and in such manner as Parent and the Company agree in
writing and shall be made in accordance with Regulation FD promulgated by the
SEC. The Company and Parent will in good faith consult with each other
concerning the means by which the Company's employees, clients and suppliers and
others having dealings with the Company will be informed of this Agreement, the
Closing and the transactions contemplated hereby, and representatives of Parent
may at its option be present for any such communication.
12.3. NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
fax (with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and fax numbers
set forth below (or to such other address, person's attention or fax number as a
party may designate by notice to the other parties given in accordance with this
Section 12.3):
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(a) If to Parent or Merger Sub:
▇▇▇▇▇ Background America
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
With a copies to:
▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to the Company:
Accufacts Pre-Employment Screening, Inc.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
12.4. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against any
of the parties in the courts of the State of New York, County of New York or the
United States District Court for the Southern District of New York, and each of
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the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Service of process or any other papers in any such action or
procedure may be made by registered or certified mail, return receipt requested,
pursuant to the provisions of Section 12.3.
12.5. FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
12.6. WAIVER
Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power or privilege.
12.7. ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter (including any correspondence,
written and oral among Parent, Merger Sub and the Company and constitutes (along
with the documents referred to in this Agreement) the entire agreement among the
parties with respect to its subject matter. This Agreement may not be amended,
nor may any provision hereof or default hereunder be waived, except by a written
agreement executed by the party to be charged with the amendment or waiver.
12.8. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights under this Agreement
without the prior written consent of the other parties except that Parent may
assign any of its rights, but not its obligations, under this Agreement to any
direct wholly owned Subsidiary of Parent. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement and the Persons contemplated by Article
11 any legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement.
12.9. SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part will remain in full force
and effect to the extent not held invalid or unenforceable.
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12.10. SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. In this
Agreement (i) words denoting the singular include the plural and vice versa,
(ii) "it" or "its" or words denoting any gender include all genders, (iii) the
word "including" shall mean "including without limitation," whether or not
expressed, (iv) any reference to a law shall mean the statute and any rules and
regulations thereunder in force as of the date of this Agreement or the Closing
Date, as applicable, unless otherwise expressly provided, (v) any reference
herein to a Section, Article, Schedule or Exhibit refers to a Section or Article
of or a Schedule or Exhibit to this Agreement, unless otherwise stated, and (vi)
when calculating the period of time within or following which any act is to be
done or steps taken, the date which is the reference day in calculating such
period shall be excluded and if the last day of such period is not a Business
Day, then the period shall end on the next day which is a Business Day. Each
party acknowledges that it has been advised and represented by counsel in the
negotiation, execution and delivery of this Agreement and accordingly agrees
that if an ambiguity exists with respect to any provision of this Agreement,
such provision shall not be construed against any party because such party or
its representatives drafted such provision.
12.11. GOVERNING LAW
This Agreement will be governed by the internal laws of the
State of New York without regard to principles of conflict of laws, except to
the extent the DGCL governs the provisions hereof relating to the Merger.
12.12. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
KROLL BACKGROUND AMERICA INC.
By: /s/
--------------------------------
Name:
Title:
ACCUFACTS ACQUISITION CORP.
By: /s/
--------------------------------
Name:
Title:
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
By: /s/
--------------------------------
Name:
Title:
TABLE OF CONTENTS
PAGE
1. DEFINITIONS...........................................................1
2. THE MERGER; CLOSING...................................................5
2.1. THE MERGER...................................................5
2.2. EFFECTIVE TIME...............................................5
2.3. EFFECTS OF THE MERGER........................................6
2.4. CERTIFICATE OF INCORPORATION.................................6
2.5. BY-LAWS......................................................6
2.6. OFFICERS AND DIRECTORS OF SURVIVING CORPORATION..............6
2.7. CONVERSION OR CANCELLATION OF SECURITIES.....................6
2.8. PURCHASE OF OPTIONS..........................................8
2.9. EXCHANGE OF COMPANY CAPITAL..................................8
2.10. NO FURTHER RIGHTS; STOCK TRANSFER BOOKS......................9
2.11. NO LIABILITY.................................................9
2.12. WITHHOLDING RIGHTS...........................................9
3. [RESERVED]............................................................9
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................9
4.1. ORGANIZATION AND GOOD STANDING...............................9
4.2. AUTHORITY; NO CONFLICT......................................10
4.3. CAPITALIZATION..............................................11
4.4. FINANCIAL STATEMENTS........................................12
4.5. NO UNDISCLOSED LIABILITIES..................................12
4.6. TAXES.......................................................13
4.7. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.......................13
4.8. NO MATERIAL ADVERSE CHANGE..................................14
4.9. BOOKS AND RECORDS...........................................14
4.10. TITLE TO PROPERTIES; ENCUMBRANCES...........................14
4.11. CONDITION AND SUFFICIENCY OF ASSETS.........................15
4.12. EMPLOYEE BENEFITS...........................................15
4.13. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS...........15
4.14. LEGAL PROCEEDINGS...........................................16
4.15. ABSENCE OF CERTAIN CHANGES AND EVENTS.......................16
4.16. CONTRACTS; NO DEFAULTS......................................17
4.17. INSURANCE...................................................19
4.18. ENVIRONMENTAL MATTERS.......................................20
4.19. EMPLOYEES...................................................20
4.20. LABOR RELATIONS.............................................21
4.21. INTELLECTUAL PROPERTY.......................................22
4.22. ABSENCE OF CERTAIN PAYMENTS.................................23
i
TABLE OF CONTENTS
(continued)
PAGE
4.23. RELATIONSHIPS WITH RELATED PERSONS........................24
4.24. BROKERS OR FINDERS........................................24
4.25. DEPOSIT ACCOUNTS..........................................24
4.26. CONDUCT OF BUSINESS; USE OF NAME..........................24
4.27. RESTRICTIONS ON BUSINESS ACTIVITIES.......................24
4.28. OUTSTANDING INDEBTEDNESS..................................25
4.29. CLIENTS AND CONTRACTORS...................................25
4.30. FAIRNESS OPINION..........................................25
4.31. VOTING REQUIREMENTS.......................................25
4.32. EMPLOYEE STOCK PURCHASE PLAN..............................25
4.33. DISCLOSURE................................................26
5. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............26
5.1. ORGANIZATION AND GOOD STANDING............................26
5.2. AUTHORITY.................................................26
5.3. LEGAL PROCEEDINGS.........................................26
5.4. BROKERS OR FINDERS........................................26
6. COVENANTS OF THE COMPANY...........................................26
6.1. NORMAL COURSE.............................................27
6.2. CONDUCT OF BUSINESS.......................................27
6.3. PREPARATION OF THE PROXY STATEMENT........................29
6.4. CERTAIN FILINGS...........................................30
6.5. CONSENTS AND APPROVALS....................................30
6.6. BEST EFFORTS TO SATISFY CONDITIONS........................30
6.7. INTERCOMPANY PAYMENTS.....................................30
6.8. NOTIFICATION OF CERTAIN MATTERS...........................30
6.9. NO SOLICITATION...........................................31
6.10. TERMINATION OF STOCK OPTIONS..............................32
7. COVENANTS OF PARENT AND MERGER SUB.................................32
7.1. CERTAIN FILINGS...........................................33
7.2. BEST EFFORTS TO SATISFY CONDITIONS........................33
7.3. NOTIFICATION OF CERTAIN MATTERS...........................33
8. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.................33
8.1. REPRESENTATIONS AND WARRANTIES............................33
8.2. PERFORMANCE OF COVENANTS..................................34
8.3. LACK OF ADVERSE CHANGE....................................34
8.4. UPDATE CERTIFICATE........................................34
8.5. NO PROCEEDING.............................................34
8.6. APPROVALS AND CONSENTS....................................34
8.7. OPINION OF COUNSEL........................................35
8.8. STOCKHOLDER APPROVAL; DISSENTERS..........................35
8.9. RESIGNATIONS..............................................35
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TABLE OF CONTENTS
(continued)
PAGE
8.10. EFFECTIVENESS OF AGREEMENTS...............................35
8.11. FIRPTA CERTIFICATE........................................35
8.12. TERMINATION OF EMPLOYEE STOCK PURCHASE PLAN...............35
8.13. TERMINATION OF SHAREHOLDER RIGHTS AND
REGISTRATION RIGHTS AGREEMENT...........................35
8.14. TERMINATION OF EMPLOYMENT AGREEMENTS......................36
8.15. TERMINATION OF STOCK OPTIONS..............................36
8.16. DISCHARGE OF INDEBTEDNESS.................................36
9. CONDITIONS TO OBLIGATIONS OF THE COMPANY...........................36
9.1. REPRESENTATIONS AND WARRANTIES............................36
9.2. PERFORMANCE OF COVENANTS..................................36
9.3. UPDATE CERTIFICATE........................................37
9.4. NO PROCEEDING.............................................37
10.TERMINATION........................................................37
10.1. TERMINATION OF AGREEMENT..................................37
10.2. EFFECT OF TERMINATION.....................................38
10.3. TERMINATION FEES..........................................38
11.INDEMNIFICATION OF DIRECTORS, OFFICERS AND STOCKHOLDERS............39
11.1. RIGHT TO INDEMNIFICATION..................................39
11.2. INSURANCE.................................................39
11.3. SUCCESSORS................................................40
11.4. SURVIVAL..................................................40
12.GENERAL PROVISIONS.................................................40
12.1. EXPENSES..................................................40
12.2. PUBLIC ANNOUNCEMENTS......................................40
12.3. NOTICES...................................................40
12.4. JURISDICTION; SERVICE OF PROCESS..........................41
12.5. FURTHER ASSURANCES........................................42
12.6. WAIVER....................................................42
12.7. ENTIRE AGREEMENT AND MODIFICATION.........................42
12.8. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS........42
12.9. SEVERABILITY..............................................42
12.10. SECTION HEADINGS, CONSTRUCTION............................43
12.11. GOVERNING LAW.............................................43
12.12. COUNTERPARTS..............................................43
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