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EXHIBIT 2.01
BUSINESS COMBINATION AGREEMENT
THIS BUSINESS COMBINATION AGREEMENT (the "Agreement") is made and
entered into effective the 12th day of March, 1997, by and among MEGA FORCE
STAFFING SERVICES, INC., a North Carolina corporation ("MFSS"), the undersigned
shareholders of MFSS (collectively, the "MFSS Shareholders" and individually, a
"MFSS Shareholder"), THE ▇▇▇▇▇▇▇▇-▇▇▇▇▇ COMPANY, L.L.C., a Tennessee limited
liability company ("▇▇▇▇▇▇▇▇-▇▇▇▇▇"), and the undersigned members of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ (collectively, the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members" and individually, a
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Member").
W I T N E S S E T H:
WHEREAS, the parties hereto have determined that it is in their best
long-term interests to effect a business combination whereby the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Members shall exchange their ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests for capital stock in The
Mega Force Staffing Companies, Inc., a Delaware corporation to be formed
pursuant to the terms and provisions hereof ("Mega Force"), and simultaneously
causing a merger of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ with and into The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Company,
Inc., a North Carolina corporation and a wholly owned subsidiary of Mega Force
("HRC"), with the effect of a contribution to the capital of MFSS by Mega Force
in exchange for the capital stock of MFSS; and at the same time MFSS
Shareholders shall exchange their capital stock in MFSS for shares in Mega Force
and MFSS shall become a wholly owned subsidiary of Mega Force; and
WHEREAS, the parties intend for such combination to constitute an
exchange of property for stock to which Section 351 of the Internal Revenue Code
of 1986, as amended, applies;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
confessed, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
Section 1.1 Certain Defined Terms. When used in this Agreement, the
following capitalized words and phrases shall have the following meanings
assigned to them:
(a) "33 Act" means the Securities Act of 1933, as amended, and
any similar or successor federal law then in force.
(b) "34 Act" means the Securities Exchange Act of 1934, as
amended, and any similar or successor federal law then in force.
(c) "Add Backs" mean those certain non-recurring items of
income and expense of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ charged to ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇
earnings and listed on Schedule 1.1(c).
(d) "Affiliate" means, with respect to any specified person,
any other person in the field of Staffing Services who, directly or
indirectly, owns or controls, is under common ownership or control
with, or is owned or controlled by, such specified person.
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(e) "Benefit Plans" means, with respect to any specified
person, any and all (i) profit sharing, pension, ESOP, 401(k) or other
retirement plans or programs, (ii) current and deferred compensation,
severance, vacation, stock purchase, stock option, bonus and incentive
compensation benefits, (iii) medical, hospital, life, health, accident,
disability, death and other fringe and welfare benefits, including any
split-dollar life insurance policies, and (iv) other individual and
group arrangements and agreements, including any unwritten
compensation, fringe benefit, payroll or employment practices,
procedures or policies of any kind or description.
(f) "Bylaws" means the bylaws of Mega Force, substantially in
the form attached hereto as Exhibit 1.1(f), to be adopted as the
initial bylaws of Mega Force.
(g) "Certificate of Incorporation" means the Amended and
Restated Certificate of Incorporation of Mega Force, substantially in
the form attached hereto as Exhibit 1.1(g), to be filed with the
Secretary of State of the State of Delaware.
(h) "Closing" shall mean the effective date or dates of the
consummation and effectuation of the contributions to the capital of
Mega Force and related transactions contemplated herein pursuant to the
terms and conditions of this Agreement.
(i) "Closing Date" shall refer to the date or dates on which
the Closing actually occurs.
(j) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any similar or successor federal tax law then in force.
(k) "Commission" means the United States Securities and
Exchange Commission, and any successor in interest thereto.
(l) "Control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of an entity in the field of Staffing Services,
whether through the ownership of voting securities, by contract or
otherwise.
(m) "Creditanstalt" shall mean Creditanstalt Corporate
Finance, Inc., a Delaware corporation, Mega Force's senior lender.
(n) "Creditanstalt Warrants" means warrants for the right to
purchase Mega Force Class A Common Stock or Class B Non-Voting Common
Stock, substantially in the form of the Warrant Agreement attached
hereto as Exhibit 1.1(n), sometimes referred to as the "Creditanstalt
Warrant Agreement."
(o) "Encumbrance" shall mean any security interest, mortgage,
lien, pledge, claim, charge, escrow, or other encumbrance affecting
title.
(p) "Environmental Condition" means, with respect to any
specified person, (i) the introduction into the environment of any
pollution, including, without limitation, any contaminant, irritant or
pollutant or other toxic or hazardous substance, in violation of any
federal, state or local law, ordinance or governmental rule or
regulations, as a result of any spill, discharge, leak, emission,
escape, injection, dumping or release of any kind whatsoever of any
substance or exposure of any type in any work places or to any medium,
including, without limitation, air, land, surface waters or ground
waters, or from any generation,
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transportation, treatment, discharge, storage or disposal of waste
materials, raw materials, hazardous materials, toxic materials or
products of any kind or from the storage, use or handling of any
hazardous or toxic materials or other substances, as a result of which
such person has or may become liable to any person or by any reason of
which any of the assets of such person may suffer or be subjected to
any lien, encumbrance or restriction of any nature, or (ii) any
noncompliance with any federal, state or local environmental law, rule,
regulation or order as a result of or in connection with any of the
foregoing.
(q) "GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board and the Commission or in such other statements by such other
entity or other practices and procedures as may be approved by a
significant segment of the accounting profession, which are applicable
to the circumstances as of the date of determination.
(r) "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Debt" shall mean ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ debt to
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members of $2,746,337.00.
(s) "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests" shall mean, with respect to
each ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Member, all of the issued and outstanding equity
membership interests of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and of any Affiliates of
▇▇▇▇▇▇▇▇-▇▇▇▇▇, including, without limitation, the assets of Career
Management, Inc., a Kentucky corporation ("Career Management"),
purchased by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ pursuant to an Asset Purchase Agreement
dated November 4, 1996, owned of record or beneficially by such
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Member on the Closing Date.
(t) "HRC" means The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Company, Inc., a North
Carolina corporation to be formed pursuant to the terms and provisions
hereof, Mega Force's wholly owned subsidiary.
(u) "HRC Bylaws" means the bylaws of The ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Company, Inc., substantially in the form attached hereto as Exhibit
1.1(u), to be adopted as the initial bylaws of The ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Company, Inc.
(v) "HRC Articles of Incorporation" means the Articles of
Incorporation of The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Company, Inc., in the form attached
hereto as Exhibit 1.1(v), as filed with the Secretary of State of the
State of North Carolina.
(w) "IRS" shall mean the Internal Revenue Service, and any
successor in interest thereto.
(x) "Lock-Up Agreement" shall mean, with respect to a party
hereto, that certain agreement to be executed by the party pursuant to
which the party agrees not to sell or otherwise transfer any of the
Mega Force stock issued thereto pursuant to the terms thereof for the
time specified therein, substantially in the form attached hereto as
Exhibit 1.1(x).
(y) "MFSS Common Stock" shall mean the common stock, with no
par value, of MFSS.
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(z) "MFSS Shares" shall mean, with respect to each MFSS
Shareholder, all of the issued and outstanding shares of capital stock
of MFSS owned of record or beneficially by the MFSS Shareholder on the
Closing Date.
(aa) "MFSS Springing Warrants" means those warrants for the
right to purchase Mega Force Class A Common Stock or Class B Non-Voting
Common Stock, substantially in the form attached hereto as Exhibit
1.1(aa)
(bb) "Mega Force Equity" shall mean the to be issued Mega
Force Class A Common Stock, Mega Force Class B Non-Voting Common Stock,
the MFSS Springing Warrants and the Creditanstalt Springing Warrants.
(cc) "Mega Force Class A Common Stock" shall mean the Class A
common stock, par value of one cent ($.01) per share, of Mega Force.
(dd) "Mega Force Class B Non-Voting Common Stock" shall mean
the Class B non-voting common stock, par value of one cent ($.01) per
share, of Mega Force.
(ee) "Mega Force Shares" shall mean the to-be issued shares of
capital stock of Mega Force.
(ff) "Registration Rights Agreement" means the Registration
Rights Agreement, by and among the holders of Mega Force Common Stock,
substantially in the form attached hereto as Exhibit 1.1(ff), to be
entered into at Closing.
(gg) "Staffing Services" means providing placement for
temporary personnel for clerical, light industrial, industrial,
technical and professional positions including direct search and
placement, project/department outsourcing, and career transition and
out-placement services.
(hh) "Stockholders Agreement" means the Stockholders
Agreement, by and among the holders of Mega Force Common Stock,
substantially in the form attached hereto as Exhibit 1.1(hh), to be
entered into at Closing.
(ii) "Subordination Agreement" shall mean a subordination
agreement acceptable in form to Mega Force and Creditanstalt,
substantially in the form set forth in Exhibit 1.1(ii).
(jj) "Subsidiary" or "Subsidiaries" of any person means any
corporation or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board
of directors or other persons performing similar functions are at the
time directly or indirectly owned or controlled by such person or one
or more Subsidiaries of such person.
Section 1.2 Other Defined Terms. Any capitalized term not specifically
defined in Section 1.1 shall have the meaning provided for the term in the
section in this Agreement in which such term is first used.
Section 1.3 References. All references in this Agreement to "Articles"
and "Sections" shall be to articles and sections of this Agreement unless
otherwise noted. The words "hereof," "herein," "hereby," "hereinafter,"
"heretofore," "hereunder" and words of similar import shall also refer to
material set forth in this Agreement as a whole and not to any particular
subdivision unless expressly so limited.
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ARTICLE II
Capital Contributions, Cash Payments, Notes and Organizational Matters
Section 2.1 Formation of Mega Force; Directors. Prior to the Closing
Mega Force shall be formed as a duly organized corporation in good standing
under the laws of the State of Delaware; the members of its Board of Directors
shall be named in stockholder resolutions set forth on Exhibit 2.1 hereto.
Section 2.2 Contribution by MFSS Shareholders. Upon the terms and
subject to the conditions of this Agreement, on the Closing Date, the MFSS
Shareholders shall be deemed to transfer, convey, assign and deliver all of
their MFSS Shares to Mega Force as a contribution to the capital of Mega Force,
free and clear of any Encumbrance in a transaction intended to comply with the
provisions of Section 351 of the Code, as amended.
Section 2.3 Merger of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and HRC; Contributions by the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members; Contribution of Business to HRC. Upon the terms and
subject to the conditions of this Agreement and the Agreement and Plan of
Merger, on the Closing Date, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members shall transfer, convey,
assign and deliver all of their ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests, free and clear of any
Encumbrance, to Mega Force and receive in exchange the Mega Force Equity set
forth in Section 2.4, hereof in a transaction intended to comply with the
provisions of Section 351 of the Code, as amended. On the Closing Date,
▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall merge with and into Mega Force, with Mega Force being the
surviving entity, in accordance with the Members Consent and the Agreement and
Plan of Merger set forth on Exhibit 2.3. Also on the Closing Date, Mega Force
will contribute the assets, liabilities and business generally of the former
▇▇▇▇▇▇▇▇-▇▇▇▇▇ to HRC, Mega Force's wholly owned subsidiary.
Section 2.4 Issuance of Mega Force Equity. On the Closing Date, on the
basis of and in reliance upon the representations and warranties of the
respective parties set forth herein, and in exchange for the MFSS Shares and the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests, Mega Force shall issue and deliver Mega Force Equity
in the following amounts and to the following parties as set forth specifically
on Schedule 2.4 hereto:
(a) 398,376 shares Mega Force Class A Common Stock and 398,374
shares of Mega Force Class B Non-Voting Common Stock,
representing 20% of the fully diluted equity interests of Mega
Force, to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members;
(b) 1,414,232 shares Mega Force Class A Common Stock and
1,414,230 shares of Mega Force Class B Non-Voting Common
Stock, representing 71% of the fully diluted equity interest
of Mega Force, to the MFSS Shareholders;
(c) Creditanstalt Warrants of 358,538 shares of Mega Force
Class A Common Stock or Mega Force Class B Non-Voting Common
Stock, representing 9.00% of the fully diluted equity interest
of Mega Force, to Creditanstalt, as set forth in the
Creditanstalt Warrant Agreement, of which (i) warrants for
258,944 shares of Mega Force Class A Common Stock or Mega
Force Class B Non-Voting Common Stock, representing 6.50% of
the fully diluted equity interest of Mega Force shall be
immediately exercisable and (ii) warrants for 99,594 shares of
Mega Force Class A Common Stock or Mega Force Class B
Non-Voting Common Stock, representing 2.50% of the fully
diluted equity interest of Mega Force shall become exercisable
only at such time as the aggregate amount of loans made to
Mega Force under the
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Loan and Security Agreement of even date herewith among Mega
Force, the lenders party thereto and Creditanstalt-Bankverein
as agent (the "Loan Agreement") equals or exceeds $20,000,000;
and
(d) MFSS Springing Warrants for a total of 99,594 shares of
Mega Force Class A Common Stock, representing 2.50% of the
fully diluted equity interest of Mega Force to those MFSS
Shareholders so designated on Schedule 2.4 exercisable only if
all loans and other obligations outstanding under the Loan
Agreement are paid in full, whether by pre-payment or upon
maturity, and the Loan Agreement is terminated prior to the
time that the aggregate amount of the loans made to Mega Force
under the Loan Agreement equals or exceeds $20,000,000.
Section 2.5 No Anti-Dilution. The parties understand and agree that
there are no anti-dilution provisions relating to future rights or issuance of
stock except as expressly provided for holders of Creditanstalt Warrants.
Section 2.6 Certain Cash Payments. On the Closing Date, Mega Force
shall pay to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members $2.25 million ($2,250,000) in cash (the
"Cash Payment").
Section 2.7 Notes. On the Closing Date, Mega Force shall issue to the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members notes in the aggregate principal amount of One Million
Dollars ($1,000,000), in the form set forth on Exhibit 2.7 hereto (collectively,
the "Mega Force Notes" and individually, a "Mega Force Note"), with each of the
two ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members receiving a Mega Force Note in the principal amount
of Five Hundred Thousand Dollars ($500,000). The Mega Force Notes shall be
subordinated to senior debt of Mega Force by operation of the Subordination
Agreement.
Section 2.8 Retirement and Assumption of Debt.
(a) Retirement and Assumption of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Debt. As of
the Closing Date, ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Debt shall be $2,746,337.00.
Immediately following the Closing, this debt shall be retired
and assumed as follows: (1) Cash from the accounts of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ of up to $1,622,504, and (2) the balance, not
to exceed $1,123,833, shall be assumed by Mega Force and
amended and restated as set forth in Exhibit 2.8 (the
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes", together with the Mega Force Notes
sometimes referred to as the "Notes"). The ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Notes shall be subordinated to senior debt of Mega Force by
operation of the Subordination Agreement.
(b) Retirement of Bank of ▇▇▇▇▇▇ Note in the Amount of
$1,250,000. On the Closing Date, this debt shall be paid in
full by Mega Force from the proceeds of the Loan Transaction
of even date.
Section 2.9 Adjustments to Cash Payment and Notes. The amount of the
Cash Payment and the Notes may be adjusted as set forth in Section 7.4 hereof.
Section 2.10 Bylaws. On the Closing Date, the Bylaws shall be adopted
by Mega Force as its bylaws.
Section 2.11 Consent of Directors. On the Closing Date, the directors
of Mega Force named in its formative resolutions shall execute a Consent of
Directors in Lieu of Organizational Meeting of Directors, substantially in the
form attached hereto as Exhibit 2.11.
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Section 2.12 Exchange of Certificates. On the Closing Date, each holder
of an outstanding certificate or certificates theretofore representing MFSS
Shares or ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests shall surrender the same to Mega Force and
shall receive in exchange a certificate representing the Mega Force shares to be
issued thereto pursuant to the terms hereof.
Section 2.13 MFSS Board of Directors, Bylaws and Officers. The members
of MFSS's Board of Directors shall be named in shareholder resolutions set forth
in Exhibit 2.13 hereto. MFSS's Amended and Restated Bylaws, set forth in Exhibit
2.13, shall be adopted by MFSS as its amended and restated bylaws. The directors
of MFSS named in the aforementioned shareholder resolution shall execute a
Consent of Directors, substantially in the form attached hereto as Exhibit 2.13.
Section 2.14 HRC Board of Directors, Bylaws and Officers. The members
of HRC's Board of Directors shall be named in shareholder resolutions set forth
in Exhibit 2.14 hereto. The HRC Bylaws shall be adopted by HRC as its bylaws.
The directors of HRC named in its formative resolutions shall execute a Consent
of Directors in Lieu of Organizational Meeting of Directors, substantially in
the form attached hereto as Exhibit 2.14.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the MFSS Shareholders.
The MFSS Shareholders, jointly and severally, hereby represent and warrant to
▇▇▇▇▇▇▇▇-▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members the following:
(a) Capital Stock. All of the shares of capital stock of MFSS
are owned of record and beneficially by the MFSS Shareholders. Each
MFSS Shareholder has good title to the MFSS Shares, free and clear of
any Encumbrances. There are no agreements, outstanding rights of first
refusal, pre-emptive rights, options or other agreements providing for
purchase rights or other rights to receive any of the MFSS shares.
(b) No Conflicts; Approvals. Neither the execution, delivery
and performance of this Agreement by any MFSS Shareholder nor the
consummation of the transactions contemplated herein will (i) result in
any conflict with, breach of, or default (or give rise to any rights to
termination, cancellation or acceleration or loss of any right or
benefit) under or require any consent or approval which has not been
obtained with respect to any of the terms, conditions, or provisions of
any material contract or agreement to which any MFSS Shareholder is a
party, or (ii) violate any order, law, rule or regulation applicable to
the MFSS Shareholders. No action, consent or approval by, or filing by
the MFSS Shareholders with any federal, state, municipal, foreign or
other court or governmental body or agency, or any other regulatory
body, is required in connection with the execution, delivery or
performance by the MFSS Shareholders of this Agreement, including the
contribution of their MFSS Shares to Mega Force, except for any such
action, consent, approval or filing obtained prior to the date hereof
and except where the failure to obtain such action, consent, approval
or filing would have a material adverse effect on the transaction
contemplated herein.
(c) No Untrue or Inaccurate Representation or Warranty. No
representation or warranty by the MFSS Shareholders set forth herein
contains any untrue statement of a
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material fact or omits to state a material fact necessary to make the
statements contained herein not misleading.
Section 3.2 Representations and Warranties of MFSS. MFSS hereby
represents and warrants to ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members the
following:
(a) Organization, Authority and Capacity. MFSS is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of North Carolina and has the full power
and authority necessary to (i) execute, deliver and perform its
obligations under this Agreement, and (ii) carry on its business as it
has been and is now being conducted and to own and lease the properties
and assets which it now owns or leases. MFSS is duly qualified to do
business and is in good standing in each jurisdiction in which the
failure to be so qualified or in good standing would have a material
adverse effect on its business. MFSS has no Subsidiaries.
(b) Authorization and Validity. The execution, delivery and
performance of this Agreement by MFSS have been duly authorized by all
necessary action on the part of MFSS. This Agreement has been duly
executed and delivered by MFSS and constitutes the legal, valid and
binding obligation of MFSS, enforceable against MFSS in accordance with
its terms, except as such terms may be limited by bankruptcy,
insolvency, or other laws affecting creditors' rights generally, or as
such terms may be modified by a court of equity.
(c) Absence of Conflicting Agreements or Required Consents.
The execution, delivery and performance by MFSS of this Agreement: (i)
does not require the consent of or notice to any governmental or
regulatory authority or any other third party; (ii) will not conflict
with any provision of MFSS's articles of incorporation or bylaws; (iii)
will not conflict with or result in a violation of any law, ordinance,
regulation, ruling, judgment, order or injunction of any court or
governmental instrumentality to which MFSS is a party or by which MFSS
or any of its assets or properties are bound; (iv) will not conflict
with, constitute grounds for termination of, result in a breach of,
constitute a default under, require any notice under, or accelerate or
permit the acceleration of any performance required by the terms of any
agreement, instrument, license or permit to which MFSS is a party or by
which any of its assets or properties are bound; and (v) will not
create any Encumbrance or restriction upon any of the assets or
properties of MFSS.
(d) Governing Documents. True and correct copies of the
organizational documents and all amendments thereto of MFSS (certified
by the Secretary of State of the State of North Carolina) and copies of
the bylaws of MFSS have been provided to ▇▇▇▇▇▇▇▇-▇▇▇▇▇. ▇▇▇▇▇▇▇▇-▇▇▇▇▇
has previously been provided with access to MFSS's minutes, and such
minutes accurately reflect all proceedings of the shareholders and
board of directors of MFSS (and all committees thereof). The stock
record books of MFSS, which have been made available to ▇▇▇▇▇▇▇▇-▇▇▇▇▇
for review, contain true, complete and accurate records of the stock
ownership of MFSS.
(e) Outstanding and Authorized Capitalization. The authorized
capital stock of MFSS consists of 100,000 shares of common stock, of
which 50,000 shares of common stock are issued and outstanding and
owned beneficially and of record by the MFSS Shareholders as of the
date of this Agreement. All of the issued and outstanding shares of
capital stock of MFSS are duly and validly issued and outstanding and
are fully paid and nonassessable under the laws of the State of North
Carolina. None of the outstanding shares of capital stock of MFSS has
been issued in violation of any pre-emptive rights of the current or
past
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shareholders of MFSS. Except as set forth in this Section 3.2(e), there
are no shares of capital stock or other equity securities of MFSS
outstanding and no outstanding rights relating to the capital stock of
MFSS.
(f) Financial Statements. Attached hereto as Schedule 3.2(f)
are the audited combined financial statements of MFSS (for the purposes
of this Section 3.2(f), MFSS shall also include its prior Affiliates)
for the year ended December 31, 1995 and quarterly unaudited combined
financial statements for MFSS's most recently ended quarterly period,
which reflect the results of the operations and financial condition of
MFSS for such periods and at such dates (collectively, the "MFSS
Financial Statements"). The MFSS Financial Statements have been
prepared in accordance with GAAP and present fairly in all material
respects the financial position of MFSS as of the dates indicated and
present fairly in all material respects the results of MFSS's
operations for the periods then ended, and are in accordance with the
books and records of MFSS, which have been properly maintained and are
complete and correct in all material respects.
Section 3.3 Representations and Warranties of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Members. The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members, jointly and severally, hereby represent and
warrant to MFSS and MFSS Shareholders the following:
(a) Equity. All of the capital equity of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is
owned of record and beneficially by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members. Each
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Member has good title to his respective share of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests, free and clear of any Encumbrances. There are
no outstanding rights of first refusal, pre-emptive rights, options or
other agreements providing for purchase rights with respect to any of
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests.
(b) No Conflicts; Approvals. Neither the execution, delivery
and performance of this Agreement by any ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Member nor the
consummation of the transactions contemplated herein will (i) result in
any conflict with, breach of, or default (or give rise to any rights to
termination, cancellation or acceleration or loss of any right or
benefit) under or require any consent or approval which has not been
obtained with respect to any of the terms, conditions, or provisions of
any material contract or agreement to which any ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Member
is a party or (ii) violate any order, law, rule or regulation
applicable to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members. No action, consent or
approval by, or filing by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members with any federal,
state, municipal, foreign or other court or governmental body or
agency, or any other regulatory body, is required in connection with
the execution, delivery or performance by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members of
this Agreement, including the contribution of their ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Interests to Mega Force, except for any such action, consent, approval
or filing obtained prior to the date hereof and except where the
failure to obtain such action, consent, approval or filing would have a
material adverse effect on the transactions contemplated herein.
(c) No Untrue or Inaccurate Representation or Warranty. No
representation or warranty by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members set forth
herein contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein
not misleading.
Section 3.4 Representations and Warranties of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and
Affiliates. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and its Affiliates hereby represent and warrant to
MFSS and the MFSS Shareholders the following; provided, that with respect to any
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Affiliate, the representations and warranties shall also apply to
such Affiliates:
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(a) Organization, Authority and Capacity. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is a
limited liability company or partnership duly organized, validly
existing, and in good standing under the laws of its state of
organization and has the full power and authority necessary to carry on
its business as it has been and is now being conducted and to own and
lease the properties and assets which it now owns or leases.
▇▇▇▇▇▇▇▇-▇▇▇▇▇ is duly qualified to do business and is in good standing
in each jurisdiction in which a failure to be so qualified or in good
standing would have a material adverse effect on its business.
(b) Authorization and Validity. The execution, delivery and
performance of this Agreement by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ have been duly
authorized by all necessary action on the part of ▇▇▇▇▇▇▇▇-▇▇▇▇▇. This
Agreement has been duly executed and delivered by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and
constitutes the legal, valid and binding obligation of ▇▇▇▇▇▇▇▇-▇▇▇▇▇,
enforceable against ▇▇▇▇▇▇▇▇-▇▇▇▇▇ in accordance with its terms, except
as may be limited by bankruptcy, insolvency, or other laws affecting
creditors' rights generally, or as may be modified by a court of
equity.
(c) Absence of Conflicting Agreements or Required Consents.
The execution, delivery and performance by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ of this
Agreement: (i) does not require the consent of or notice to any
governmental or regulatory authority or any other third party; (ii)
will not conflict with any provision of ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ organizational
or governing documents; (iii) will not conflict with or result in a
violation of any law, ordinance, regulation, ruling, judgment, order or
injunction of any court or governmental instrumentality to which
▇▇▇▇▇▇▇▇-▇▇▇▇▇ is a party or by which ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or any of its
assets or properties are bound; (iv) will not conflict with, constitute
grounds for termination of, result in a breach of, constitute a default
under, require any notice under, or accelerate or permit the
acceleration of any performance required by the terms of any agreement,
instrument, license or permit to which ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is a party or by
which any of its assets or properties are bound; and (v) will not
create any Encumbrance or restriction upon any of the assets or
properties of ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
(d) Governing Documents. True and correct copies of the
organizational documents and all amendments thereto of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
(certified by the Secretary of State of the State of Tennessee) and
copies of the bylaws or operating agreements of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ have
been provided to MFSS. MFSS has been provided previously with access to
▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ minutes, and such minutes accurately reflect all
proceedings of the members and directors or managers of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
(and all committees thereof). The membership record books of
▇▇▇▇▇▇▇▇-▇▇▇▇▇, which have been made available to MFSS for review,
contain true, complete and accurate records of the equity ownership of
▇▇▇▇▇▇▇▇-▇▇▇▇▇.
(e) Outstanding and Authorized Capitalization. The authorized
equity of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ consists of membership interests, of which all
membership interests are owned beneficially and of record by the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members as of the date of this Agreement. All of the
issued and outstanding equity interests of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ are duly and
validly issued and outstanding and are fully paid and nonassessable
under the laws of the State of Tennessee. None of the outstanding
equity interests of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has been issued in violation of any
pre-emptive rights of the current or past members of ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
Except as set forth in this Section 3.4(e), there are no shares of
equity securities of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ outstanding and no outstanding
rights relating to the equity interests of ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
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(f) Financial Statements. Attached hereto as Schedule 3.4(f)
are the unaudited consolidated financial statements of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
for the year ended December 31, 1995 and the six-month period ended
June 30, 1996, as well as quarterly unaudited consolidated financial
statements for ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ most recently ended quarterly period,
which reflect the results of operations and financial condition of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ for such periods and at such dates (collectively, the
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial Statements"). The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial
Statements have been prepared in accordance with GAAP on a consolidated
basis and present fairly in all material respects the financial
position of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ as of the dates indicated and present fairly
in all material respects the results of the operations of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ for the periods then ended, and are in accordance with
the books and records of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, which have been properly
maintained and are complete and correct in all material respects.
(g) Absence of Changes. Except as disclosed on Schedule
3.4(g), since December 31, 1995, ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has not:
(1) suffered any material adverse change in its
working capital, condition (financial or otherwise), assets,
liabilities, reserves, business or operations;
(2) paid, discharged or satisfied any material
liability other than in the ordinary course of business;
(3) written off as uncollectible any account
receivable other than in the ordinary course of business;
(4) compromised any debts, claims or rights or
disposed of any of its properties or assets other than in the
ordinary course of business;
(5) entered into any commitments or transactions not
in the ordinary course of business involving aggregate value
in excess of $100,000 or made aggregate capital expenditures
or commitments in excess of $100,000;
(6) made any material change in any method of
accounting or accounting practice;
(7) subjected any of its assets, tangible or
intangible, to any Encumbrance or restriction of any nature
whatsoever, except for liens for current property taxes not
yet due and payable;
(8) increased any salaries, wages or employee
benefits for any employee other than in the ordinary course of
business;
(9) hired, committed to hire or terminated any
employee other than in the ordinary course of business;
(10) declared, set aside or made (or became obligated
for) any payment, dividend or other distribution to any holder
of capital stock or purchased, redeemed or otherwise acquired,
directly or indirectly, (or
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12
became obligated to purchase, redeem or otherwise acquire) any
of its capital stock;
(11) terminated or amended any material contract,
license or other instrument to which ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is a party
or suffered any loss or termination or threatened loss or
termination of any existing material contract, business
arrangement or supplier;
(12) effected any change in its capital structure; or
(13) agreed, whether in writing or otherwise, to take
any action described in this Section 3.4(g).
(h) No Undisclosed Liabilities. Except as listed on Schedule
3.4(h) hereto, or as otherwise disclosed herein or in the Schedules
hereto, ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has no liabilities or obligations, whether
accrued, absolute, contingent or otherwise, other than liabilities and
obligations reflected in the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial Statements or
incurred in the ordinary course of its business since the date of
▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ most recent balance sheet included in the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial Statements.
(i) Litigation. Except as listed on Schedule 3.4(i) hereto,
(i) there are no claims, lawsuits, actions, arbitrations,
administrative or other proceedings pending against or affecting the
assets, properties or business of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, and, to the knowledge
of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, no such matter is threatened and there is no basis
for any such action, (ii) to the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, there are
no governmental or administrative investigations or inquiries pending
that involve ▇▇▇▇▇▇▇▇-▇▇▇▇▇, and (iii) there are no judgments against
or consent decrees binding on ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or any of their respective
assets.
(j) No Violation of Law. Except as set forth on Schedule
3.4(j) hereto, to the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has
not been and is not now in violation of any applicable local, state or
federal law, ordinance, regulation, order, injunction or decree, or any
other requirement of any governmental body, agency or authority or
court binding on it, or relating to its property or business or its
advertising, sales or pricing practices, except for any such violations
as would not individually or in the aggregate have a material adverse
effect on ▇▇▇▇▇▇▇▇-▇▇▇▇▇, financial or otherwise.
(k) Real and Personal Property.
(1) Schedule 3.4(k)(1) sets forth a list of all items
of material personal and mixed, tangible and intangible,
property, rights and assets of ▇▇▇▇▇▇▇▇-▇▇▇▇▇. Except as set
forth on Schedule 3.4(k)(1), ▇▇▇▇▇▇▇▇-▇▇▇▇▇ (i) has good and
valid title to all of the personal and mixed, tangible and
intangible, property, rights and assets which it purports to
own, including all the personal property and assets reflected
in the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial Statements; and (ii) owns such
rights, assets and personal property free and clear of all
liens, encumbrances or restrictions of any nature whatsoever
(except for current year ad valorem taxes).
(2) Schedule 3.4(k)(2) contains a true and correct
description of all real property owned or leased by
▇▇▇▇▇▇▇▇-▇▇▇▇▇, including all improvements located thereon.
Except as set forth on Schedule 3.4(k)(2),
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▇▇▇▇▇▇▇▇-▇▇▇▇▇ has good and valid title to all real property
owned by it, free and clear of any liens, encumbrances or
restrictions of any nature whatsoever. MFSS has been furnished
with true, correct and complete copies of all leases, deeds,
easements and other documents and instruments concerning the
matters listed on Schedule 3.4(k)(2). No condemnation or
similar actions are currently in effect or pending against any
part of any real property owned or leased by ▇▇▇▇▇▇▇▇-▇▇▇▇▇
thereof and, to the best knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, no such
action is threatened against any such real property. There are
no encroachments, leases, easements, covenants, restrictions,
reservations or other burdens of any nature which might impair
in any material respect the use of any owned or leased real
property in a manner consistent with past practices nor does
any part of any building structure or any other improvement
thereon encroach on any other property.
(3) To the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, the present
zoning, subdivision, building and other ordinances and
regulations applicable to any owned or leased real property
permit the continued operation, use, occupancy and enjoyment
of such real property consistent with past practices, and
▇▇▇▇▇▇▇▇-▇▇▇▇▇ is in compliance with, and has received no
notices of violations of, any applicable zoning, subdivision
or building regulation, ordinance or other law, regulation, or
requirement. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has all rights and easements
necessary for public ingress thereto and egress therefrom and
for the provision of all utility services thereto, including
any required curb cut or street opening permits or licenses
for vehicular access over presently existing roads and
driveways.
(4) The assets (including all buildings and
improvements in connection therewith owned by ▇▇▇▇▇▇▇▇-▇▇▇▇▇)
of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ are in good operating condition and repair,
ordinary wear and tear excepted.
(5) Each piece of real property set forth on Schedule
3.4(k)(2) is, to the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, separately
assessed for real property tax assessment purposes and is not
combined with any other real property for such tax assessment
purposes. Schedule 3.4(k)(5) contains true, complete and
correct copies of the most recent tax bills for each piece of
real property set forth on Schedule 3.4(k)(2).
(6) Schedule 3.4(k)(6) contains a complete and
correct list of all trademarks, trade names, service marks,
service names, brand names, copyrights, technology rights and
licenses, know-how, software and patents, registrations
thereof and applications therefor, and any other intellectual
property used in the business of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, together with
a complete list of all licenses granted by or to
▇▇▇▇▇▇▇▇-▇▇▇▇▇ with respect to any of the foregoing.
▇▇▇▇▇▇▇▇-▇▇▇▇▇ is not in receipt of any notice of any
violation of, and has no reason to believe that the operations
of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ are violating the rights of others with
respect to, any such matter, and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has taken
reasonable measures to protect its rights with respect to any
such matters as are proprietary to it.
(l) Contracts and Commitments.
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(1) Schedule 3.4(l) contains a complete and accurate
list of all contracts, agreements, commitments, instruments
and obligations (whether written or oral, contingent or
otherwise) of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ concerning the following matters
(collectively, the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Agreements"):
(i) the lease (as lessee or lessor) or
license (as licensee or licensor) of any real or
personal property (tangible or intangible);
(ii) the employment or engagement of any
officer, director, employee, consultant or agent;
(iii) any arrangement limiting the freedom
of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ to compete in any manner in any
line of business or requiring ▇▇▇▇▇▇▇▇-▇▇▇▇▇ to share
profits;
(iv) any arrangement that could reasonably
be anticipated to have a material adverse effect on
▇▇▇▇▇▇▇▇-▇▇▇▇▇, financial or otherwise;
(v) any arrangement not in the ordinary
course of business;
(vi) any power of attorney, whether limited
or general, granted by or to ▇▇▇▇▇▇▇▇-▇▇▇▇▇; and
(vii) any arrangement granting a member of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ any rights which are not common to all
other members of ▇▇▇▇▇▇▇▇-▇▇▇▇▇; and
(viii) any other arrangement that requires
performance for a period of more than 90 days or that
requires payments in excess of $50,000.
(2) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has delivered to MFSS true and
complete copies of all of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Agreements.
Except as indicated on Schedule 3.4(l) hereto, the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Agreements are valid and effective in
accordance with their respective terms, and there is not under
any of such ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Agreements (i) any existing or
claimed default by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or any event which with
notice or lapse of time, or both, would constitute a default
by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or (ii) to the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇,
any existing or claimed default by any other party or event
which with notice or lapse of time, or both, would constitute
a default by any such party. Except as indicated on Schedule
3.4(l), the continuation, validity and effectiveness of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Agreements will not be affected by the
transactions contemplated by this Agreement and the
transactions contemplated by this Agreement will not result in
a breach of or default under, or require the consent of any
other party to, any of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Agreements. There is
no actual or, to the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, threatened
termination, cancellation or limitation of any of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Agreements. To the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇,
there
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is no pending or threatened bankruptcy, insolvency or similar
proceeding with respect to any other party to the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Agreements.
(m) Employment and Labor Matters.
(1) Schedule 3.4(m)(1) sets forth (i) the number of
full-time and part-time employees of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and (ii)
the name and compensation paid to each employee of or
consultant to ▇▇▇▇▇▇▇▇-▇▇▇▇▇ who received salary, benefits and
bonuses for either of ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ most recently ended
fiscal years in excess of $50,000.
(2) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is in compliance in all material
respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment,
wages and hours, occupational safety and health, including
laws concerning unfair labor practices within the meaning of
Section 8 of the National Labor Relations Act, as amended, and
the employment of non-residents under the Immigration Reform
and Control Act of 1986, as amended.
(3) Except as disclosed on Schedule 3.4(m)(3),
(i) there are no charges, governmental
audits, investigations, administrative proceedings or
complaints concerning employment practices of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ pending or, to the knowledge of
▇▇▇▇▇▇▇▇-▇▇▇▇▇, threatened before any federal, state
or local agency or court, and, to the knowledge of
▇▇▇▇▇▇▇▇-▇▇▇▇▇, no basis for any such matter exists;
(ii) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is not a party to any
union or collective bargaining agreement, and, to the
knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, no union attempts to
organize the employees of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ have been
made, nor are any such attempts now threatened; and
(iii) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has not experienced any
organized slowdown, work interruption, strike, or
work stoppage by its employees.
(n) Employee Benefit Matters. The Benefit Plans described in
Schedule 3.4(n) are the only Benefit Plans maintained by ▇▇▇▇▇▇▇▇-▇▇▇▇▇
for the benefit of its members, officers, directors, employees, former
employees, or independent contractors. Except as disclosed on Schedule
3.4(n), there are no contributions or payments due with respect to any
of the Benefit Plans of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, nor will any such contributions
or payments be due or required to be paid on or prior to the Closing
Date. Each Benefit Plan of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has been operated and
administered in compliance with the provisions of ERISA, and the
provisions of the Code applicable to it. No Benefit Plan of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ or its ERISA Affiliates which is subject to the minimum
funding standards of ERISA or the Code, if any, has incurred any
accumulated funding deficiency within the meaning of ERISA or the Code.
All contributions with respect to a Benefit Plan of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or
its ERISA Affiliates that is subject to Code Section 412 or ERISA
Section 302 have been timely made and there is
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16
no lien or expected to be a lien under Code Section 412(n) or ERISA
Section 302(f) or tax under Code Section 4971. No Benefit Plan of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ or its ERISA Affiliates has a "liquidity shortfall" as
defined in Code Section 412(m)(5). Neither ▇▇▇▇▇▇▇▇-▇▇▇▇▇ nor its ERISA
Affiliates are subject to or can reasonably be expected to become
subject to a lien under Code Section 401(a)(29). No event has occurred
in connection with a Benefit Plan of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or its ERISA
Affiliates that could result in liability to ▇▇▇▇▇▇▇▇-▇▇▇▇▇ under Title
IV of ERISA. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has not incurred any liability to the
Pension Benefit Guaranty Corporation in connection with any Benefit
Plan of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or its ERISA Affiliates which is subject to
Title IV of ERISA, if any. The assets of each Benefit Plan of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ or its ERISA Affiliates that is subject to Title IV of
ERISA, if any, are sufficient to provide all "benefit liabilities" (as
defined in ERISA Section 4001(a)(16)) under such Benefit Plan if such
Benefit Plan terminated, and are also sufficient to provide all other
benefits due under the Benefit Plan (including, but not limited to,
ancillary, disability, shutdown, early retirement and welfare
benefits). Neither ▇▇▇▇▇▇▇▇-▇▇▇▇▇ nor its ERISA Affiliates have had an
"obligation to contribute" (as defined in ERISA Section 4212) to a
"multiemployer pension plan" (as defined in ERISA Sections 4001(a)(3)
and 3(37)(A)) at any time. No event which constitutes a reportable
event as defined in Section 4043 of ERISA has occurred or is continuing
with respect to any Benefit Plan covered by ERISA. No facts exist which
will result in a material increase in the premium costs of any Benefit
Plan for which benefits are insured or a material increase in benefit
costs of any Benefit Plan which provides self-insured benefits. No
"prohibited transaction" (as defined in ERISA Section 406 or Code
Section 4975) has occurred with respect to any Benefit Plan. None of
the Benefit Plans has any current or projected liability in respect of
post-employment or post-retirement health or medical or life insurance
benefits for former or retired employees of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, except as
required to avoid excise taxes under Code Section 4980B. All Benefit
Plans subject to Code Section 4980B or Part 6 of Title I of ERISA have
been maintained in compliance with the requirements of Code Section
4980B and Part 6 of Title I of ERISA. There is no contract, agreement,
plan or arrangement covering any employee or former employee of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ that could result in the payment of any amount that
would not be deductible under Code Sections 162(m) or 280G. As of the
Closing Date, ▇▇▇▇▇▇▇▇-▇▇▇▇▇ will have no material liabilities under
any Benefit Plan that is not reflected in the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial
Statements.
(o) Insurance Policies. Except as described on Schedule
3.4(o), all of the assets and business of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is insured in
such amounts and against such losses, casualties or risks as are
customary for similar properties and businesses, and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has
maintained such customary insurance continuously from the earlier of
(i) the date of its inception and (ii) the date of inception of any of
its predecessors. Schedule 3.4(o) sets forth a complete and accurate
list and description of all insurance policies in force naming
▇▇▇▇▇▇▇▇-▇▇▇▇▇, or any employee thereof, as an insured or beneficiary
or as a loss payee or for which ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has paid or is obligated
to pay all or part of the premiums, including, without limitation, all
liability, fire, health and life insurance policies. All such policies
are in full force and effect and the premiums due thereon have been
timely paid. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has not received notice of any pending or
threatened termination or premium increase (retroactive or otherwise)
with respect thereto, and, to the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇,
▇▇▇▇▇▇▇▇-▇▇▇▇▇ is in compliance with all conditions contained therein.
Except as set forth on Schedule 3.4(o), there are no pending claims
against such insurance by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ as to which insurers are
defending under reservation of rights or have denied liability, and
except as set forth on Schedule 3.4(o), there exists no claim under
such insurance that has not been properly filed by ▇▇▇▇▇▇▇▇-▇▇▇▇▇. To
the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, there are no outstanding or
unfulfilled requirements or recommendations of any insurance company
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insuring ▇▇▇▇▇▇▇▇-▇▇▇▇▇ regarding any repairs to or work to be
performed with respect to the assets of ▇▇▇▇▇▇▇▇-▇▇▇▇▇. ▇▇▇▇▇▇▇▇-▇▇▇▇▇
has complied with any such requirements and recommendations as to which
▇▇▇▇▇▇▇▇-▇▇▇▇▇ has received notice. Schedule 3.4(o) contains a listing
of all claims made and loss histories in respect of any insurance
maintained by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or any predecessor during the past three
(3) years. Schedule 3.4(o) contains also a listing by amount and
description of all current and pending workers' compensation reserves
and claims naming ▇▇▇▇▇▇▇▇-▇▇▇▇▇ as employer.
(p) Environmental Matters. Except as set forth in Schedule
3.4(p), there are no present or past Environmental Conditions in any
way relating to the business, properties or assets of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is currently operating its business in compliance
with all federal, state and local environmental laws.
(q) Accounts Receivable and Payable. To the knowledge of
▇▇▇▇▇▇▇▇-▇▇▇▇▇, except as set forth on Schedule 3.4(q), the accounts
receivable of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ outstanding as of the Closing Date will be
subject to no defenses, counterclaims, or rights of setoff other than
those arising in the ordinary course of business and for which adequate
reserves have been established. Except as set forth on Schedule 3.4(q),
no undisputed accounts payable of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ are, at this date,
over 45 days old.
(r) Taxes.
(1) Except as listed in Schedule 3.4(r) or as
reflected in the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial Statements, there
does not exist and will not after the Closing Date exist any
liability for taxes which may be asserted by any taxing
authority against, and no lien or other encumbrance for taxes
will attach to, ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or its respective assets other
than taxes due in respect of periods for which tax returns are
not yet due and for which adequate accruals have been made in
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial Statements. All federal, state
and local tax returns and tax reports required to be filed
prior to the date hereof with respect to ▇▇▇▇▇▇▇▇-▇▇▇▇▇ have
been filed (other than returns for which extensions to file
have been granted) with the appropriate governmental agencies
in all jurisdictions in which such returns and reports are
required to be filed, all of which are true, correct and
complete, and all amounts shown as owing thereon have been
paid.
(2) Except as listed on Schedule 3.4(r),
▇▇▇▇▇▇▇▇-▇▇▇▇▇ has not received notice of any tax claims being
asserted or any proposed assessment by any taxing authority
and no tax returns of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ have been examined by the
IRS or the appropriate state agencies for any fiscal year or
period ended prior to the date hereof, and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is
not presently under, nor has it received notice of any,
contemplated investigation or audit by the IRS or any state
agency concerning any fiscal year or period ended prior to the
date hereof. Except as listed on Schedule 3.4(r),
▇▇▇▇▇▇▇▇-▇▇▇▇▇ has not executed any extension or waivers of
any statute of limitations on the assessment or collection of
any tax due that is currently in effect.
(3) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and any predecessors in interest
have withheld or collected from each payment made to each of
their employees the amount of all taxes required to be
withheld or collected therefrom and
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▇▇▇▇▇▇▇▇-▇▇▇▇▇ and any predecessors in interest have paid the
same to the proper tax depositories or collecting authorities.
(4) For purposes hereof, "taxes" shall mean any
federal, state, county, local, foreign or other tax, charge,
imposition or other levy (including interest or penalties
thereon) including, without limitation, income taxes,
estimated taxes, excise taxes, sales taxes, use taxes, gross
receipts taxes, franchise taxes, taxes on earnings and
profits, employment and payroll related taxes, property taxes,
real property transfer taxes, Federal Insurance Contributions
Act taxes, taxes on value added and import duties, whether or
not measured in whole or in part by net income, imposed by the
United States or any political subdivision thereof or by any
jurisdiction other than the United States or any political
subdivision thereof.
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(s) Licenses and Authorizations.
(1) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ is the holder of all valid
licenses and other rights and authorizations required by law,
ordinance, regulation or ruling of any governmental regulatory
authority necessary to operate its business. Set forth on
Schedule 3.4(s) is a correct and complete list of such
licenses, permits and other authorizations, complete and
correct copies of which have been provided to MFSS.
(2) To the knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, no material
violation, default, order or deficiency exists with respect to
any of the items listed on Schedule 3.4(s). ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has
not received any notice of any action pending or recommended
by any state or federal agencies having jurisdiction over the
items listed on Schedule 3.4(s), either to revoke, withdraw or
suspend any license, right or authorization thereunder. To the
knowledge of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, no event has occurred which, with
the giving of notice, the passage of time, or both, would
constitute grounds for a violation, order or deficiency with
respect to any of the items listed on Schedule 3.4(s) or to
revoke, withdraw or suspend any such license. Except as listed
on Schedule 3.4(s), no consent or approval of, prior filing
with or notice to, or any action by, any governmental body or
agency or any other third party is required in connection with
any such license, right or authorization by reason of the
consummation of the transactions contemplated by this
Agreement and the continued operation of the businesses of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ thereafter on a basis consistent with past
practices.
(t) Inspections and Investigations. Except as set forth and
described in Schedule 3.4(t), (i) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has not, during the
past three (3) years, been the subject of any inspection,
investigation, survey, audit, monitoring or other form of review by any
governmental regulatory entity, trade association, professional review
organization, accrediting organization or certifying agency for the
purpose of any alleged improper activity, nor has ▇▇▇▇▇▇▇▇-▇▇▇▇▇
received any notice of deficiency in connection with its operations,
(ii) there are not presently any outstanding deficiencies or work
orders of any governmental authority having jurisdiction over
▇▇▇▇▇▇▇▇-▇▇▇▇▇, or other third party, requiring conformity to any
applicable agreement, statute, regulation, ordinance or bylaw,
including, but not limited to, the government and private programs, and
(iii) there is not any notice of any claim, requirement or demand of
any licensing or certifying agency or other third party supervising or
having authority over ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or its operations to rework or
redesign any part thereof or to provide additional furniture, fixtures,
equipment, appliances or inventory so as to conform to or comply with
any existing law, code, rule, regulation or standard. Copies of all
reports, correspondence, notices and other documents relating to any
matter described or referenced in Schedule 3.4(t) have been provided to
MFSS.
(u) Statements True and Correct. No representation or warranty
made herein by ▇▇▇▇▇▇▇▇-▇▇▇▇▇, nor in any statement, certificate or
instrument to be furnished to MFSS by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ pursuant to this
Agreement, 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 contained herein and therein not misleading.
-19-
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(v) Subsidiaries and Predecessors. Except as set forth on
Schedule 3.4(v), ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has not owned and does not currently
own, directly or indirectly, of record, beneficially or equitably, any
capital stock or other equity, ownership or proprietary interest in any
corporation, partnership, limited liability company, association,
trust, joint venture or other entity. Set forth on Schedule 3.4(v) is a
listing of all predecessor companies of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, including the
names of any entities from whom ▇▇▇▇▇▇▇▇-▇▇▇▇▇ previously acquired
material assets, and any other entity of which ▇▇▇▇▇▇▇▇-▇▇▇▇▇ has been
a subsidiary or division. Except as listed on Schedule 3.4(v),
▇▇▇▇▇▇▇▇-▇▇▇▇▇ has not sold or disposed of, by way of asset sale, stock
sale, spin-off or otherwise, any material assets or business of
▇▇▇▇▇▇▇▇-▇▇▇▇▇.
ARTICLE IV
Covenants of the Parties
Section 4.1 Covenants of ▇▇▇▇▇▇▇▇-▇▇▇▇▇. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ hereby
covenants and agrees as follows:
(a) Access and Information. Prior to the Closing Date:
(1) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall give representatives of MFSS
reasonable access during normal business hours to each of the
offices in which the business operations of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ are
conducted, books, accounts and records and all other relevant
documents and will make available, and use its best efforts to
cause their independent auditors to make available, copies of
all such documents and information with respect to the
business and properties of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ as representatives
of MFSS may from time to time reasonably request, including,
without limitation, the working papers used to prepare the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial Statements and income tax returns
filed previously by or on behalf of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, all in
such manner as not unduly to disrupt ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ normal
business activities. ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ accountants shall
prepare and deliver to MFSS an analysis of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Financial Statements illustrating appropriate adjustments to
GAAP.
(2) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall confer on a regular and
frequent basis with one or more representatives of MFSS to
report material operational matters and to report the general
status of on-going operations of ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
(3) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall notify MFSS of any material
adverse change in the financial position, earnings or business
of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, of any unexpected emergency or other
unanticipated change in the business of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, or of
any governmental complaints, investigations or hearings or
adjudicatory proceedings (or communications indicating that
the same may be contemplated), or of any other matter which
may be material to ▇▇▇▇▇▇▇▇-▇▇▇▇▇, or which would cause the
representations contained in Section 3.4 hereof not to be true
and correct, and shall keep MFSS fully informed of such events
and permit its representatives to participate in all
discussions relating thereto.
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(b) Conduct of Business. Prior to the Closing Date, except as
otherwise approved by MFSS or necessary to consummate the transactions
contemplated by this Agreement, ▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall conduct its
business only in the ordinary course thereof consistent with past
practice and in such a manner that the representations and warranties
contained in Section 3.4 hereof shall be true and correct at and as of
the Closing Date (except for changes contemplated, permitted or
required by this Agreement) and so that the conditions to be satisfied
by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ at the Closing Date shall have been satisfied.
▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall, consistent with conducting its business in
accordance with reasonable business judgment, preserve its business
intact; and use its best and most diligent efforts to (i) preserve and
maintain the business organization and the personnel of its business,
(ii) keep available to Mega Force the services of its present
employees, (iii) preserve for Mega Force the goodwill of its customers
and all others having business relations with either ▇▇▇▇▇▇▇▇-▇▇▇▇▇,
and (iv) promptly pay or perform, in accordance with its current
policies and procedures, when due, all liabilities incurred prior to
the Closing Date.
(c) Unusual Events. Until the Closing Date, ▇▇▇▇▇▇▇▇-▇▇▇▇▇
shall supplement or amend all relevant Exhibits and Schedules with
respect to any matter thereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been
required to be set forth or described in such Exhibits or Schedules.
(d) Departmental Violations. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall make all
reasonable attempts to comply with all notices of violations of law or
municipal ordinances, orders or requirements noted in or issued by
government agencies or departments having authority with respect to
buildings, fire, labor, health, or any other federal, state or
municipal department having jurisdiction against or affecting the
operations of ▇▇▇▇▇▇▇▇-▇▇▇▇▇, prior to the Closing Date unless
contesting the same in good faith. All such notices, after the date
hereof and prior to the Closing Date, shall be complied with by
▇▇▇▇▇▇▇▇-▇▇▇▇▇, as applicable, prior to the Closing Date. Upon written
request, ▇▇▇▇▇▇▇▇-▇▇▇▇▇, as required, shall furnish MFSS with an
authorization to make the necessary searches for such notices.
(e) Prior Consent of MFSS. Between the date hereof and the
Closing Date, ▇▇▇▇▇▇▇▇-▇▇▇▇▇ will not, without the prior written
consent of MFSS:
(1) make any change in its governing instruments;
(2) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of
any kind;
(3) declare or pay a dividend;
(4) enter into any contract or commitment or incur or
agree to incur any liability or make any capital expenditures
in excess of $5,000 in the aggregate, except for purchases of
inventory in accordance with past practices in the ordinary
course of business;
(5) increase the compensation payable or to become
payable to any officer, director, shareholder, employee or
independent contractor;
(6) create, assume or permit to exist any new
Encumbrance;
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(7) sell, assign, lease or otherwise transfer or
dispose of any of its property or assets, except in the
ordinary course of business consistent with past practices;
(8) negotiate for the acquisition of any business or
the start-up of any new business;
(9) merge or consolidate or agree to merge or
consolidate with or into any other entity;
(10) waive any of its material rights or claims;
(11) knowingly breach or permit a breach or amend or
terminate any material contract to which it is a party or by
which it is bound or any Permit;
(12) enter into any other transaction outside the
ordinary course of it's business or prohibited hereunder; or
(13) adopt, amend or terminate any Employee Benefit
Plan.
(f) Since June 30, 1996 and up to the Closing Date,
▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall not have expended, or contracted to expend more
than $275,000 in aggregate capital expenditures.
(g) Exclusivity. Prior to the Closing Date, ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members affirm their covenant not to engage in
discussion with any other party concerning merger, sale or combination
of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ business.
Section 4.2 Covenants of MFSS. MFSS hereby covenants and agrees as
follows:
(a) Access and Information. Prior to the Closing Date:
(1) MFSS thereof shall give representatives of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ reasonable access during normal business hours
to each of the offices in which the business operations of
MFSS are conducted, books, accounts and records and all other
relevant documents and will make available, and use its best
efforts to cause its independent auditors to make available,
copies of all such documents and information with respect to
the business and properties of MFSS, as representatives of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ may from time to time reasonably request,
including, without limitation, the working papers used to
prepare the MFSS Financial Statements and income tax returns
filed previously by or on behalf of MFSS, all in such manner
as not unduly to disrupt MFSS's normal business activities.
MFSS's accountants shall prepare and deliver to ▇▇▇▇▇▇▇▇-▇▇▇▇▇
an analysis of the MFSS Financial Statements illustrating
appropriate adjustments to GAAP.
(2) MFSS shall confer on a regular and frequent basis
with one or more representatives of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ to report
material operational matters and to report the general status
of on-going operations of MFSS.
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(3) MFSS shall notify ▇▇▇▇▇▇▇▇-▇▇▇▇▇ of any material
adverse change in the financial position, earnings or business
of MFSS, and any unexpected emergency or other unanticipated
change in the business of MFSS, and of any governmental
complaints, investigations or hearings or adjudicatory
proceedings (or communications indicating that the same may be
contemplated), or of any other matter which may be material to
MFSS, or any Subsidiary thereof, or which would cause the
representations contained in Section 3.2 hereof not to be true
and correct and shall keep ▇▇▇▇▇▇▇▇-▇▇▇▇▇ fully informed of
such events and permit its representatives to participate in
all discussions relating thereto.
(b) Conduct of Business. Prior to the Closing Date, except as
otherwise approved by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or necessary to consummate the
transactions contemplated by this Agreement, MFSS shall conduct its
business only in the ordinary course thereof consistent with past
practice and in such a manner that the representations and warranties
contained in Section 3.2 hereof shall be true and correct at and as of
the Closing Date (except for changes contemplated, permitted or
required by this Agreement) and so that the conditions to be satisfied
by MFSS at the Closing Date shall have been satisfied. MFSS shall,
consistent with conducting its business in accordance with reasonable
business judgment, preserve its business intact; and use its best and
most diligent efforts to (i) preserve and maintain the business
organization and the personnel of its business, (ii) keep available to
Mega Force the services of its present employees, (iii) preserve for
Mega Force the goodwill of its customers and all others having business
relations with MFSS, and (iv) promptly pay or perform, in accordance
with its current policies and procedures, when due, all liabilities
incurred prior to the Closing Date.
(c) Unusual Events. Until the Closing Date, MFSS shall
supplement or amend all relevant Exhibits and Schedules with respect to
any matter thereafter arising or discovered which, if existing or known
at the date of this Agreement, would have been required to be set forth
or described in such Exhibits or Schedules.
(d) Departmental Violations. MFSS shall make all reasonable
attempts to comply with all notices of violations of law or municipal
ordinances, orders or requirements noted in or issued by government
agencies or departments having authority with respect to buildings,
fire, labor, health, or any other federal, state or municipal
department having jurisdiction against or affecting the operations of
MFSS or any Subsidiary thereof prior to the Closing Date unless
contesting the same in good faith. All such notices, after the date
hereof and prior to the Closing Date, shall be complied with by MFSS
prior to the Closing Date. Upon written request, MFSS shall furnish
▇▇▇▇▇▇▇▇-▇▇▇▇▇ with an authorization to make the necessary searches for
such notices.
(e) Prior Consent of ▇▇▇▇▇▇▇▇-▇▇▇▇▇. Prior to the Closing
Date, MFSS will not, without the prior written consent of
▇▇▇▇▇▇▇▇-▇▇▇▇▇:
(1) make any change in its governing instruments;
(2) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of
any kind;
(3) declare or pay a dividend;
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(4) enter into any contract or commitment or incur or
agree to incur any liability or make any capital expenditures
in excess of $5,000 in the aggregate, except for purchases of
inventory in accordance with past practices in the ordinary
course of business;
(5) increase the compensation payable or to become
payable to any officer, director, shareholder, employee or
independent contractor;
(6) create, assume or permit to exist any new
Encumbrance;
(7) sell, assign, lease or otherwise transfer or
dispose of any of its property or assets, except in the
ordinary course of business consistent with past practices;
(8) negotiate for the acquisition of any business or
the start-up of any new business;
(9) merge or consolidate or agree to merge or
consolidate with or into any other entity;
(10) waive any of its material rights or claims;
(11) knowingly breach or permit a breach or amend or
terminate any material contract to which it is a party or by
which it is bound or any Permit;
(12) enter into any other transaction outside the
ordinary course of it's business or prohibited hereunder; or
(13) adopt, amend or terminate any Employee Benefit
Plan.
ARTICLE V
Conditions Precedent to Closing
Section 5.1 Conditions Precedent to Performance by the MFSS
Shareholders. All obligations hereunder of the MFSS Shareholders are subject to
the performance, at or prior to the Closing Date, of all covenants and
agreements contained herein which are to be performed by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and each
of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members at or prior to such Closing Date and to the
fulfillment at, or prior to, the Closing Date, of each of the following
conditions (unless expressly waived in writing by the MFSS Shareholders at any
time at or prior to the Closing Date):
(a) Representations and Warranties True. All of the
representations and warranties made by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and each
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Member herein shall be true as of the date of this
Agreement, shall be deemed to have been made again at and as of the
Closing Date, and shall be true at and as of the Closing Date in all
material respects and MFSS shall have been furnished with a certificate
of the President or any Vice President or managing member of
▇▇▇▇▇▇▇▇-▇▇▇▇▇, dated the Closing Date, in his or her corporate
capacity, certifying to the truth of such representations and
warranties as of the Closing Date.
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(b) No Obstructive Proceeding. No action or proceedings shall
have been instituted against, and no order, decree or judgment of any
court, agency, commission or governmental authority shall be subsisting
against the MFSS Shareholders or the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members which seeks
to, or would, render it unlawful as of the Closing Date to effect the
transfer of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests and the MFSS Shares in
accordance with the terms hereof. Also, no substantive legal objection
to the transactions contemplated by this Agreement shall have been
received from or threatened by any governmental department or agency.
(c) Opinion of ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ Counsel. MFSS shall have
received on the Closing Date an opinion of legal counsel to
▇▇▇▇▇▇▇▇-▇▇▇▇▇, dated the Closing Date, in form and substance
satisfactory to MFSS, to the effect set forth in Exhibit 5.1(c).
(d) Consents and Approvals. Any consents required from any
public or regulatory agency having jurisdiction shall have been
received, including termination of the waiting period under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act, if applicable to the
contemplated transactions, and any consents required from third parties
to the transactions contemplated herein shall have been received.
(e) Proceedings and Documents Satisfactory. All proceedings in
connection with the transfer of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests and all
certificates and documents delivered to the parties pursuant to this
Agreement shall be satisfactory in form and substance to the parties
acting reasonably and in good faith.
(f) Execution of Employment Contracts. ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall each execute an Employment Contract with
Mega Force, in substantially the forms attached hereto as Exhibit
5.1(f), with annual cash compensation fixed at $150,000. Other
executive officers of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ whose names appear on Schedule
5.1(f) shall enter into employment and non-competition agreements with
Mega Force in a form substantially similar to Exhibit 5.1(f).
(g) No Adverse Change. From the date of this Agreement until
the Closing Date, the operations of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall have been
conducted in the ordinary course of business, consistent with past
practices, and from the date of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Financial Statements
until the Closing Date no event shall have occurred or have been
threatened which has or would have a material and adverse effect upon
the operations of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and shall not have sustained any loss
or damage to its business, whether or not insured, or been the subject
of any activity that affects materially and adversely the value of its
assets, properties or operations.
(h) Financing. Mega Force shall have obtained commitments for
debt or equity financing for at least $25 million ($25,000,000) prior
to the Closing Date and be prepared to consummate the financing
transaction at Closing.
(i) Lock-Up Agreement. Mega Force and each of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members shall have entered into a Lock-Up Agreement in
the form of Exhibit 1.1(x).
(j) Delivery of Transfer Instruments. The instruments of
transfer and certificates described in Section 6.4 shall have been
properly executed and delivered to MFSS.
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(k) Incumbency Certificates. MFSS shall have received from
▇▇▇▇▇▇▇▇-▇▇▇▇▇ appropriate Incumbency Certificates, dated as of the
Closing Date, containing specimens of the signatures of the appropriate
officers of ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
(l) Bring Down Certificate. MFSS shall have received a true
and complete and accurate list as of the Closing Date, showing (i) all
liabilities, obligations and contracts and agreements of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
incurred or entered into since the date hereof, other than those
contracts, liabilities and obligations incurred or entered into in the
ordinary course of the operations of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ (excluding
liabilities resulting from or arising out of any claim for medical
malpractice or other tort liability), and (ii) all assets of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ acquired since the date hereof other than those assets
acquired in the ordinary course of their operations.
(m) Registration Rights Agreement. Each of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Members shall have entered into the Registration Rights Agreement in
the form of Exhibit 1.1(ff).
(n) Stockholders Agreement. Each of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members
shall have entered into the Stockholders Agreement in the form of
Exhibit 1.1(hh).
(o) Trademark Assignment. The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Company, Inc., a
Tennessee corporation, and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members shall each
transfer and convey any and all right, title and interest in and to the
"▇▇▇▇▇▇▇▇-▇▇▇▇▇" name to Mega Force. The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Company, Inc.
shall have entered into Trademark Assignments in the form of Exhibit
5.1(o), which shall transfer and convey all right, title and interest
in and to the "▇▇▇▇▇▇▇▇-▇▇▇▇▇" trademark and copyrights to Mega Force.
(p) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and HRC Merger. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members shall execute or cause to be entered the Members
Consent and the Agreement and Plan of Merger in the form of Exhibit
2.3. A Certificate of Merger shall be executed, filed and accepted in
the office of the Secretary of State of Tennessee and North Carolina
evidencing such merger.
Section 5.2 Conditions Precedent to Performance by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Members. All obligations hereunder of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members are subject to
the performance, at or prior to such Closing Date, of all covenants and
agreements contained herein which are to be performed by MFSS and each of the
MFSS Shareholders at or prior to the Closing Date and to the fulfillment at, or
prior to, the Closing Date, of each of the following conditions (unless
expressly waived in writing by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members at any time at or
prior to such Closing Date):
(a) Representations and Warranties True. All of the
representations and warranties made by MFSS and each of the MFSS
Shareholders herein shall be true as of the date of this Agreement,
shall be deemed to have been made again at and as of the Closing Date,
and shall be true at and as of the Closing Date in all material
respects and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members shall have been furnished with
appropriate certificates of the President or any Vice President, dated
the Closing Date, in his or her corporate capacity, certifying to the
truth of such representations and warranties as of the Closing Date.
(b) No Obstructive Proceeding. No action or proceedings shall
have been instituted against, and no order, decree or judgment of any
court, agency, commission or governmental authority shall be subsisting
against the MFSS Shareholders or the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members which seeks
to, or would, render it unlawful as of the Closing Date to effect
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the transfer of the MFSS Shares or the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests in
accordance with the terms hereof, and no such action shall seek damages
in a material amount by reason of the transactions contemplated hereby.
Also, no substantive legal objection to the transactions contemplated
by this Agreement shall have been received from or threatened by any
governmental department or agency.
(c) Opinion of MFSS's Counsel. The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members
shall have received on the closing date an opinion of legal counsel to
MFSS, dated the Closing Date, in form and substance satisfactory to the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members, to the effect set forth in Exhibit 5.2(c).
(d) Consents and Approvals. Any consents required from any
public or regulatory agency having jurisdiction shall have been
received, including termination of the waiting period under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act, if applicable to the
contemplated transactions, and any consents required from third parties
to the transaction contemplated herein shall have been received.
(e) Proceedings and Documents Satisfactory. All proceedings in
connection with the transfers contemplated herein and all certificates
and documents delivered to the parties pursuant to this Agreement shall
be satisfactory in form and substance to the parties acting reasonably
and in good faith.
(f) Execution of Employment Contracts. H. ▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇ shall each execute an Employment Contract with Mega
Force, in substantially the forms attached hereto as Exhibit 5.2(f).
(g) No Adverse Change. From the date of this Agreement until
the Closing Date, the operations of MFSS shall have been conducted in
the ordinary course of business, consistent with past practices, and
from the date of the MFSS Financial Statements until the Closing Date
no event shall have occurred or have been threatened which has or would
have a material and adverse effect upon the operations of MFSS and
shall not have sustained any loss or damage to its business, whether or
not insured, or been the subject of any activity that affects
materially and adversely the value of its assets, properties or
operations.
(h) Lock-Up Agreement. Mega Force and each of the MFSS
Shareholders shall have entered into a Lock-Up Agreement in the form of
Exhibit 1.1(x).
(i) Delivery of Transfer Instruments. The instruments of
transfer and certificates described in Section 6.2 hereof shall have
been properly executed and delivered to ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
(j) Registration Rights Agreement. Each of the MFSS
Shareholders shall have entered into a Registration Rights Agreement in
the form of Exhibit 1.1(ff).
(k) Stockholders' Agreement. Each of the MFSS Shareholders
shall have entered into a Stockholders Agreement in the form of Exhibit
1.1(hh).
(l) Incumbency Certificates. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall have
received from MFSS appropriate Incumbency Certificates, dated as of the
Closing Date, containing specimens of the signatures of the appropriate
officers of MFSS.
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(m) Bring Down Certificate. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall have received
a true and complete and accurate list as of the Closing Date, showing
(i) all liabilities, obligations and contracts and agreements of MFSS
incurred or entered into since the date hereof, other than those
contracts, liabilities and obligations incurred or entered into in the
ordinary course of the operations of MFSS, (excluding liabilities
resulting from or arising out of any claim for medical malpractice or
other tort liability), and (ii) all assets of MFSS acquired since the
date hereof other than those assets acquired in the ordinary course of
their operations.
ARTICLE VI
Closing
Section 6.1 The Closing. The Closing shall take place at the offices of
▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇, PLLC in Raleigh, North Carolina or at such other place as may
be fixed by mutual consent of the MFSS Shareholders and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Members.
Section 6.2 Closing Activities. At the Closing, each of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members and the MFSS Shareholders shall deliver or cause to be
delivered each of the respective items described in Section 6.3 hereof, and
shall execute such other documents, certificates and agreements as are
contemplated elsewhere herein.
Section 6.3 Closing Deliveries.
(a) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members. The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members shall
deliver the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests to Mega Force in exchange for the
Mega Force Shares.
(b) MFSS Shareholders. The MFSS Shareholders shall deliver the
MFSS Shares to Mega Force in exchange for the Mega Force Shares.
(c) All Parties. Each of the parties hereto shall, as
appropriate, deliver or cause to be delivered the following:
(1) The certificates, dated as of the Closing Date,
referred to in Article V hereof;
(2) The executed agreements, contracts, certificates
and assignments referred to in Article V hereof;
(3) The opinions of legal counsels referred to in
Sections 5.1 and 5.2 hereof; and
(4) Such other instrument or instruments as shall be
necessary or appropriate to carry out and effect the purpose
and intent of this Agreement.
(d) Cash Payment; Notes. Mega Force shall deliver or cause to
have delivered to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members the Cash Payment, the Mega
Force Notes and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes.
ARTICLE VII
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Certain Post Closing Covenants
Section 7.1 Full Cooperation. Each of the parties hereto shall
cooperate and take such action, including the execution of such other documents,
as may be necessary to fully consummate the transactions contemplated hereby,
and as may be reasonably requested in order to carry out the provisions and
purposes of this Agreement and the transactions contemplated herein.
Section 7.2 Tax Covenant. The parties hereto intend that the
contribution to the capital of Mega Force of the MFSS Shares and the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests will qualify as a transfer of assets pursuant to the
requirements of Section 351 of the Code, and that the transfer of assets from
▇▇▇▇▇▇▇▇-▇▇▇▇▇ to HRC shall constitute a contribution to capital in exchange for
capital stock by Mega Force, HRC's parent, also pursuant to the requirements of
Section 351 of the Code. Accordingly:
(a) Both prior to and after the Closing Date, all books and
records shall be maintained, and all federal income tax returns and
schedules thereto shall be filed in a manner consistent with the
contributions contemplated herein being qualified as transfers under
Section 351 of the Code. Each party shall provide to each other such
tax information, reports, returns, or schedules as may be reasonably
required to assist such party in accounting for and reporting such
contributions as so qualified.
(b) Notwithstanding anything herein to the contrary, no party
hereto shall have any obligation to indemnify and defend any other
party (or such party's shareholders, partners or members) with respect
to any tax, interest, penalties, loss, claims, damages, costs or
expenses (including all attorney fees and accounting fees relating to
audit, IRS appeals, and litigation, including judicial appeals
therefrom) incurred in connection with an assertion by the IRS that the
contributions to Mega Force or to HRC contemplated herein (or any one
of them) do (does) not qualify under Section 351 of the Code.
Section 7.3 Appointment of Ernst & Young. The Board of Directors of
Mega Force shall appoint Ernst & Young, LLP ("Ernst & Young") as auditors of
Mega Force.
Section 7.4 Post Closing Adjustments. The total consideration paid to
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members shall be adjusted as set forth below.
(a) An increase to the Cash Payment, subject to any offset set
forth in (b) below, shall be made proportionately for any increase in
the net assets of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ as of February 28, 1997 from the
figure of $2,366,132.00 as of June 30, 1996. Net assets for the
purposes of this adjustment shall consist of ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ total
assets less ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ total liabilities (in both cases including
Affiliates) as determined by an audit of ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ financial
statements by Ernst & Young as of February 28, 1997 as required by Mega
Force or its senior lenders plus the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Debt of
$2,746,337.00. In any event ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ financial statements will
be audited by Ernst & Young as of December 31, 1996 and any adjustments
will be reflected in the calculation of net assets as of February 28,
1997.
(b) ▇▇▇▇▇▇▇▇-▇▇▇▇▇'▇ EBITDA for the twelve (12) months ending
as of February 28, 1997 shall be determined by an audit or review by
Ernst & Young ("Audited EBITDA"), as required by Mega Force or its
senior lenders. The sum of Audited EBITDA and Add Backs shall
constitute "Adjusted EBITDA." If Adjusted EBITDA is greater than or
equal to $1,600,000.00, then there shall be no adjustment under this
Section 7.4(b). If
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Adjusted EBITDA is less than $1,600,000, then the amount that Adjusted
EBITDA is less than $1,600,000.00 will be multiplied by 6.5 and said
product shall be deducted proportionately from the non-equity
consideration received by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members as follows: (1)
from the Cash Payment made in accordance with subsection (a) above, in
the same proportion as the Cash Payment is to the sum of the Cash
Payment, the Mega Force Notes, and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes; and (2)
from the Mega Force Notes, in the same proportion as the Mega Force
Notes are to the sum of the Cash Payment, the Mega Force Notes, and the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes; and (3) from the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes, in the
same proportion as the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes are to the sum of the Cash
Payment, the Mega Force Notes, and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes.
(c) If the sum of net assets as of February 28, 1997 as
determined pursuant to (a) above is less than $2,366,132.00, then the
amount that said net assets is less than $2,366,132.00 shall be
deducted proportionately from the total consideration made to the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members as follows: (1) from the Mega Force Notes, in
the same proportion as the Mega Force Notes are to the sum of the Mega
Force Notes and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes; and (2) from the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes, in the same proportion as the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Notes are to the sum of the Mega Force Notes and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Notes.
Section 7.5 Career Management Acquisition. Mega Force or its
Subsidiaries shall retire or assume those ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes relating to the
acquisition of Career Management as specifically set forth on Schedule 7.5.
Section 7.6 Mechanics of Settlement. The post-closing adjustment shall
be determined no later than ten (10) working days following the issuance of the
Ernst & Young audit report of ▇▇▇▇▇▇▇▇-▇▇▇▇▇. The post-closing adjustment shall
be determined by determined by Ernst & Young as required by Mega Force or its
senior lender. Each party will have ten (10) working days to appeal to Ernst &
Young for changes in such audited figures.
(a) Ernst & Young may consider appeals for changes and using
its sole discretion either change or not change the findings of its
audit, all to be determined within ten (10) working days after
receiving any record of appeal.
(b) Subject to the process of appeal and reconsideration as
set forth above, the parties agree that the findings of Ernst & Young
shall be conclusive and final as to the post-closing adjustments set
forth in Section 7.4. The parties further agree to indemnify and hold
harmless Ernst & Young from any claims or damages arising from
conducting its audit or publishing its findings to the parties.
(c) Within five (5) days following the conclusion of any
appeal and reconsideration by Ernst & Young, Mega Force shall receive
from the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members a check or checks in total amount of
any decrease in the purchase price as reflected in the Cash Payment as
adjusted by operation of Section 7.4, and the Mega Force Notes and
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes shall be amended and restated to reflect such
decrease. Should an increase in the purchase price be indicated by the
Ernst & Young audit, then five (5) days after the conclusion of any
appeal and reconsideration by Ernst & Young, Mega Force shall issue to
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members a check or checks in total amount of any
increase in the purchase price as reflected in the Cash Payment and
adjusted by operation of Section 7.4, and the Mega Force Notes and
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Notes shall be amended and restated to reflect such
increase.
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Section 7.7 Use of Name. As of the Closing the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members
will cease and desist from using the name "▇▇▇▇▇▇▇▇-▇▇▇▇▇", "The ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Company, LLC" or "The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Company, Inc." for any and all activities
and will cause any entity, corporation, or partnership under their control using
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ name to have changed its name prior to or as of Closing.
ARTICLE VIII
Termination
Section 8.1 Optional Termination. This Agreement may be terminated and
the contribution of the MFSS Shares and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Interests abandoned
at any time prior to the Closing Date as follows:
(a) By the mutual consent of MFSS and ▇▇▇▇▇▇▇▇-▇▇▇▇▇;
(b) By MFSS if any representation or warranty of
▇▇▇▇▇▇▇▇-▇▇▇▇▇ or any ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Holder contained in this Agreement
or in any certificate or other document executed and delivered by
▇▇▇▇▇▇▇▇-▇▇▇▇▇ or the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members pursuant to this Agreement
is or becomes untrue or breached in any material respect or if
▇▇▇▇▇▇▇▇-▇▇▇▇▇ or any ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Member fails to comply in any
material respect with any covenant or agreement contained herein, and
any such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written
notice thereof;
(c) By ▇▇▇▇▇▇▇▇-▇▇▇▇▇ if any representation or warranty of
MFSS or any MFSS Shareholder contained in this Agreement or in any
certificate or other document executed and delivered by MFSS or any
MFSS Shareholder pursuant to this Agreement is or becomes untrue or
breached in any material respect or if MFSS or any MFSS Shareholder
fails to comply in any material respect with any covenant or agreement
contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after
receipt of written notice thereof;
(d) By either ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or MFSS if any action, suit,
proceeding or claim before any court, governmental agency or other
entity has been instituted or threatened against ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or MFSS
which, if adversely determined, would have a material adverse effect on
the assets or business of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or MFSS.
(e) By either ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or MFSS, following the failure of
any conditions precedent to Closing for the party seeking termination
as set forth in Article V hereof.
(f) In the event that the transactions referred to herein
shall not have closed by May 31, 1997 and (i) such failure to close
shall not be the fault of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members, then the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members shall have the option to terminate their
obligations hereunder, or (ii) such failure to close shall not be the
fault of the MFSS Shareholders, then the MFSS Shareholders shall have
the option to terminate their obligations hereunder.
Section 8.2 Effect of Termination. In the event this Agreement is
terminated pursuant to the provisions of this Article VIII:
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(a) Then, (i) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and MFSS shall deliver to the
other all documents previously delivered (and copies thereof in its
possession) concerning one another and the transactions contemplated
hereby and (ii) none of the parties nor any of their respective
shareholders, directors, officers, or agents shall have any liability
to the other party for costs, expenses, loss of anticipated profits,
consequential damages, or otherwise, except for any deliberate breach
or deliberate omission resulting in breach of any of the provisions of
this Agreement.
(b) After termination each party shall keep confidential all
information provided by the other parties pursuant to this Agreement
which is not in the public domain, and shall exercise the same care in
handling such information as it would exercise with similar information
of its own.
ARTICLE IX
Federal Securities Laws Restrictions
Section 9.1 Investment Representations. Each party hereto hereby
acknowledges that the Mega Force Shares to be delivered pursuant to the
provisions of this Agreement (i) have not been and will not be registered under
the '33 Act, or any state securities laws, and Mega Force is under no obligation
to so register such Mega Force Shares, (ii) must be held indefinitely unless the
same are subsequently registered or an exemption from such registration is
available, and (iii) have been acquired solely for the recipient's own account,
for investment purposes only and with no present intention of distributing,
selling or otherwise disposing of the Mega Force Shares in connection with a
distribution within the meaning of the '33 Act and the rules and regulations
thereunder.
Section 9.2 Compliance with Law. Each of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members and
the MFSS Shareholders covenants, warrants and represents that none of the Mega
Force Shares to be issued to it pursuant to this Agreement will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except (i) pursuant to the provisions of a Lock-Up Agreement and (ii) after full
compliance with all of the applicable provisions of the '33 Act and the rules
and regulations of the Securities and Exchange Commission and applicable state
securities laws and regulations. All certificates evidencing the Mega Force
Shares shall bear the following legend (together with any other legends required
by the Lock-Up Agreement applicable state securities laws) for as long as Mega
Force deems it necessary:
"The shares represented hereby have not been registered under
the Securities Act of 1933, as amended (the "Act"), or the
securities laws of any state and may not be sold or otherwise
transferred unless in compliance with the Act and all other
applicable securities laws."
ARTICLE X
Indemnification
Section 10.1 Indemnification by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Members. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members each agree jointly and
severally to indemnify, defend and hold harmless MFSS and MFSS Shareholders and
their successors and assigns from, against and with respect to any and all
claims, liabilities, obligations, losses, damages, assessments, judgments, costs
or expenses (including,
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without limitation, reasonable attorneys' fees and costs and expenses incurred
in investigating, preparing, defending against or prosecuting any litigation or
claim, action, suit, proceeding or demand), of any kind or character, arising
out of or in any manner incident, relating or attributable to: (i) any
inaccuracy in a representation or any breach of any warranty of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
or the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members contained in this Agreement or in any certificate,
instrument of transfer or other instrument, document or agreement executed or
delivered by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members in connection with
this Agreement, or (ii) any failure by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ or the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Members to perform or observe, or to have performed or observed, in full, any
covenant, agreement or condition to be performed or observed by him or her under
this Agreement or under any certificate or other instrument, document or
agreement executed by him, her or it in connection with this Agreement.
Section 10.2 Indemnification by MFSS and the MFSS Shareholders. MFSS
and the MFSS Shareholders each agree to indemnify, defend and hold harmless
▇▇▇▇▇▇▇▇-▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members and their successors and assigns
from, against and with respect to any and all claims, liabilities, obligations,
losses, damages, assessments, judgments, costs or expenses (including, without
limitation, reasonable attorneys' fees and costs and expenses incurred in
investigating, preparing, defending against or prosecuting any litigation or
claim, action, suit, proceeding or demand), of any kind or character, arising
out of or in any manner incident, relating or attributable to: (i) any
inaccuracy in a representation or any breach of any warranty of MFSS or the MFSS
Shareholders contained in this Agreement or in any certificate, instrument of
transfer or other instrument, document or agreement executed or delivered by
MFSS or the MFSS Shareholders in connection with this Agreement, or (ii) any
failure by MFSS or the MFSS Shareholders to perform or observe, or to have
performed or observed, in full, any covenant, agreement or condition to be
performed or observed by MFSS or the MFSS Shareholders under this Agreement or
under any certificate or other instrument, document or agreement executed by it
in connection with this Agreement.
Section 10.3 Definitions. Any person or entity seeking indemnification
pursuant to this Article X is hereinafter referred to as an Indemnitee and any
person or entity against whom indemnification is sought is hereinafter referred
to as an Indemnitor.
Section 10.4 Procedures for Payment of Claims by Indemnitor(s). In the
event any Indemnitee(s) shall have any claim against any Indemnitor(s), whether
by reason of a third party action, suit or proceeding or by reason of any other
liability of the Indemnitor(s) for indemnification pursuant to this Article IX,
the Indemnitee(s) shall provide the Indemnitor(s) with written notice of the
claim which shall set forth the reasons why the Indemnitee(s) are liable for the
claim (the "Indemnification Notice"). If the claim involves any action, suit or
proceeding commenced by a third party, the Indemnification Notice shall be
accompanied by a copy of any complaint or other documents asserting the claim.
If all or any portion of the claim is contingent or if any portion of the amount
of the claim is unknown at the time the Indemnification Notice is given, the
Indemnification Notice shall be sufficient if it states the known amount of the
claim, if any, and indicates that the ultimate amount of the claim is unknown.
Within ten (10) days from the date the Indemnification Notice is given,
the Indemnitor(s) shall give the Indemnitee(s) written notice (the
"Responsibility Notice") as to whether the Indemnitor(s) agree the Indemnitor(s)
are liable pursuant to this Article X for all or any portion of the claim stated
in the Indemnification Notice.
Within thirty (30) days after the Indemnification Notice is given by
the Indemnitee(s), the Indemnitor(s) shall pay to the Indemnitee(s) any and all
amounts for which the Indemnitor(s) accepted liability pursuant to the
Responsibility Notice. If the Indemnitor(s) have acknowledged liability for a
contingent claim or a claim or liability of unknown amount, the Indemnitor(s)
shall pay the Indemnitee(s) for such claim within thirty (30) days after the
Indemnitee(s) give the Indemnitor(s) written reasonable evidence that the claim
or liability is no longer contingent or of the amount of the claim or liability.
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Section 10.5 Procedures for Defense of Claims. If any claim or
liability is asserted or threatened, or any action, suit or proceeding is
commenced by any third party against any Indemnitee(s) that might result in any
liability being imposed on any Indemnitor(s) hereunder, the Indemnitee(s) shall,
within a reasonable time following the receipt of same, give an Indemnification
Notice to the Indemnitor(s) together with a copy of any complaint or other
documents asserting such claim. Within ten (10) days from the date the
Indemnification Notice is given, the Indemnitor(s) shall give the Indemnitee(s)
written notice as to whether the Indemnitor(s) elect to defend any such claim or
liability (the "Defense Notice"); provided, however, that during the interim,
the Indemnitee(s) shall be entitled to take reasonable action with respect to
such claim which the Indemnitee(s) deem necessary to protect against such
further damage or default with respect thereto. The Indemnitor(s) may not elect
to defend any claim or liability unless they also agree that the Indemnitor(s)
are liable to the Indemnitee(s) for such claim or liability pursuant to this
Article X.
If the Indemnitor(s) elect to defend any such claim or liability, such
defense shall be at the cost and expense of the Indemnitor(s) and using
professionals chosen by the Indemnitor(s), subject to the approval of the
Indemnitee(s), which approval shall not unreasonably be denied. In the event
that the Indemnitor(s) shall elect to defend any claim or liability pursuant to
this subparagraph, the Indemnitee(s) agree that (i) they will permit the
Indemnitor(s), their attorneys, accountants or other agents to have access to
all relevant properties, records and documents of the Indemnitee(s) and to
furnish to the Indemnitor(s) such financial, commercial, legal, operations and
other information as the Indemnitor(s) may reasonably request and as may be
related to the claim or liability being contested; (ii) they will cooperate to
permit the Indemnitor(s) to make any investigations which they may reasonably
request. If the Indemnitor(s) do not elect to defend any claim or liability, the
Indemnitor(s) shall nevertheless cooperate with the Indemnitee(s) to the same
extent the Indemnitee(s) would have been required to cooperate with the
Indemnitor(s) had the Indemnitor(s) elected to defend against the claim or
liability.
If the Indemnitor(s) elect to defend any claim or liability pursuant to
this paragraph, the Indemnitee(s) may participate in the defense of such claim
or liability that the Indemnitor(s) have elected to defend, but such
participation shall be at their own expense unless a conflict of interest exists
which makes such participation advisable; provided, however, that, if the
liability or claim is ultimately shown to have been caused by the Indemnitee(s)
and not the Indemnitor(s), such participation shall be at the expense of the
Indemnitee(s). A conflict of interest shall not be deemed to exist solely by
reason of the liability of the Indemnitor(s) pursuant to this Article X.
If the Indemnitor(s) elect to defend any claim or liability pursuant to
this paragraph, the Indemnitee(s) shall not settle or agree to settle any claim
or liability without the prior written consent of the Indemnitor(s), which shall
not unreasonably be withheld. In the event the Indemnitor(s) fail to consent to
the settlement of any claim or liability within ten (10) days after the written
request therefor by any Indemnitee(s), the Indemnitee(s) shall be entitled to
settle such claim or liability. In the event the Indemnitor(s) do not elect to
defend against any claim or liability, the Indemnitee(s) shall be entitled to
take such actions to defend against such claim or liability as the Indemnitee(s)
shall deem reasonable, including, without limitation, settlement of such claim
or liability without consent by Indemnitor(s). It is agreed that settlement of
any claim or liability shall not determine whether the Indemnitor(s) are liable
to the Indemnitee(s) pursuant to this Article X, which liability is to be
determined in accordance with the provisions of this Article X without regard to
the Indemnitee(s) right to settle as provided herein.
If as provided above, the Indemnitor(s) have no right to defend any
claim or liability, the Indemnitee(s) shall nevertheless provide the
Indemnitor(s) with reasonable amounts of information about the defense conducted
by the Indemnitee(s) and the Indemnitor(s) shall nevertheless cooperate with the
Indemnitee(s) to aid in the defense as provided herein.
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ARTICLE XI
Notices
Section 11.1 In General. All notices, demands and other communications
required or permitted under this Agreement shall be sufficiently given if
delivered in person or mailed by certified mail, postage prepaid, return receipt
requested, if addressed as provided herein.
Section 11.2 Addresses.
(a) If to MFSS, address to:
Mega Force Staffing Services, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
P.O. Drawer 53449
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇, PLLC
One Hannover Square, Suite 1700
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) If to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members, address to:
The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Company, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: King ▇▇▇▇▇▇, Esq.
Section 11.3 Changes to Address. Notwithstanding the foregoing, any
party hereto may change its address for notice purposes by designated such
changed address in writing and delivering a copy thereof to each of the other
parties hereto in the manner provided hereinabove.
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ARTICLE XII
Miscellaneous Provisions
Section 12.1 Assignment. No party hereto shall have any right at any
time to assign this Agreement, or any rights, benefits, duties, or obligations
therein or thereunder, to any person or entity without the prior written consent
of each of the other parties hereto. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their permitted assigns.
Section 12.2 Amendments. This Agreement may be amended from time to
time by the written agreement of the parties hereto.
Section 12.3 Headings. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement or as in
any way limiting or amplifying the terms and provisions hereof.
Section 12.4 Governing Law. This Agreement shall in all respects be
interpreted, construed, and governed by and in accordance with the laws of the
State of North Carolina.
Section 12.5 Entire Agreement. This Agreement embodies all the
representations, warranties, covenants, and agreements of the parties in
relation to the subject matter hereof, and no representations, warranties,
covenants, understandings, or agreements, or otherwise, in relation thereto
exist between the parties except as expressly set forth herein.
Section 12.6 Complete Agreement. This Agreement and those other
documents expressly referred to herein embody the complete agreement and
understanding between the parties and supersede and preempt any prior
understandings, agreements, or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
Section 12.7 Payment of Expenses. Each party hereto shall pay their own
expenses, including, without limitation, the disbursements and fees of their
respective attorneys, accountants, advisors, agents, and other representatives,
incidental to the preparation and carrying out of this Agreement, whether or not
the transaction contemplated hereby is consummated.
Section 12.8 Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original, and all of which taken
together constitute one and the same Agreement.
Section 12.9 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal, or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality, or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed, and enforced in such jurisdiction as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Section 12.10 Survival. The indemnities, warranties and representations
made in this Agreement shall survive the Closing for a period of two (2) years
(except for tax indemnities, warranties and representations which shall survive
the Closing for a period of three (3) years), irrespective of any investigation
made by or on behalf of any party, and shall not be deemed merged in any
document or instrument executed or delivered at the Closing.
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Section 12.11 Waiver. Any waiver of any provision hereof shall not be
effective unless made expressly and in a writing executed in the name of the
party sought to be charged. The failure of any party to insist, in any one or
more instances, on performance of any of the terms or conditions of this
Agreement shall not be construed as a waiver or relinquishment of any rights
granted hereunder or the future performance of any such term, covenant or
condition, but the obligations of the parties with respect thereto shall
continue in full force and effect.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MFSS: MEGA FORCE STAFFING SERVICES, INC.,
a North Carolina corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
President
THE MFSS SHAREHOLDERS: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ H. ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------------
H. ▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ TRUST
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ TRUST
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ TRUST
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ TRUST
/s/ H. ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------------
By: H. ▇▇▇▇▇▇ ▇▇▇▇▇, Trustee
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ TRUST
/s/ H. ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------------
By: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
-▇▇-
▇▇
▇▇▇▇▇▇▇▇-▇▇▇▇▇: THE ▇▇▇▇▇▇▇▇-▇▇▇▇▇ COMPANY, L.L.C.,
a Tennessee limited liability company
By:
-----------------------------------
T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
The ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Members:
-----------------------------------------
▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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SCHEDULE 2.4
to the Business Combination Agreement
Mega Force Equity
2.4(a) THE ▇▇▇▇▇▇▇▇-▇▇▇▇▇ MEMBERS:
Class A Class B
Common Shares Non-Voting Common
Shares
199,188 199,187 ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
199,188 199,187 T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------- -------
398,376 398,374
2.4(b) THE MFSS SHAREHOLDERS:
Class A Class B
Common Shares Non-Voting Common
Shares
858,156 858,156 H. ▇▇▇▇▇▇ ▇▇▇▇▇
386,369 386,369 ▇▇▇▇▇ ▇. ▇▇▇▇▇
98,997 98,995 ▇▇▇ ▇. ▇▇▇▇▇
14,142 14,142 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust
14,142 14,142 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust
14,142 14,142 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Trust
14,142 14,142 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust
14,142 14,142 ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Trust
------ ------
1,414,232 1,414,230
2.4(c) CREDITANSTALT WARRANTS FOR CLASS A COMMON STOCK OR CLASS B NON-VOTING
COMMON STOCK:
(i) 258,944 immediately exercisable
(ii) exercisable only at such time as the aggregate amount
of loans made to Mega Force under the Loan and
99,594 Security Agreement equals or exceeds $20,000,000
-------
358,538
2.4(d) MFSS SPRINGING WARRANTS FOR CLASS A COMMON STOCK OR CLASS B NON-VOTING
COMMON STOCK
68,675 H. ▇▇▇▇▇▇ ▇▇▇▇▇
30,919 ▇▇▇▇▇ ▇. ▇▇▇▇▇
99,594