Exhibit 2.9
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AGREEMENT AND PLAN OF REORGANIZATION
by and among
CRDENTIA CORP.,
CPS ACQUISITION CORPORATION
and
CARE PROS STAFFING, INC.,
and the Shareholders of Care Pros Staffing, Inc.
dated August 13, 2004
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TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS........................................................2
1.1 Defined Terms......................................................2
1.2 Construction of Certain Terms and Phrases..........................2
ARTICLE 2. THE MERGER.........................................................2
2.1 The Merger.........................................................2
2.2 Effective Time.....................................................2
2.3 Effect of the Merger...............................................2
2.4 Certificate of Incorporation; Bylaws...............................2
2.5 Directors and Officers.............................................2
2.6 Effect on Capital Stock/Merger Consideration.......................2
2.7 Revenue Adjustments to Merger Consideration........................2
2.8 Exchange Procedure.................................................2
2.9 Closing............................................................2
2.10 Exemption from Registration........................................2
2.11 Authorization of the CPS Stockholder Representative................2
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................2
3.1 Organization of the Company........................................2
3.2 Capital Stock of the Company.......................................2
3.3 Ownership of Shares................................................2
3.4 Authority of the Company...........................................2
3.5 No Affiliates......................................................2
3.6 No Conflicts.......................................................2
3.7 Consents and Governmental Approvals and Filings....................2
3.8 Books and Records..................................................2
3.9 Company Financial Statements.......................................2
3.10 Absence of Changes.................................................2
3.11 No Undisclosed Liabilities.........................................2
3.12 Tangible Personal Property.........................................2
3.13 Benefit Plans; ERISA...............................................2
3.14 Real Property......................................................2
3.15 Proprietary Information of Third Parties...........................2
3.16 Compliance with Legal Requirements; Governmental Authorizations....2
3.17 Legal Proceedings; Orders..........................................2
3.18 Contracts..........................................................2
3.19 Accounts Receivable................................................2
3.20 Accounts Payable...................................................2
3.21 Equipment..........................................................2
3.22 Insurance..........................................................2
3.23 Tax Matters........................................................2
3.24 Labor and Employment Relations.....................................2
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3.25 Certain Employees..................................................2
3.26 Absence of Certain Developments....................................2
3.27 Customers..........................................................2
3.28 Bank Accounts......................................................2
3.29 Permits............................................................2
3.30 Regulatory Compliance..............................................2
3.31 Third Party Consents...............................................2
3.32 Relationships with Related Persons.................................2
3.33 Certain Payments...................................................2
3.34 Brokers............................................................2
3.35 Verification of Credentials........................................2
3.36 [Intentionally Deleted]............................................2
3.37 Existing Indebtedness..............................................2
3.38 Material Misstatements and Omissions...............................2
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION CO........2
4.1 Organization.......................................................2
4.2 Authority..........................................................2
4.3 Litigation.........................................................2
4.4 Reports and Financial Statements...................................2
4.5 No Conflicts.......................................................2
4.6 Consents and Governmental Approvals and Filings....................2
4.7 Brokers............................................................2
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.................2
5.1 Requisite Power and Authority......................................2
5.2 Investment Representations.........................................2
5.3 Transfer Restrictions..............................................2
5.4 Market Standoff....................................................2
5.5 Filings............................................................2
ARTICLE 6. ADDITIONAL AGREEMENTS..............................................2
6.1 Access to Information..............................................2
6.2 Public Announcements; Company Literature...........................2
6.3 Fees and Expenses..................................................2
6.4 Confidentiality....................................................2
ARTICLE 7. CONDITIONS TO CONSUMMATION OF THE MERGER...........................2
7.1 Conditions to Each Party's Obligations to Effect the Merger........2
7.2 Conditions to the Obligations of the Company.......................2
7.3 Conditions to the Obligations of Parent and Acquisition Co.........2
ARTICLE 8. TERMINATION; AMENDMENT; WAIVER.....................................2
8.1 Termination........................................................2
8.2 Effect of Termination..............................................2
8.3 Amendment..........................................................2
8.4 Extension; Waiver..................................................2
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ARTICLE 9. ACTIONS BY THE PARTIES AFTER THE CLOSING...........................2
9.1 Survival of Representations, Warranties, Etc.......................2
9.2 Indemnification....................................................2
9.3 Right of Offset....................................................2
9.4 Non-Exclusivity....................................................2
ARTICLE 10. ARBITRATION.......................................................2
10.1 Arbitration........................................................2
ARTICLE 11. MISCELLANEOUS.....................................................2
11.1 Further Assurances.................................................2
11.2 Notices............................................................2
11.3 Entire Agreement...................................................2
11.4 Waiver.............................................................2
11.5 Amendment..........................................................2
11.6 No Third Party Beneficiary.........................................2
11.7 No Assignment; Binding Effect......................................2
11.8 Headings...........................................................2
11.9 Severability.......................................................2
11.10 Governing Law......................................................2
11.11 Consent to Jurisdiction and Forum Selection........................2
11.12 Construction.......................................................2
11.13 Counterparts.......................................................2
11.14 Attorney's Fees....................................................2
11.15 Continued Representation...........................................2
SCHEDULES AND EXHIBITS
Exhibits
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Exhibit A - Articles of Merger
Exhibit B - Form of Promissory Note
Exhibit C - Additional Merger Consideration Calculation
Exhibit D-1 to D-4 Non-Competition and Non-Solicitation Agreements
Exhibit E - Company Secretary Certificate
Exhibit F - Release
Exhibit G - Opinion of Company Counsel to Company
Exhibit H - Subordination Agreement
Exhibit I - Parent Secretary Certificate
Exhibit J - Acquisition Co. Secretary Certificate
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made
and entered into as of August 13, 2004, by and among Crdentia Corp., a Delaware
corporation ("Parent"), CPS Acquisition Corporation, a Texas corporation and a
wholly-owned subsidiary of Parent ("Acquisition Co."), Care Pros Staffing, Inc.,
a Texas corporation (the "Company"), and ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇▇ who currently constitute all of the Shareholders of the Company
(individually a "Shareholder" and collectively, the "Shareholders").
RECITALS:
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the Texas Business Corporation Act (the "TBCA"), Parent and
the Company will enter into a business combination transaction pursuant to which
the Company will merge with and into Acquisition Co. (the "Merger").
B. The Board of Directors of Parent has (i) determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Parent and fair to, and in the best interests of, Parent and its shareholders,
and (ii) approved this Agreement, the Merger and the other transactions
contemplated by this Agreement.
C. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, and in the best interests of, the Company and its
Shareholders, and (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
D. The Shareholders of the Company have unanimously approved this
Agreement, the Merger and the other transactions contemplated by this Agreement.
E. The sole Shareholder of Acquisition Co. has approved this Agreement,
the Merger and other transactions contemplated by this Agreement.
F. Parent, Acquisition Co. and the Company desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
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ARTICLE 1.
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following defined terms
have the meanings indicated below:
"Acquisition Co." has the meaning set forth in the first paragraph of this
Agreement.
"Acquisition Co. Common Stock" has the meaning set forth in Section
2.6(c)(iii).
"Actions or Proceedings" means any action, suit, proceeding, arbitration,
Order, inquiry, hearing, assessment with respect to fines or penalties or
litigation (whether civil, criminal, administrative, investigative or informal)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental or Regulatory Authority.
"Affiliate" means, with respect to any Person, a Family Member or another
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such Person.
"Agreement" has the meanings set forth in the first paragraph of this
Agreement and in Section 2.2.
"Articles of Merger" has the meaning set forth in Section 2.2.
"Assets and Properties" and "Assets or Properties" of any Person each
means all assets and properties of every kind, nature, character and description
(whether real, personal or mixed, whether tangible or intangible, whether
absolute, accrued, contingent, fixed or otherwise and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person, including, without limitation, cash, cash equivalents, accounts and
notes receivable, chattel paper, documents, instruments, general intangibles,
real estate, equipment, inventory, goods and Intellectual Property.
"Auditor" shall mean BDO ▇▇▇▇▇▇▇, LLP, or such other certified public
accounting firm engaged by Parent.
"Benefit Plan" means any Plan established, arranged or maintained by the
Company or any corporate group of which the Company is or was a member, existing
at the Closing Date or prior thereto, to which the Company contributes or has
contributed, or under which any employee, officer, director or former employee,
officer or director of the Company or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
"Books and Records" of any Person means all files, documents, instruments,
papers, books, computer files (including but not limited to files stored on a
computer's hard drive or on floppy disks), electronic files and records in any
other medium relating to the business, operations, accounting practices or
condition of such Person.
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"Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the State of Texas are authorized or obligated to close.
"Cash Consideration" has the meaning set forth in Section 2.6(b)(i).
"Closing" has the meaning set forth in Section 2.9(a).
"Closing Date" has the meaning set forth in Section 2.9(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Common Stock" has the meaning set forth in Section 3.2(a) of this
Agreement.
"Company Disclosure Schedule" means the disclosure schedule attached
hereto which sets forth the exceptions to the representations and warranties
contained in Article III hereof and certain other information called for by this
Agreement.
"Company Financial Statements" means (i) the unaudited balance sheets of
the Company and the related audited statements of income and retained earnings
for the fiscal periods ended December 31, 2003, December 31, 2002 and December
31, 2001, and (ii) the Interim Financial Statements.
"Company Year-End Financial Statements" shall mean the unaudited balance
sheet of the Company and the related statements of income and retained earnings
for the year-end ended December 31, 2003 prepared in accordance with GAAP and
audited by the Auditors in the sole and absolute discretion of the Parent.
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" means all of the transactions contemplated by
this Agreement, including: (a) the Merger; (b) the execution, delivery, and
performance of the Non-Competition Agreements, the Subordination Agreements, and
the Releases; (c) the performance by Parent and the Company of their respective
covenants and obligations under this Agreement; and (d) Parent's acquisition and
ownership of the Company Common Stock and exercise of control over the Company.
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Copyrights" has the meaning set forth in the definition of "Intellectual
Property."
"CPS Shareholder Representative" has the meaning set forth in Section
2.11(a).
"Damages" has the meaning set forth in Section 9.2(a).
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"Defined Benefit Plan" means each Benefit Plan which is subject to Part 3
of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"Effective Time" has the meaning set forth in Section 2.2.
"Encumbrances" means any mortgage, pledge, assessment, security interest,
deed of trust, lease, lien, adverse claim, equitable interest, levy, charge,
community property interest, right of first refusal or other encumbrance of any
kind, or any conditional sale or title retention agreement or other agreement to
give any of the foregoing in the future.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any entity which is a member of a "controlled
group of corporations" or which is or was under "common control" with the
Company as defined in Section 414 of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Family Member" of an individual Person means (i) the individual's spouse
and former spouses, (ii) any other natural person who is related to the
individual or the individual's spouse within the second degree, and (iii) any
other natural person who resides with such individual.
"Final Date" has the meaning set forth in Section 8.1(b).
"GAAP" means United States generally accepted accounting principles, as
currently in effect, applied on a basis consistent with the basis on which
Parent's audited financial statements are prepared.
"Governmental Authorization" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental or Regulatory Authority
or pursuant to any Legal Requirement.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or other country, any state, county, city or other political
subdivision.
"Industry Acquisitions" shall mean acquisitions by Parent or any Affiliate
thereof of temporary health staffing companies or travel nurse companies.
"Intellectual Property" means (i) trademarks, service marks, trade dress,
logos, trade names and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith (collectively, "Trademarks"), (ii) trade secrets and
confidential business information (including without limitation, know-how,
customer lists, current and anticipated customer requirements, price lists,
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market studies, business plans), however documented; (iii) proprietary computer
software and programs (including object code and source code) and other
proprietary rights and copies and tangible embodiments thereof (in whatever form
or medium); (iv) database technologies, systems, structures and architectures
(and related processes, formulae, compositions, improvements, devices, know-how,
inventions, discoveries, concepts, ideas, designs, methods and information) and
any other related information, however, documented; (v) any and all information
concerning the business and affairs of a Person (which includes historical
financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names and backgrounds
of key personnel and personnel training and techniques and materials), however
documented; (vi) any and all notes, analysis, compilations, studies, summaries,
and other material prepared by or for a Person containing or based, in whole or
in part, on any information included in the foregoing, however documented; and
(vii) any similar or equivalent rights to any of the foregoing.
"Interim Financial Statements" means the unaudited balance sheet and the
related unaudited statement of income and retained earnings for the Company, in
each case for the period ending August 13, 2004.
"Key Employees" means those employees of the Company that Parent in its
sole discretion has designated as "key employees" prior to the Closing and set
forth on Schedule 1.1(c) attached hereto.
"Knowledge of the Company" or "Known to the Company" means the knowledge
of any officer, director or Shareholder of the Company. An officer, director or
Shareholder of the Company will be deemed to have Knowledge of a particular fact
or other matter if such individual is actually aware of such fact or other
matter.
"Knowledge of the Parent" or "Known to the Parent" means the knowledge of
any officer or director of the Parent. An officer or director of Parent will be
deemed to have Knowledge of a particular fact or other matter if such individual
is actually aware of such fact or other matter.
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute or treaty.
"Letter of Transmittal" has the meaning set forth in Section 2.8(a).
"Material Adverse Effect" means, for any Person, a material adverse effect
whether individually or in the aggregate (a) on the business, operations,
financial condition, Assets and Properties, liabilities or prospects of such
Person, or (b) on the ability of such Person to consummate the transactions
contemplated hereby.
"Merger" has the meaning set forth in the first recital of this Agreement.
"Non-Competition Agreements" has the meaning set forth in Section
2.9(b)(iii).
"Note" shall have the meaning set forth in Section 2.6(b)(ii).
"Note Consideration" shall have the meaning set forth in Section
2.6(b)(ii).
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"Order" means any award, decision, writ, judgment, decree, ruling,
subpoena, verdict, injunction or similar order of any Governmental or Regulatory
Authority (in each such case whether preliminary or final).
"Ordinary Course of Business" means the action of a Person that is (i)
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person; (ii) not required to
be authorized by the board of directors of the Company; and (iii) similar in
nature and magnitude to actions customarily taken, without the action of the
board of directors or similar body, in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
the Company.
"OTCBB" shall mean the regulated quotation service known as the OTC
Bulletin Board.
"Outstanding Company Common Stock" has the meaning set forth in Section
2.6(a).
"Parent" has the meaning set forth in the first paragraph of this
Agreement.
"Parent Group" has the meaning set forth in Section 9.2(a).
"Parent SEC Documents" means each form, report, schedule, statement and
other document filed by the Parent beginning in August 2003 through the date of
this Agreement under the Exchange Act or the Securities Act, including any
amendment to such document.
"Permits" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations and similar consents granted or issued
by any Governmental or Regulatory Authority.
"Permitted Encumbrance" means (a) any Encumbrance for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP and (b) any
minor imperfection of title or similar Encumbrance which individually or in the
aggregate with other such Encumbrances does not impair the value of the property
subject to such Encumbrance or the use of such property in the conduct of the
business of the Company.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workers' compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, including, but not limited to, any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental or Regulatory Authority.
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"Qualified Plan" means each Benefit Plan which is intended to qualify
under Section 401 of the Code.
"Real Property" has the meaning set forth in Section 3.14.
"Release" has the meaning set forth in Section 2.9(b)(v).
"SEC" shall mean the Securities & Exchange Commission of the United
States.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholders" has the meaning set forth in the first paragraph of this
Agreement.
"Stock Certificates" has the meaning set forth in Section 2.8(a).
"Subordination Agreement" has the meaning set forth in Section 2.9(b)(ix).
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Tax" (and, with correlative meaning, "Taxes," "Taxable" and "Taxing")
means (i) any federal, state, local or foreign income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental or Regulatory
Authority responsible for the imposition of any such tax (domestic or foreign),
(ii) any liability for payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined, unitary or
other group for any Taxable period and (iii) any liability for the payment of
any amounts of the type described in (i) or (ii) as a result of any express or
implied obligation to indemnify any other Person.
"Tax Return" means any return, report, information return, schedule or
other document (including any related or supporting information) filed or
required to be filed with respect to any taxing authority with respect to Taxes.
"Third Party Expenses" has the meaning set forth in Section 6.3.
"Threatened" means a claim, Proceeding, dispute, action or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist that would
lead a prudent Person to conclude that such a claim, proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
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"Trademarks" has the meaning set forth in the definition of "Intellectual
Property."
1.2 Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires, (a) words of any gender include each other gender;
(b) words using the singular or plural number also include the plural or
singular number, respectively; (c) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement; (d) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; (e) the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or;" and (f) "including" means
"including without limitation." Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. All accounting terms used in this Agreement shall have the meanings
given to them under GAAP.
ARTICLE 2.
THE MERGER
2.1 The Merger. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of the TBCA, the
Company shall be merged with and into Acquisition Co., the separate corporate
existence of the Company shall cease and Acquisition Co. shall continue as the
surviving corporation. Acquisition Co. as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving Corporation."
2.2 Effective Time. Subject to the provisions of this Agreement, the
parties hereto shall cause the Merger to be consummated by the filing of the
articles of merger substantially in the form attached hereto as Exhibit A (the
"Articles of Merger") with the Secretary of State of the State of Texas in
accordance with the relevant provisions of the TBCA (the time of acceptance by
the Secretary of State of the State of Texas such filing, or such later time as
may be agreed in writing by the parties and specified in the Articles of Merger,
being the "Effective Time") as soon as practicable on the Closing Date. Unless
the context otherwise requires, the term "Agreement" as used herein refers
collectively to this Agreement and the Articles of Merger.
2.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of TBCA.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Acquisition Co. shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Acquisition Co. shall become
the debts, liabilities and duties of the Surviving Corporation.
2.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
Acquisition Co. shall be the Certificate of Incorporation of the Surviving
Corporation, except that Article I thereof shall be amended to read in its
entirety as follows: "The name of the Corporation is Care Pros Staffing, Inc."
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(b) At the Effective Time, the Bylaws of Acquisition Co. shall be
the Bylaws of the Surviving Corporation, except that the Bylaws shall be amended
to reflect that the name of the Surviving Corporation shall be "Care Pros
Staffing, Inc."
2.5 Directors and Officers. The directors of Acquisition Co. immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, to serve until their respective successors are duly elected or
appointed and qualified. The officers of Acquisition Co. immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
to serve until their successors are duly elected or appointed or qualified.
2.6 Effect on Capital Stock/Merger Consideration.
(a) Conversion of Company Common Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any Person, each
share of the Company Common Stock issued and outstanding immediately prior to
the Effective Time (the "Outstanding Company Common Stock") shall be canceled
and automatically converted into the right to receive, upon surrender of the
certificates representing such shares and a Letter of Transmittal, a ratable
portion of the Cash Consideration and Note Consideration as determined in
Section 2.6(b) below. At the Effective Time, all rights in respect of such
Outstanding Company Common Stock shall cease to exist, other than the right to
receive the Cash Consideration and Note Consideration, and all such shares shall
be cancelled and retired.
(b) Merger Consideration. The merger consideration shall consist of
$550,000 (the "Merger Consideration") and be paid on the Closing Date as
follows:
(i) Cash Consideration. $275,000 in the aggregate shall be
paid in cash (the "Cash Consideration") to the Shareholders based on his pro
rata share of the Merger Consideration by wire transfer to the Shareholders or
by cashier's checks drawn upon a federally insured lending institution on the
Closing Date; and
(ii) Note Consideration. $275,000 (the "Note Consideration")
shall be paid in the form of a one-year subordinated promissory note (the
"Note") in the form attached hereto as Exhibit B issued by the Parent to the
Shareholders in the aggregate original principal amount of the Note
Consideration. The Parent shall issue a Note to each Shareholder in accordance
with their pro rata share of the Merger Consideration.
(c) Actions at the Effective Time. At the Effective Time:
(i) Except for the securities referred to in Section
2.6(c)(ii) below, each share of Outstanding Company Common Stock will
automatically, by virtue of the Merger and without any action on the part of the
holder thereof, be canceled and converted into a right to receive from Parent
the Cash Consideration and the Note Consideration in the amount as determined
pursuant to this Section 2.6.
(ii) Each share of Company Common Stock held in the treasury
of the Company shall be canceled and retired without payment of any
consideration therefor.
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(iii) Each share of common stock of Acquisition Co.
("Acquisition Co. Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock of the Surviving Corporation
and shall constitute the only shares of capital stock of the Surviving
Corporation outstanding immediately after the Effective Time. Each stock
certificate of Acquisition Co. evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(d) Cash/Accounts Receivable Balances/Loan Balances. The Parent
recognizes and agrees that, immediately prior to Closing, the Company will
distribute all cash on hand to the Shareholders. Additionally, the Company and
the Shareholders agree to collect its accounts receivable in the ordinary course
and that, at the Closing, the accounts receivable shall not be less than
$60,000. The Company currently has outstanding a line of credit with First
American Bank (the "Bank"). The Company and the Shareholders agree that, at the
Closing, the outstanding amounts under the line of credit with the Bank shall
not exceed $10,000.
2.7 Revenue Adjustments to Merger Consideration. The Parent may pay
additional Merger Consideration in accordance with the terms and conditions set
forth:
(a) Calculation of Additional Merger Consideration. The Parent may
pay additional Merger Consideration in accordance with the terms and conditions
set forth on Exhibit C attached hereto. The Company's revenues shall be
calculated by management of Parent in good faith and in a manner consistent with
Parent's consolidated audited financial statements and the determination of
management, absent fraud, shall be final and binding on all parties. The
additional consideration payable pursuant to this Section 2.7(a), if any, shall
be made in accordance with each Shareholder's respective pro rata share of the
Merger Consideration paid on the Closing Date. The additional consideration if
any, issuable and payable pursuant to this Section 2.7(a) shall be referred to
as the "Incremental Revenue Payment."
(b) Incremental Revenue Payment Date. Parent shall pay the
Incremental Revenue Payment, if any, on or before October 15, 2005 unless the
Shareholders dispute Parent's calculations pursuant to Exhibit C, in which case
Parent shall pay the applicable Incremental Revenue Payment, if any, within
thirty (30) days after resolution of the dispute in accordance with the dispute
provisions of Article 10 regarding arbitration.
2.8 Exchange Procedure.
(a) Promptly after the Effective Time, Parent shall mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented Company Common Stock (the "Stock Certificates") whose
shares are being converted into a ratable portion of the Cash Consideration and
Note Consideration pursuant to Section 2.6 above, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Stock Certificates shall pass, only upon delivery of the Stock
Certificates to the Parent and which shall be in such form and have such other
provisions as Parent may reasonably specify) (the "Letter of Transmittal") and
(ii) instructions for use in effecting the surrender of the Stock Certificates
in exchange for the Cash Consideration and Note Consideration. Upon surrender of
a Stock Certificate for cancellation to Parent or to such other agent or agents
as may be appointed by Parent, duly endorsed in blank (or accompanied by duly
executed stock powers) and, if necessary, spousal consents by each spouse, if
any, of each Shareholder, duly executed by such spouses, together with such
Letter of Transmittal duly executed, the holder of such Stock Certificate shall
be entitled to receive in exchange therefor the Cash Consideration and Note
Consideration to which such holder of Company Common Stock is entitled pursuant
to Section 2.6 above. The Stock Certificates so surrendered shall forthwith be
canceled. No interest will accrue or be paid to the holder of any Company Common
Stock. From and after the Effective Date, until surrendered as contemplated by
this Section 2.8, each Stock Certificate shall be deemed for all corporate
purposes to evidence the amount of the Cash Consideration and Note Consideration
into which the Company Common Stock represented by such Stock Certificate have
been converted.
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(b) The Cash Consideration and Note Consideration delivered upon the
surrender for exchange of Company Common Stock in accordance with the terms
hereof shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such Company Common Stock. There shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Stock Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.8, provided that the presenting holder is listed on the Company's
Shareholder list as a holder of Company Common Stock.
(c) In the event that any Stock Certificates evidencing Company
Common Stock shall have been lost, stolen or destroyed, the Parent shall pay in
exchange for such lost, stolen or destroyed Stock Certificates, upon the making
of an affidavit of that fact by the holder thereof, such Merger Consideration as
may be required pursuant to Section 2.6 above; provided, however, that Parent
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Stock Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
Stock Certificates alleged to have been lost, stolen or destroyed.
(d) Notwithstanding anything to the contrary in this Section 2.8,
none of the Surviving Corporation or any party hereto shall be liable to a
holder of Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) Each of the Parent, Acquisition Co. and the Company will take
all such reasonable and lawful acts as may be necessary or desirable in order to
effectuate the Merger in accordance with this Agreement as promptly as possible.
If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company, the officers and
directors of the Company and Acquisition Co. are fully authorized in the name of
the respective corporations or otherwise to take, and will take, all such lawful
and necessary action so long as such action is not inconsistent with this
Agreement.
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2.9 Closing.
(a) Time and Place. The closing of the Merger under this Agreement
(the "Closing") shall take place at the offices of Kane, Russell, ▇▇▇▇▇▇▇ &
▇▇▇▇▇, P.C., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. on
August 16, 2004, or at such time and in such manner as the parties mutually
agree (the "Closing Date").
(b) Closing Deliveries by the Company and the Shareholders. At the
Closing, the Company and the Shareholders, as the case may be, shall have
delivered or caused to be delivered to Parent and/or Acquisition Co., as the
case may be:
(i) the Articles of Merger, duly executed by the Company;
(ii) [Intentionally Deleted];
(iii) the Non-Competition and Non-Solicitation Agreement by
and between Parent and each Shareholder, substantially in the form of Exhibit
D-1 through Exhibit D-4, as appropriate, (the "Non-Competition Agreement"), duly
executed by such parties;
(iv) a certificate of the Secretary of the Company
substantially in the form of Exhibit E attached hereto, certifying as of the
Closing Date (A) a true and complete copy of the organizational documents of the
Company certified as of a recent date by the Secretary of State of Texas, (B) a
certificate of each appropriate Secretary of State certifying the good standing
of the Company in its state of incorporation and all states in which it is
qualified to do business, (C) a true and complete copy of the resolutions of the
board of directors of the Company and the resolutions of the Shareholders of the
Company, each authorizing the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
hereby and (D) incumbency matters;
(v) a Release by each of the Shareholders, substantially in
the form of Exhibit F attached hereto (the "Release"), duly executed by each
Shareholder;
(vi) resignation letter of each of the officers and directors
of the Company, dated effective as of the Closing;
(vii) an opinion of ▇▇▇▇▇▇▇ & Klasky, P.C., counsel to the
Company substantially in the form attached hereto as Exhibit G;
(viii) a listing of the amount of Note Consideration and Cash
Consideration to be paid at the Closing to each Person entitled to receive a
portion thereof pursuant to the terms hereof to be attached as Schedule 2.9
hereto;
(ix) a Subordination Agreement by each Shareholder
substantially in the form of Exhibit H (each, a "Subordination Agreement");
(x) such other documents as Parent may reasonably request for
the purpose of facilitating the consummation of the Contemplated Transactions.
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(c) Closing Deliveries By Parent. At the Closing, Parent and/or
Acquisition Co., as the case may be, shall have delivered or caused to be
delivered to the Company and/or the Company Shareholders, as the case may be:
(i) the Non-Competition Agreement, duly executed by Parent;
(ii) a certificate of the Secretary of Parent substantially in
the form of Exhibit I attached hereto, certifying as of the Closing Date (A) a
true and complete copy of the organizational documents of Parent certified as of
a recent date by the Secretary of State of Delaware, (B) a true and complete
copy of the resolutions of the board of directors of Parent authorizing the
execution, delivery and performance of this Agreement by Parent and the
consummation of the transactions contemplated hereby and (C) incumbency matters;
(iii) the Note Consideration and Cash Consideration for each
Shareholder as set forth on Section 2.9 of the Company Disclosure Schedule; and
(iv) a certificate of the Secretary of Acquisition Co.
substantially in the form of Exhibit J attached hereto, certifying as of the
Closing Date (A) a true and complete copy of the organizational documents of
Acquisition Co., (B) a true and complete copy of the resolutions of the board of
directors and shareholder of Acquisition Co. authorizing the execution, delivery
and performance of this Agreement by Acquisition Co. and the consummation of the
transactions contemplated hereby and (C) incumbency matters.
2.10 Exemption from Registration. The issuance of the Parent Common Stock
issuable as Merger Consideration will be exempt from registration requirements
of the Securities Act pursuant to the private placement exemption provided by
Rule 505 and/or 506 of Regulation D promulgated under the Securities Act and/or
Section 4(2) of the Securities Act, and applicable state securities laws.
2.11 Authorization of the CPS Stockholder Representative.
(a) ▇▇▇ ▇▇▇▇ (and each successor appointed in accordance with
this Section 2.11) hereby is appointed, authorized and empowered to act as the
stockholder representative (when acting in such capacity, the "CPS Stockholder
Representative") on behalf of the Shareholders, in connection with and to
facilitate the consummation of the transactions contemplated by this Agreement,
which powers shall include, without limitation: (i) to deliver all certificates
representing the Company Common Stock tendered therewith to Parent; (ii) to
prosecute, negotiate, defend, agree to, enter into settlements and comprises of,
and comply with orders of courts and awards of arbitrators with respect to
indemnification claims or other disputes arising under this Agreement; (iii) to
resolve any indemnification claims under this Agreement; and (iv) to make,
execute, acknowledge and deliver all such other agreements, guarantees, orders,
receipts, endorsements, notices, requests, instructions, certificates, stock
powers, letters and other writings, and, in general, do to any and all things
and to take any and all actions that the CPS Stockholder Representative in his
sole and absolute discretion, may consider necessary or proper or convenient in
connection with the consummation of the transactions contemplated by this
Agreement.
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Accordingly, the CPS Stockholder Representative shall have unlimited
authority and power to act on behalf of the Shareholders with respect to this
Agreement and the disposition, settlement or other handling of all disputes and
indemnification claims, and other rights or obligations arising from or taken
pursuant to this Agreement. Each Shareholder will be bound by all actions taken
by the CPS Stockholder Representative in connection with this Agreement. The CPS
Stockholder Representative shall not be liable to any Shareholder for any costs,
damages or expenses incurred in connection with the performance of his
responsibilities hereunder, except to the extent such costs, damages or expenses
arise from the CPS Stockholder Representative's intentional misconduct, gross
negligence or fraudulent acts.
The grant of authority provided for in this Section 2.11 is coupled with
an interest and is being granted, in part, as an inducement to Parent and
Acquisition Co. to enter into this Agreement, and shall be irrevocable and
survive the death, incompetency, bankruptcy or liquidation of any Shareholder
and shall be binding upon any successor thereto.
Parent, Acquisition Co. and Surviving Corporation shall have the right to
rely upon all actions taken or omitted to be taken by the CPS Stockholder
Representative pursuant to this Agreement or any applicable ancillary document,
and notwithstanding anything herein to the contrary, Parent, Acquisition Co. and
Surviving Corporation shall not have any responsibility or obligation whatsoever
to any Shareholder or to any other party with respect to or arising out of the
actions taken or any inaction by the CPS Stockholder Representative.
(b) If the CPS Stockholder Representative is unable or unavailable
to perform his duties hereunder, a successor CPS Stockholder Representative
shall be selected by a majority (based on percentage of stock ownership) of the
Shareholders of the Company.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company and each of the Shareholders, jointly and severally, represent
and warrant to Parent and Acquisition Co. as of the date hereof and as of the
Closing Date, except as set forth on the Company Disclosure Schedule furnished
to Parent specifically identifying the relevant subparagraph hereof, which
exceptions shall be deemed to be representations and warranties as if made
hereunder, as follows:
3.1 Organization of the Company. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Texas. The Company is duly authorized to conduct business and is in good
standing in Texas and each jurisdiction where such qualification is required
except for any jurisdiction where failure so to qualify would not have a
Material Adverse Effect upon the Company. The Company has full power and
authority, and holds all Permits and authorizations necessary to carry on its
business and to own and use the Assets and Properties owned and used by the
Company except where the failure to have such power and authority or to hold
such Permit or authorization would not have a Material Adverse Effect on the
Company's business. The Company has delivered to Parent correct and complete
copies of its charter documents and organizational documents, each as amended to
date.
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3.2 Capital Stock of the Company.
(a) The authorized capital stock of the Company consists of (i)
100,000 shares of common stock, par value $0.001 per share ("Company Common
Stock"), of which 100,000 shares are issued and outstanding as of the date
hereof; (ii) no shares of capital stock of the Company in treasury; and (iii) no
shares of preferred stock. Each share of the issued and outstanding capital
stock of the Company is duly authorized, validly issued, fully paid and
nonassessable. Section 3.2(a) of the Company Disclosure Schedule sets forth a
complete and accurate list specifying the number of shares of Company Common
Stock held by each Shareholder.
(b) There are no subscriptions, options, warrants, calls,
commitments and other rights of any kind for the purchase or acquisition of, and
any securities convertible or exchangeable for, any capital stock of the
Company, including the holder thereof, the number of shares of Company Common
Stock subject thereto, the exercise price, date of grant, vesting schedule and
expiration thereof and any terms regarding the acceleration of vesting thereof.
(c) There are no agreements to which the Company is a party or by
which it is bound with respect to the voting (including voting trusts or
proxies), registration under the Securities Act, or sale or transfer (including
agreements relating to pre-emptive rights, rights of first refusal, co-sale
rights or "drag-along" rights) of any securities of the Company. To the
Knowledge of the Company, there are no agreements among other parties, to which
the Company is not a party and by which it is not bound, with respect to the
voting (including voting trusts or proxies) or sale or transfer (including
agreements relating to rights of first refusal, co-sale rights or "drag-along"
rights) of any securities of the Company.
3.3 Ownership of Shares. Each of the Shareholders owns beneficially and of
record that number of shares of Company Common Stock listed opposite such
Shareholder's name in Section 3.2(a) of the Company Disclosure Schedule, free
and clear of all Encumbrances, and has good and valid title to such shares. The
delivery of the stock certificate(s) representing the Outstanding Common Stock
in the manner provided in Section 2.8 will transfer to the Parent good and valid
title thereto free and clear of all Encumbrances.
3.4 Authority of the Company. The Company has all necessary power and
authority and has taken all action necessary to enter into this Agreement, to
consummate the transactions contemplated hereby and to perform its obligations
hereunder and no other proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
3.5 No Affiliates. The Company does not have any Affiliates or
subsidiaries and is not a partner in any partnership or a party to a joint
venture.
15
3.6 No Conflicts. The execution and delivery by the Company of this
Agreement does not, and the performance by the Company of its obligations under
this Agreement and the consummation of the transactions contemplated hereby will
not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the charter documents, bylaws or other
organizational documents of the Company;
(b) conflict with or result in a violation or breach of, or give any
Governmental or Regulatory Authority the right to revoke, withdraw, suspend,
cancel, termination or modify any term or provision of any law, Order, Permit,
statute, rule or regulation applicable to the Company, the business or Assets or
Properties of the Company or the capital stock of the Company Common Stock;
(c) result in a breach of, or default under (or give rise to right
of termination, modification, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other similar instrument or obligation to which the Company,
any of its Assets and Properties or the Company Common Stock may be bound,
except for such breaches or defaults as set forth in Section 3.6(c) of the
Company Disclosure Schedule as to which requisite waivers or consents will have
been obtained by the Closing Date;
(d) cause any of the Assets or Properties of the Company to be
reassessed or revalued by any taxing authority or any Governmental or Regulatory
Authority;
(e) result in an imposition or creation of any Encumbrance or Tax on
the business or Assets or Properties of the Company or the Company Common Stock.
3.7 Consents and Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory Authority
on the part of the Company is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.8 Books and Records. The minute books and other corporate records of the
Company as made available to Parent contain a true and complete record of all
actions taken at all meetings and by all written consents in lieu of meetings of
the Shareholders, the boards of directors and committees of the boards of
directors of the Company. The Company has delivered or made available true and
complete copies of each document which has been requested by Parent or its
counsel in connection with their legal and accounting review of the Company. The
stock transfer ledgers and other similar records of the Company accurately
reflect all issuances and record transfers in the capital stock of the Company.
The other Books and Records of the Company are true, correct and complete,
represent bonafide business transactions and have been maintained in accordance
with sound business practices, including the maintenance of an adequate system
of internal controls.
3.9 Company Financial Statements. The Company has previously delivered to
Parent the Company Financial Statements. Such Company Financial Statements (i)
are materially true, correct and complete, (ii) have been prepared in accordance
with the Books and Records of the Company, (iii) have been prepared in
conformity with GAAP, and (iv) fairly present the financial condition and
results of operations of the Company as of the respective dates thereof and for
the periods covered thereby; provided that the Interim Financial Statements are
subject to normal year-end adjustments and lack footnotes and certain other
presentation items.
16
3.10 Absence of Changes. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on or prior to the
Closing Date, since December 31, 2003, there has not been any material adverse
change, or any event or development which, individually or together with other
such events, could reasonably be expected to result in a Material Adverse Effect
on the Company.
3.11 No Undisclosed Liabilities. Except as disclosed in Section 3.11 of
the Company Disclosure Schedule or in the Company Financial Statements, there
are no liabilities, whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due, whether or not of a kind
required by GAAP to be set forth on a financial statement or on the notes
thereto, including but not limited to any liability for Taxes (the
"Liabilities"), nor any basis for any claim against the Company for any such
liabilities, relating to or affecting the Company or any of its Assets and
Properties, other than such liabilities incurred after December 31, 2003 in the
Ordinary Course of Business which have not had, and could not reasonably be
expected to result in, individually or in the aggregate, a Material Adverse
Effect on the Company. To the Knowledge of the Company there is no circumstance,
condition, event or arrangement that may hereafter give rise to any liabilities
of the Company or any successor to its business except in the Ordinary Course of
Business or is otherwise set forth on in Section 3.11 of the Company Disclosure
Schedule.
3.12 Tangible Personal Property. The Company is in possession of and has
good and marketable title to, or has valid leasehold interests in or valid
rights under written agreements to use, all tangible personal property,
equipment, plants, buildings, structures, facilities and all other Assets and
Properties used in or reasonably necessary for the conduct of the Company's
business, including all tangible personal property reflected on the Company
Financial Statements and any tangible personal property acquired since that date
other than property disposed of since such date in the Ordinary Course of
Business. All such tangible personal property, equipment, plants, buildings,
structures, facilities and all other assets and properties are listed in Section
3.12 of the Company Disclosure Schedule and are free and clear of all
Encumbrances, other than Permitted Encumbrances which have not had a Material
Adverse Effect on the Company.
3.13 Benefit Plans; ERISA.
(a) Section 3.13(a) of the Company Disclosure Schedule lists each
Benefit Plan together with a brief description of the type of plan and benefit
provided thereunder. The Company has no commitment, proposal, or communication
to employees regarding the creation of an additional Plan or any increase in
benefits under any Benefit Plan. The Company has provided to Parent (i) a copy
of each Benefit Plan (including amendments) and a list of persons participating
in such arrangement, (ii) the three most recent annual reports on the Form 5500
series for each Benefit Plan required to file such report and (iii) the most
recent trustee's report for each Benefit Plan funded through a trust.
17
(b) Neither the Company, an ERISA Affiliate or predecessor thereof
has ever maintained, contributed to or been obligated to contribute to any
Defined Benefit Plan or multiemployer plan (as defined in Section (3)(37) or
4001(a)(3) of ERISA) and no condition exists that presents a material risk to
the Company or an ERISA Affiliate of incurring a liability under Title IV of
ERISA.
(c) Each Benefit Plan has been operated and administered in all
material respects in accordance with its terms and, as of the Closing Date, will
be in full compliance, in form and operation, with all applicable laws
(including but not limited to ERISA and the Code). The reserves reflected in the
Company Financial Statements for the obligations of the Company under all
Benefit Plans are adequate and were determined in accordance with GAAP.
(d) Each Qualified Plan has received a determination letter from the
Internal Revenue Service confirming that it qualifies under Section 401(a) of
the Code and nothing has occurred since the issuance of that letter which would
adversely affect such qualified status or the plan sponsor's ability to rely on
such determination letter.
(e) No Benefit Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company or any ERISA Affiliate beyond their termination
of service (other than (i) coverage mandated by applicable law, (ii) benefits
under a Qualified Plan, (iii) deferred compensation benefits accrued as
liabilities on the books of the Company or any ERISA Affiliate or (iv) benefits
the full cost of which is borne by any current or former employee (or his or her
beneficiary)).
(f) The consummation of the transactions contemplated by this
Agreement will not, either immediately or upon the occurrence of any event
thereafter, (i) entitle any current or former employee or officer or director of
the Company or any ERISA Affiliate to severance pay, unemployment compensation
or any other payment, or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation otherwise due any such individual.
(g) There are no pending or, to the Knowledge of the Company,
anticipated or threatened claims by or on behalf of any Benefit Plan, by any
employee or beneficiary covered under any such Benefit Plan, or otherwise
involving any such Benefit Plan (other than routine claims for benefits).
3.14 Real Property. The Company does not own any real property. Section
3.14 of the Company Disclosure Schedule contains a complete and accurate legal
description of each parcel of real property leased by the Company (as lessee or
lessor) (the "Real Property") and all Encumbrances (other than Permitted
Encumbrances) relating to or affecting the Real Property. The Company has a
valid leasehold interest in all real property used in or relating to the conduct
of the Company's business, free and clear of all Encumbrances other than
Permitted Encumbrances. The Company has rights of ingress and egress with
respect to the Real Property, and all buildings, structures, facilities,
fixtures and other improvements thereon material for the operation of the
Company's business. Each lease with respect to the Real Property is a legal,
valid and binding agreement of the Company subsisting in full force and effect
enforceable in accordance with its terms, and except as set forth in Section
3.14 of the Company Disclosure Schedule, there is no, and the Company has not
received notice of any, default (or any condition or event which, after notice
or lapse of time or both, would constitute a default) thereunder.
18
3.15 Proprietary Information of Third Parties. No third party has claimed
or, to the Knowledge of the Company, has reason to claim that any Person
employed by or affiliated with the Company in connection with and during the
Company's operation of its business has (i) violated or may be violating any of
the terms or conditions of such Person's employment, non-competition or
non-disclosure agreement with such third party, (ii) disclosed or may be
disclosing or utilized or may be utilizing any proprietary information or
documentation of such third party, or (iii) interfered or may be interfering in
the employment relationship between such third party and any of its present or
former employees. No third party has requested information from the Company
which relates to such a claim. To the Knowledge of the Company, no Person
employed by or affiliated with the Company in connection with and during the
Company's ownership and operation of its business has employed or proposes to
employ any trade secret or any information or documentation proprietary to any
former employer and no Person employed by or affiliated with the Company in
connection with and during the Company's ownership and operation of its business
has violated any confidential relationship which such Person may have had with
any third party, in connection with the sale of any service or proposed service
of the Company, and to the Knowledge of the Company, there is no reason to
believe there will be any such employment or violation.
3.16 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Section 3.16(a) of the Company Disclosure
Schedule:
(i) the Company is, and at all times since its incorporation
has been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its Assets and Properties;
(ii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute or result in a violation
by the Company of, or failure on the part of the Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental or Regulatory
Authority or any other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or (B)
any actual, alleged, possible, or potential obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
19
(b) Section 3.16(b) of the Company Disclosure Schedule contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
Assets and Properties owned or used by, the Company. Each Governmental
Authorization listed or required to be listed in Section 3.16(b) of the Company
Disclosure Schedule is valid and is in full force and effect. Except as set
forth on Section 3.16(b) of the Company Disclosure Schedule:
(i) the Company is, and at all times has been, in full compliance
with all of the terms and requirements of each Governmental Authorization
identified or required to be identified in Section 3.16(b) of the Company
Disclosure Schedule;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or indirectly
in a violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Section 3.16(b) of
the Company Disclosure Schedule, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Section 3.16(b) of the Company Disclosure Schedule;
(iii) the Company has not received any notice or other communication
(whether oral or written) from any Governmental or Regulatory Authority or any
other Person regarding (A) any actual, alleged, possible, or potential violation
of or failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of the
Governmental Authorizations listed or required to be listed in Section 3.16(b)
of the Company Disclosure Schedule have been duly filed on a timely basis with
the appropriate Governmental or Regulatory Authority, and all other filings
required to have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental or Regulatory
Authority.
The Governmental Authorizations listed in Section 3.16(b) of the Company
Disclosure Schedule collectively constitute all of the Governmental
Authorizations necessary to permit the company to lawfully conduct and operate
its business in the manner it currently conducts and operates such business and
to permit the Company to own and use its assets in the manner in which it
currently owns and uses such assets.
3.17 Legal Proceedings; Orders.
(a) Except as set forth in Section 3.17(a) of the Company Disclosure
Schedule, there is no pending Proceeding:
(i) To the Knowledge of the Company, that has been commenced
by or against the Company or that otherwise relates to or may affect the
business of, or any of the Assets or Properties owned or used by the Company; or
20
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of the Company, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding. The
Company has delivered to Parent copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Section 3.17(a) of the
Company Disclosure Schedule. The Proceedings listed in Section 3.17(a) of the
Company Disclosure Schedule will not have a material adverse effect on the
business, operations, assets, condition, or prospects of the Company.
(b) Except as set forth in Section 3.17(b) of the Company Disclosure
Schedule:
(i) the Company is not subject to any Order that relates to
the business of, or any of the assets owned or used by, the Company; and
(ii) no officer, director, agent, or employee of the Company
is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company.
(c) Except as set forth in Section 3.17(c) of the Company Disclosure
Schedule:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to which it, or
any of the Assets or Properties owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company, or any of the Assets or Properties owned or used by the Company, is
subject; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental or Regulatory
Authority or any other Person regarding any actual, alleged, possible, or
potential violation of, or failure to comply with, any term or requirement of
any Order to which the Company, or any of the Assets or Properties owned or used
by the Company, is or has been subject.
3.18 Contracts.
(a) Section 3.18 of the Company Disclosure Schedule contains a true
and complete list of each of the following contracts, agreements or other
arrangements to which the Company is a party or by which any of its Assets and
Properties is bound (and, to the extent oral, accurately describes the terms of
such contracts, agreements and arrangements):
(i) all collective bargaining or similar labor agreements;
21
(ii) all contracts for the employment of any officer, employee
or other Person or entity on a full time, part time, consulting or other basis
and all independent contractor agreements;
(iii) all loan agreements, indentures, debentures, notes or
letters of credit relating to the borrowing of money or to mortgaging, pledging
or otherwise placing a lien on any material asset or material group of assets of
the Company;
(iv) each written warranty, guaranty, or other similar
undertaking with respect to contractual performance extended by the Company;
(v) all leases or agreements under which the Company is lessee
or lessor of, or holds, or operates, any property, real or personal, owned by
any other party;
(vi) all commitments, contracts, sales contracts, purchase
orders, mortgage agreements or groups of related agreements with the same party
or any group or affiliated parties which require or may in the future require
payment of any consideration by the Company;
(vii) all license agreements, distribution agreements or any
other agreements involving any of the Company's Intellectual Property, including
agreements with current and former employees, consultants or contractors
regarding the appropriation or the non-disclosure of any Intellectual Property;
(viii) each joint venture partnership and other Contract
(however named) involving a sharing of profits, losses, costs or liabilities by
the Company with any other Person;
(ix) any Contract for payments to or by any Person by the
Company based on sales, purchases or profits, other than direct payments for
goods;
(x) each power of attorney that is currently effective and
outstanding; (xi) each Contract entered into other than in the Ordinary Course
of Business that contains or provides for an express undertaking by the Company
to be responsible for consequential damages;
(xii) each Contract for capital expenditures in excess of
$10,000;
(xiii) all subscription or other agreements related to the
equity ownership of the Company;
(xiv) all contracts or commitments that in any way restrict
the Company from carrying on its business anywhere in the world;
(xv) all other contracts and agreements that (A) involve the
payment or potential payment in excess of $10,000, pursuant to the terms of any
such contract or agreement, by the Company and (B) cannot be terminated within
30 days after giving notice of termination without resulting in any cost or
penalty to the Company;
(xvi) all contracts or commitments that in any way grants a
third party a right of first refusal for the purchase of the Company or any of
its Assets or Properties; and
22
(xvii) each amendment, supplement, and modification (whether
oral or written) in respect to any of the foregoing.
(b) A correct and complete copy of each Contract disclosed in the
Company Disclosure Schedule has been previously provided to Parent. Each
contract, agreement or other arrangement disclosed in the Company Disclosure
Schedule is in full force and effect and constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms, of the Company, and to the
Knowledge of the Company, the other parties thereto; and the Company has
performed all of its required obligations under, and is not in violation or
breach of or default under, any such contract, agreement or arrangement. To the
Knowledge of the Company, the other parties to any such contract, agreement or
arrangement are not in violation or breach of or default under any such
contract, agreement or arrangement. To the Knowledge of the Company, none of the
present or former employees, officers, directors or Shareholders of the Company
is a party to any oral or written contract or agreement prohibiting any of them
from freely competing with other parties or engaging in the Company's business
as now operated. No event has occurred or circumstance exists that (with or
without notice or the lapse of time) may contravene, conflict with, or result in
a violation or breach of, or give the Company or any other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, termination, or modify, any Contract to which the
Company is a party. The Company has not given to or received from any other
Person any notice or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of, or default under
any Contract. There are no renegotiations of, attempts to renegotiate or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or complete Contract with any Person and, to the Knowledge
of the Company, no such Person has made written demand for such renegotiation.
The Contracts relating to the sale of services of the Company have been entered
into in the Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that would be in violation of any
Legal Requirement.
3.19 Accounts Receivable. All accounts receivable of the Company that are
reflected on the Company Financial Statements or the accounting records of the
Company as of the Closing (collectively, the "Accounts Receivable") represent or
will represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. There is no contest,
claim, or right of set-off, other than returns in the Ordinary Course of
Business under any contract with any obligor of Accounts Receivable relating to
the amount or validity of such Accounts Receivable. Section 3.19 of the Company
Disclosure Schedule contains a complete and accurate list of all Accounts
Receivable as of July 31, 2004, which lists sets forth the aging of such
Accounts Receivable.
3.20 Accounts Payable. Set forth in Section 3.20 of the Company Disclosure
Schedule is a complete and accurate list of all accounts payable or the Company
as of July 31, 2004 (collectively, the "Accounts Payable") which represent or
will represent obligations of the Company arising from purchases actually made,
services actually received or obligations otherwise incurred by the Company.
23
3.21 Equipment. All tangible personal property and equipment used by the
Company in the conduct of its business are in good operating condition and
repair (subject to normal wear and tear) with no known material defects so as to
permit the operation of its business as presently conducted, no such equipment
or tangible personal property is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs which are not material in nature or
cost, and with respect to each item of equipment and tangible personal property,
the Company has not received notification that it is in violation, in any
material respect, of any applicable building, zoning, subdivision, fire
protection, health or other law, Order, ordinance or regulation and no such
violation exists.
3.22 Insurance. Set forth in Section 3.22 of the Company Disclosure
Schedule is a complete and accurate list of all primary, excess and umbrella
policies, bonds and other forms of insurance currently owned or held by or on
behalf of and/or providing insurance coverage to the Company or the Assets and
Properties of the Company (or any of the Company's directors, officers,
salespersons, agents or employees), including the following information for each
such policy: type(s) of insurance coverage provided; name of insurer; effective
dates; policy number; per occurrence and annual aggregate deductibles or
self-insured retentions; per occurrence and annual aggregate limits of liability
and the extent, if any, to which the limits of liability have been exhausted.
All policies set forth on the Company Disclosure Schedule are in full force and
effect, and with respect to such policies, all premiums currently payable or
previously due have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. All such policies are sufficient
for compliance with all requirements of law and all agreements to which the
Company is a party or otherwise bound, and are valid, outstanding, collectible
and enforceable policies and, to the Knowledge of the Company, provide adequate
insurance coverage for the Company and the business and Assets and Properties of
the Company and will remain in full force and effect through the respective
dates set forth in Section 3.22 of the Company Disclosure Schedule. None of such
policies contains a provision that would permit the termination, limitation,
lapse, exclusion or change in the terms of coverage of such policy (including,
without limitation, a change in the limits of liability) by reason of the
consummation of the Contemplated Transactions. Complete and accurate copies of
all such policies and related documentation have previously been provided to the
Parent.
3.23 Tax Matters.
(a) Except as set forth in Section 3.23 of the Company Disclosure
Schedule, all Tax Returns required to be filed by or on behalf of the Company
have been duly filed on a timely basis and to the Knowledge of the Company such
Tax Returns are true, complete and correct. Except as set forth in Section 3.23
of the Company Disclosure Schedule, all Taxes shown to be payable on the Tax
Returns or on subsequent assessments with respect thereto have been paid in full
on a timely basis, and no other Taxes are payable by the Company with respect to
items or periods covered by such Tax Returns (whether or not shown on or
reportable on such Tax Returns) or with respect to any period prior to Closing.
The Company has withheld and paid over all Taxes required to have been withheld
and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. There are no liens on any of the
assets of the Company with respect to Taxes, other than liens for Taxes not yet
due and payable. The Company is not currently the beneficiary of any extension
of time within which to file any Tax Return.
24
(b) Except as set forth in Section 3.23 of the Company Disclosure
Schedule, the amount of the Company's liability for unpaid Taxes for all periods
ending on or before July 31, 2004 does not, in the aggregate, exceed the amount
of the current liability accruals for Taxes (excluding reserves for deferred
Taxes), reflected on the Company Financial Statements, and except as provided in
Section 3.23 of the Company Disclosure Schedule, the amount of the Company's
liability for unpaid Taxes for all periods ending on or before the Closing Date
shall not, in the aggregate, exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes), as such accruals are
reflected on the Company Financial Statements, as adjusted for operations and
transactions in the Ordinary Course of Business since July 31, 2004 in
accordance with past custom and practice. There are no contracts, agreements,
arrangements, commitments or undertakings relating to any prior audit of the
Company, and there are no contracts, agreements, arrangements, commitments or
undertakings with the Internal Revenue Service or any other Governmental or
Regulatory Authority that have or are reasonably likely to have a material and
adverse impact on the Company's Taxes that are not reflected in the Company
Financial Statements.
(c) To the extent such documents exist, Parent has been furnished by
the Company true and complete copies of (i) relevant portions of income tax
audit reports, statements of deficiencies, closing or other agreements received
by the Company or on behalf of the Company relating to Taxes, and (ii) except as
set forth in Section 3.23 of the Company Disclosure Schedule, all federal and
state income or franchise tax returns for the Company for all periods ending on
and after December 31, 2001.
(d) The Tax Returns of the Company have never been audited by a
Governmental or Regulatory Authority, nor is any such audit in process, pending
or threatened (either in writing or verbally, formally or informally). To the
Knowledge of the Company, and except as set forth in Section 3.23 of the Company
Disclosure Schedule, no deficiencies exist or have been asserted (either in
writing or verbally, formally or informally) or are expected to be asserted with
respect to Taxes of the Company, and the Company has not received notice (either
in writing or verbally, formally or informally) or expects to receive notice
that it has not filed a Tax Return or paid Taxes required to be filed or paid by
it. The Company is neither a party to any action or proceeding for assessment or
collection of Taxes, nor has such event been asserted or threatened (either in
writing or verbally, formally or informally) against the Company or any of its
assets. No waiver or extension of any statute of limitations is in effect with
respect to Taxes or Tax Returns of the Company. The Company has disclosed on its
federal income tax returns all positions taken therein that could give rise to a
substantial understatement penalty within the meaning of Section 6662 of the
Code.
(e) The Company is not (nor has it ever been) a party to any Tax
sharing agreement or Tax indemnity agreement and has not assumed the Tax
liability of any other Person under contract. The Company is not or has ever
been a member of an affiliated group filing a consolidated federal income Tax
Return and, except as set forth in Section 3.23 of the Company Disclosure
Schedule, the Company has no liability for the Taxes of any individual or entity
under Section 1.1502-6 of the Treasury Regulations (or any similar provision of
state, local or foreign law) as a transferee or successor, by contract or
otherwise.
25
(f) The Company does not have any deferred income or gains
reportable for Tax purposes in any period ending after the Closing Date but that
is attributable to a transaction occurring in, or resulting from a change in
accounting method for a period prior to the Closing Date.
(g) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Books and Records provided to Parent.
(h) All of the Shareholders are "United States Persons," within the
meaning of Section 7701(a)(30) of the Code.
3.24 Labor and Employment Relations. To the Knowledge of the Company, no
officer, executive or group of five or more employees of the Company has or have
any plans to terminate his, her or their employment with the Company. The
Company is not a party to or bound by any collective bargaining agreement with
any labor organization, group or association covering any of its employees, and
to the Knowledge of the Company, there are no attempts to organize any of the
Company's employees by any Person, unit or group seeking to act as their
bargaining agent. The Company has complied with all applicable laws relating to
the employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining, discrimination against race, color,
national origin, religious creed, physical or mental disability, sex, age,
ancestry, medical condition, marital status or sexual orientation, occupational
health and safety and the withholding and payment of social security and other
Taxes. The Company is not liable for the payment of any compensation, damages,
taxes, fines, penalties or other amounts, however designated, for the failure to
comply with any of the foregoing Legal Requirements. To the Knowledge of the
Company, no employees of the Company are in violation of any term of any
employment contract, patent disclosure agreement, non-competition agreement, or
any restrictive covenant to a former employer relating to any such employee to
be employed by the Company because of the nature of the business conducted or
presently proposed to be conducted by the Company or the use of trade secrets or
proprietary information of others. There are no pending or, to the Knowledge of
the Company, threatened charges (by employees, independent contractors, their
representatives or governmental authorities) of unfair labor practices or of
employment discrimination or of any other wrongful action with respect to any
aspect of employment of any Person employed or formerly employed by the Company.
To the Knowledge of the Company, no union representation elections relating to
the Company's employees have been scheduled by any Governmental or Regulatory
Authority, no organizational effort is being made with respect to any of such
employees, and no investigation of the Company's employment policies or
practices by any Governmental or Regulatory Authority is pending or threatened.
The Company is not currently, and in the past has not been, involved in labor
negotiations with any unit or group seeking to become the bargaining unit for
any employees of the Company. The Company has never experienced any work
stoppages and to the Knowledge of the Company, no work stoppage has been
threatened or is planned.
26
3.25 Certain Employees. Set forth in Section 3.25 of the Company
Disclosure Schedule is (i) the name, title and total compensation of each
officer and director of the Company; (ii) the name, title and total compensation
for each other employee, consultant, agent or other representative of the
Company for 2002 and 2003; (iii) all wage and salary increase, bonuses and
increases and any other direct or indirect compensation received by any such
Person since December 31, 2003; (iv) any payments or commitments to pay any
severance or termination pay to any current or former officer, director,
employee, consultant, contractor or agent of the Company; and (v) any accrual
for, or commitment or agreement by the Company to pay, such increases, bonus or
pay. Except as set forth on Schedule 3.25, the Company has not received any
notice from any such Person whether orally or in writing that he or she will
cancel or otherwise terminate such Person's relationship with the Company. None
of such Persons has an employment agreement or understanding, whether oral or
written, with the Company which is not terminable on notice by the Company
without cost or other liability to the Company.
3.26 Absence of Certain Developments. Except as set forth on Schedule
3.26, since December 31, 2003, the Company has not:
(a) issued any stock, bonds or other corporate securities or any
right, options or warrants with respect thereto;
(b) borrowed any amount, obtained any letters of credit or incurred
or become subject to any liabilities in excess of $10,000 in the aggregate;
(c) discharged or satisfied any lien or Encumbrance or paid any
obligation or liability, other than current liabilities paid in the Ordinary
Course of Business and other than current federal income Tax liabilities;
(d) declared or made any payment or distribution of cash or other
property to Shareholders with respect to its stock, or purchased or redeemed any
shares of its capital stock;
(e) mortgaged or pledged any of its Assets or Properties, or
subjected them to any lien, charge or any other Encumbrance, except liens for
current property Taxes not yet due and payable;
(f) sold, leased, subleased, assigned or transferred any of its
Assets or Properties, except in the Ordinary Course of Business, or cancelled
any debts or claims;
(g) made any changes in any employee, consultant or contractor
compensation, severance or termination agreement, commitment or transaction
other than routine salary increases consistent with past practice or offer
employment to any individuals;
(h) entered into any material transaction or modified any existing
transaction (the aggregate consideration for which is in excess of $10,000);
27
(i) suffered any damage, destruction or casualty loss, whether or
not covered by insurance;
(j) made any capital expenditures, additions or improvements or
commitments for the same, except those made in the Ordinary Course of Business
which in the aggregate do not exceed $10,000;
(k) entered into any transaction or operated the Company's business
not in the Ordinary Course of Business;
(l) made any change in its accounting methods or practices or ceased
making accruals for taxes, obsolete inventory, vacation and other customary
accruals;
(m) ceased from reserving cash to pay taxes, principal and interest
on borrowed funds, and other customary expenses and payments;
(n) caused to be made any reevaluation of any of its Assets or
Properties;
(o) caused to be entered into any amendment or termination of any
lease, customer or supplier contract or other material contract or agreement to
which it is a party, other than in the Ordinary Course of Business;
(p) made any material change in any of its business policies,
including, without limitation, advertising, distributing, marketing, pricing,
purchasing, personnel, sales, returns, budget or product acquisition or sale
policies;
(q) terminated or failed to renew, or received any written threat
(that was not subsequently withdrawn) to terminate or fail to renew, any
contract or other agreement that is or was material to the Company's business or
its financial condition;
(r) permitted to occur or be made any other event or condition of
any character which has had a Material Adverse Effect on it;
(s) waived any rights material to its financial or business
condition;
(t) made any illegal payment or rebates; or
(u) entered into any agreement to do any of the foregoing.
3.27 Customers. The Company has previously provided to Parent a true and
correct list of the Company's current customers and the Company's customers
during the 2002 and 2003 fiscal years related to the Company business. Since
January 1, 2003 no single customer or group of affiliated customers contributing
more than $10,000 per annum to the gross revenues of the Company's business has
stopped doing business with the Company, and no such customer has given notice
to the Company of an intention to discontinue doing business or reduce the level
of gross revenues from that in fiscal year 2003 with the Company.
28
3.28 Bank Accounts. Section 3.28 of the Company Disclosure Schedule
contains a complete and accurate list of each deposit account or asset
maintained by or on behalf of the Company with any bank, brokerage house or
other financial institution, specifying with respect to each the name and
address of the institution, the name under which the account is maintained, the
account number, and the name and title or capacity of each Person authorized to
have access thereto.
3.29 Permits. Section 3.29 of the Company Disclosure Schedule contains a
true and complete list of all Permits used in and material, individually or in
the aggregate, to the Company's business. All such Permits are currently
effective and valid and have been validly issued. No additional Permits are
necessary to enable the Company to conduct its business in material compliance
with all applicable federal, state and local laws. Neither the execution,
delivery or performance of this Agreement nor the mere passage of time will have
any effect on the continued validity or sufficiency of the Permits, nor will any
additional Permits be required by virtue of the execution, delivery or
performance of this Agreement to enable the Company to conduct its business as
now operated. To the Knowledge of the Company, there is no pending Action or
Proceeding by any Governmental or Regulatory Authority which could affect the
Permits or their sufficiency for the current conduct of the Company's business
or of the conduct of the Company's business after the Closing. The Company has
provided Parent with true and complete copies of all Permits listed in the
Company Disclosure Schedule.
3.30 Regulatory Compliance. Neither the Company nor any of its operations
are regulated by any Governmental or Regulatory Authority and the Company has
complied with all applicable requirements of any Governmental or Regulatory
Authority with respect to any services provided by it (including but not limited
to the Medicare Anti-Kickback Statute, the Health Insurance Portability and
Accountability Act of 1996, the Federal False Claims Act, the Federal laws
concerning physician self-referral known as "▇▇▇▇▇ I" and "▇▇▇▇▇ II", and the
rules and regulations of the Joint Commission on Accreditation of Healthcare
Organizations).
Neither the Company, nor any officer, employee or agent of the Company has
made an untrue statement of a material fact or fraudulent statement to any
Governmental or Regulatory Authority, failed to disclose a material fact
required to be disclosed to any Governmental or Regulatory Authority, or
committed an act, made a statement, or failed to make a statement that, at the
time such disclosure was made, could reasonably be expected to provide a basis
for any Governmental or Regulatory Authority to invoke its policies respecting
fraud, untrue statements of material facts, bribery or illegal gratuities or any
similar policies.
3.31 Third Party Consents. No consent, approval or authorization of any
third party on the part of the Company is required in connection with the
consummation of the transactions contemplated hereunder except as otherwise
provided in Section 3.31 of the Company Disclosure Schedule.
3.32 Relationships with Related Persons. Except as set forth on Schedule
3.32, no Shareholder or any Affiliate of the Company has, or since January 1,
2002 has had, any interest in the property, whether real, personal or mixed, or
whether tangible or intangible, used in or pertaining to the Company's
businesses. No Shareholder or any Affiliate of the Company owns, or since
January 1, 2002 has owned (of record or as beneficial owner) an equity interest
or any other financial or profit interest in a Person that has (i) had business
dealings or a material financial interest in any transaction with the Company or
(ii) engaged in competition with the Company with respect to any line of the
products or services of the Company. Except as set forth in Section 3.32 of the
Company Disclosure Schedule, no Shareholder nor any Affiliate of the Company is
a party to any Contract with or has any right or claim against the Company.
29
3.33 Certain Payments. Neither the Company nor any director, officer,
agent or employee of the Company, or to the Knowledge of the Company, any other
Person associated with or acting for or on behalf of the Company, has directly
or indirectly (i) made any contribution, gift, bribe, rebate, payoff, influence
payment, kick-back or other payment to any Person, private or public, regardless
of any form, whether in money, property or services (A) to obtain favorable
treatment in securing business, (B) to pay for favorable treatment for business
secured, (C) to obtain special concessions or for special concessions already
obtained for or in respect of the Company or any Affiliate thereof, or (D) in
violation of any Legal Requirement, or (ii) established or maintained any fund
or asset that has not been recorded in the Books and Records of the Company.
3.34 Brokers. Except as set forth in Section 3.34 of the Company
Disclosure Schedule, neither the Shareholders nor the Company have retained any
broker in connection with the transactions contemplated hereunder. Parent has,
and will have, no obligation to pay any broker's, finder's, investment banker's,
financial advisor's or similar fee in connection with this Agreement or the
transactions contemplated hereby by reason of any action taken by or on behalf
of the Shareholders or the Company.
3.35 Verification of Credentials. Except as set forth in Section 3.35 of
the Company Disclosure Schedule, the Company has implemented policies and
procedures to verify the credentials (including, but not limited to, with
respect to education and licensure) of personnel that the Company places with
its clients and to collect, maintain and update such credentialing information.
To the Knowledge of the Company, employees, contractors and consultants each
consistently follow and have followed such policies and procedures.
3.36 [Intentionally Deleted]
3.37 Existing Indebtedness. As of the date of this Agreement and as of the
close of business on the day prior to the Closing Date, (i) all indebtedness of
or any obligation of the Company (whether as obligor or as guarantor) for
borrowed money, whether current, short-term, or long-term, secured or unsecured,
(ii) all indebtedness of the Company (whether as obligor or as guarantor) for
the deferred purchase price for purchases of property outside the ordinary
course which is not evidenced by trade payables, (iii) all lease obligations of
the Company (whether as obligor or as guarantor) under leases which are capital
leases in accordance with GAAP, (iv) all off-balance sheet financings of the
Company (whether as obligor or as guarantor), (v) any payment obligations of the
Company (whether as obligor or as guarantor) in respect of banker's acceptances
or letters of credit (other than stand-by letters of credit in support of
ordinary course trade payables), (vi) any liability of the Company (whether as
obligor or as guarantor) with respect to interest rate swaps, collars, caps and
similar hedging obligations, (vii) any present, future or contingent obligations
of the Company under (A) any phantom stock or equity appreciation rights, plan
or agreement, (B) any consulting, deferred pay-out or earn-out arrangements in
connection with the purchase of any business or entity, (C) any non-competition
agreement, (viii) any accrued bonuses, (ix) any accrued Taxes other than payroll
Taxes accrued in the Ordinary Course of Business, (x) any accrued and unpaid
interest or any contractual prepayment premiums, penalties or similar
contractual charges resulting from the Contemplated Transactions or the
discharge of such obligations with respect to any of the foregoing, (xi) all
indebtedness of or any obligation of the Company owed to the Shareholders or to
any Affiliate of the Shareholders and (xii) all indebtedness of or any
obligation of the Company incurred for the personal benefit of the Shareholders
or any Affiliate of the Shareholders, including without limitation, any Family
Members of the Shareholders, is listed on Schedule 3.37 hereto (collectively,
but without duplication, the "Existing Indebtedness").
30
3.38 Material Misstatements and Omissions. The statements, representations
and warranties of the Company contained in this Agreement (including the
exhibits and schedules hereto) and in each document, statement, certificate or
exhibit furnished or to be furnished by or on behalf of the Company pursuant
hereto, or in connection with the transactions contemplated hereby, taken
together, do not contain and will not contain any untrue statement of a material
fact and do not or will not omit to state a material fact necessary to make the
statements or facts contained herein or therein, in light of the circumstances
made, not misleading.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION CO.
Parent and Acquisition Co., jointly and severally, represent and warrant
to the Company as of the date hereof and as of the Closing Date, as follows:
4.1 Organization. Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of the Delaware. Acquisition
Co. is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Texas. Each of Parent and Acquisition Co. is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required except for any jurisdiction
where failure so to qualify would not have a Material Adverse Effect upon Parent
or Acquisition Co., as the case may be.
4.2 Authority. Each of Parent and Acquisition Co. has all necessary
corporate power and corporate authority and has taken all corporate actions
necessary to enter into this Agreement, to consummate the transactions
contemplated hereby and to perform its respective obligations hereunder and no
other proceedings on the part of Parent or Acquisition Co. are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of
Parent and Acquisition Co. and constitutes a legal, valid and binding obligation
of Parent and Acquisition Co., respectively, enforceable against each of Parent
and Acquisition Co. in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
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4.3 Litigation. There are no Actions or Proceedings pending or, to the
Knowledge of Parent, threatened or anticipated against, relating to or affecting
the transactions contemplated by this Agreement, and, to the Knowledge of
Parent, there is no basis for any such Action or Proceeding.
4.4 Reports and Financial Statements. As of the date hereof, the Parent
has furnished or made available to the Company and the Shareholders true and
complete copies of all Parent SEC Documents. As of their respective filing
dates, all such Parent SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and none
of such Parent SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC. The Parent Financial Statements comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-QSB of the SEC) and present fairly the consolidated
financial position of the Parent at the dates thereof and the consolidated
results of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal audit adjustments).
4.5 No Conflicts. The execution and delivery by the Parent of this
Agreement does not, and the performance by the Parent of its obligations under
this Agreement and the consummation of the transactions contemplated hereby will
not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the charter documents, bylaws or other
organizational documents of the Parent;
(b) conflict with or result in a violation or breach of, or give any
Governmental or Regulatory Authority the right to revoke, withdraw, suspend,
cancel, termination or modify any term or provision of any law, Order, Permit,
statute, rule or regulation applicable to the Parent, the business or Assets or
Properties of the Parent or the capital stock of the Parent Common Stock;
(c) result in a breach of, or default under (or give rise to right
of termination, modification, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other similar instrument or obligation to which the Parent,
any of its Assets and Properties or the Parent Common Stock may be bound;
(d) cause any of the Assets or Properties of the Parent to be
reassessed or revalued by any taxing authority or any Governmental or Regulatory
Authority;
(e) result in an imposition or creation of any Encumbrance or Tax on
the business or Assets or Properties of the Parent or the Parent Common Stock.
32
4.6 Consents and Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory Authority
on the part of the Parent is required in connection with the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby.
4.7 Brokers. Neither Parent nor Acquisition Co. has retained any broker in
connection with the transactions contemplated hereunder. Neither the Company nor
the Shareholders has, and will have, any obligation to pay any broker's,
finder's investment banker's, financial advisor's or similar fee in connection
with this Agreement or the transactions contemplated hereby by reason of any
action taken by or on behalf of Parent or Acquisition Co.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants to Parent and Acquisition
Co. as follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company and the Shareholders set forth in
Article III above):
5.1 Requisite Power and Authority. Such Shareholder has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out its provisions. All action on such
Shareholder's part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing. Upon
execution and delivery, this Agreement will be the valid and binding obligation
of such Shareholder, enforceable in accordance with its terms.
5.2 Investment Representations. Such Shareholder understands that the
shares of the Parent Common Stock have not been registered under the Securities
Act. Such Shareholder also understands that the shares of Parent Common Stock
are being offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon such Shareholder's representations and
warranties contained in this Agreement. Such Shareholder hereby represents and
warrants as follows:
(a) [INTENTIONALLY OMITTED]
(b) Such Shareholder has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to Parent so that he, she or it is capable of evaluating the merits and risks of
his, her or its investment in Parent and has the capacity to protect his, her or
its own interests. Such Shareholder must bear the economic risk of this
investment indefinitely unless the shares of Parent Common Stock are registered
pursuant to the Securities Act, or an exemption from registration is available.
Such Shareholder also understands that there is no assurance that any exemption
from registration under the Securities Act will be available and that, even if
available, such exemption may not allow such Shareholder to transfer all or any
portion of the shares of Parent Common Stock under the circumstances, in the
amounts or at the times such Shareholder might propose.
33
(c) Such Shareholder is acquiring the shares of Parent Common Stock
for such Shareholder's own account for investment only, and not with a view
towards their distribution.
(d) Such Shareholder represents that by reason of his, her or its
business or financial experience, such Shareholder has the capacity to protect
his, her or its own interests in connection with the transactions contemplated
in this Agreement. Further, such Shareholder is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement.
(e) Such Shareholder has received and read the Parent SEC Filings
and has had an opportunity to discuss Parent's business, management and
financial affairs with directors, officers and management of Parent and has had
the opportunity to review Parent's operations and facilities. Such Shareholder
has also had the opportunity to ask questions of and receive answers from Parent
and its management regarding the terms and conditions of this investment.
(f) Such Shareholder acknowledges and agrees that the shares of
Parent Common Stock must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Such Shareholder has been advised or is aware of the provisions of
Rule 144 promulgated under the Securities Act as in effect from time to time,
which permits limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
availability of certain current public information about Parent, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market (as said term is defined
under the Exchange Act) and the number of shares being sold during any three
month period not exceeding specified limitations.
(g) Such Shareholder resides in the state or province identified in
the address of such Shareholder set forth on the signature page to this
Agreement.
5.3 Transfer Restrictions. Such Shareholder acknowledges and agrees that
the shares of Parent Common Stock are subject to restrictions on transfer set
forth in this Section 5.3. Such Shareholder agrees not to make any disposition
of all or any portion of the shares of Parent Common Stock unless and until: (i)
there is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or (ii) the transferee (except for transfers
in compliance with Rule 144) has agreed in writing to be bound by the terms of
Article 5 of this Agreement, such Shareholder shall have notified Parent of the
proposed disposition and shall have furnished Parent with a detailed statement
of the circumstances surrounding the proposed disposition and if reasonably
requested by Parent, such Shareholder shall have furnished Parent with an
opinion of counsel, reasonably satisfactory to Parent, that such disposition
will not require registration of such shares under the Securities Act.
Notwithstanding the provisions of clauses (i) and (ii) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
by such Shareholder to a family member of such Shareholder or trust for the
benefit of such Shareholder or family member; provided, however, that in each
case the transferee will be subject to the terms of Article 5 of this Agreement
to the same extent as if he, she or it were an original Shareholder hereunder.
Parent shall be entitled to impose stop transfer instructions with respect to
the Parent Common Stock in order to enforce the foregoing restrictions.
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The certificates representing the Parent Common Stock (when issued
pursuant to this Agreement) shall bear the following legend restricting
transfer, and such other legends as may be required by any applicable state
securities law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS OF THE TERMS AND CONDITIONS OF THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION DATED ________, 2004 BY AND
AMONG CRDENTIA CORP., CPS ACQUISITION CORPORATION, CARE PROS
STAFFING, INC. AND THE SHAREHOLDERS OF CARE PROS STAFFING, INC.
5.4 Market Standoff. Such Shareholder agrees that he, she or it will not,
without the prior written consent of Parent, during the period commencing on the
date of filing of a registration statement by Parent pursuant to an underwritten
public offering by Parent of its capital stock or securities convertible into
its capital stock and ending on the date specified by Parent (such period not to
exceed 180 days following the filing of the final prospectus relating to such
offering), transfer or dispose of any shares of Parent Common Stock owned by
such Shareholder. In order to enforce the foregoing covenant, Parent may impose
stop-transfer instructions with respect to such securities of the Shareholder
(and the shares or securities of every other Person subject to the foregoing
restriction) until the end of such period.
5.5 Filings. The Parent agrees to continue to file all reports and filings
under the Securities Exchange Act of 1934, as amended, during the time Rule 144
shall be available to the Shareholders until such time as the Shareholders may
sell under the provisions of Rule 144k.
35
ARTICLE 6.
ADDITIONAL AGREEMENTS
6.1 Access to Information. The Company has given Parent and its authorized
representatives (including, without limitation, its attorneys and accountants),
reasonable access to all employees, customers, plants, offices, warehouses and
other facilities, to (and where necessary, provide copies of) all books and
records, contracts and all personnel files of current employees of the Company
and its subsidiaries and the Company has caused its officers and those of its
subsidiaries to furnish Parent with such financial and operating data and other
information with respect to the business and properties of the Company and its
subsidiaries as Parent has requested.
6.2 Public Announcements; Company Literature. None of Parent, Acquisition
Co. or the Company shall issue any press release or otherwise make any public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, without the prior consent of Parent and Acquisition Co.
(in the case of the Company) or the Company (in the case of Parent or
Acquisition Co.), except as may be required by applicable law, including any
determination by Parent that a press release or other public statement is
required under applicable securities or regulatory rules. The parties agree
there shall be no public announcement of this Agreement or the consummation of
the Merger except as may be required by applicable law. The parties agree to
announce this Agreement or the consummation of the Merger to the Company's
employees, customers, vendors and strategic partners at such time and in such
form as is mutually agreed upon by all parties to this Agreement.
6.3 Fees and Expenses. Whether or not the Merger is consummated, all fees,
costs and expenses incurred in connection with the Merger, this Agreement and
the other agreements and transactions contemplated hereby and thereby, including
all legal, accounting, financial advisory, broker's consulting and other fees
and expenses of third parties incurred by a party in connection with the
negotiation, documentation and effectuation of the terms and conditions of the
Merger, this Agreement and the other agreements and Contemplated Transactions
hereby and thereby ("Third Party Expenses"), shall be the obligation of the
respective party incurring such Third Party Expenses. Notwithstanding the
foregoing, the Shareholders shall severally be responsible and bear all costs
and expenses incurred and fees payable for counsel for the Company in connection
with the Contemplated Transactions, or any broker, finder or financial
intermediary representing the Company. The Shareholders shall further personally
and severally bear the incremental costs (if any) of bringing the Company's
accounting Books and Records to a state which is in accordance with sound
business practices and in accordance with GAAP in preparation for Crdentia's
audit of such accounting Books and Records.
6.4 Confidentiality. The parties hereto will maintain in confidence, and
will direct its directors, officers, employees, agents, Affiliates and advisors
to maintain in confidence any written, oral or other information furnished by
another party to this Agreement in connection with the Contemplated
Transactions, unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the transactions
contemplated by this Agreement, or (c) the furnishing or use of such information
is required by law. If the Merger is not consummated, each party will return or,
at the request of the party supplying the information, destroy as much of such
written information as the other party may reasonably request.
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ARTICLE 7.
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party hereto to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States federal or state court or United States federal or state
Governmental or Regulatory Authority that prohibits, restrains, enjoins or
restricts the consummation of the Merger; and
(b) any governmental or regulatory notices, approvals or other
requirements necessary to consummate the transactions contemplated hereby shall
have been given, obtained or complied with, as applicable.
7.2 Conditions to the Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations and warranties of Parent and Acquisition Co.
contained in this Agreement shall be true and correct in all material respects
at and as of the Effective Time with the same effect as if made at and as of the
Effective Time (except to the extent such representations specifically relate to
an earlier date, in which case such representations shall be true and correct in
all material respects as of such earlier date, and in any event, subject to the
foregoing materiality qualification) and, at the Closing, Parent and Acquisition
Co. shall have delivered to the Company a certificate to that effect, executed
by an officer of Parent and Acquisition;
(b) each of the covenants and obligations of Parent and Acquisition
Co. to be performed at or before the Effective Time pursuant to the terms of
this Agreement shall have been duly performed in all material respects at or
before the Effective Time and, at the Closing, Parent and Acquisition Co. shall
have delivered to the Company a certificate to that effect, executed by an
officer of Parent and Acquisition Co.;
(c) Parent shall have delivered all of Closing deliveries set forth
in Section 2.9(c) above; and
(d) all proceedings taken by the Parent and Acquisition Co. and all
instruments executed and delivered by Parent and Acquisition Co. on or prior to
the Closing in connection with the Contemplated Transactions shall be reasonably
satisfactory in form and substance to counsel for the Company.
37
7.3 Conditions to the Obligations of Parent and Acquisition Co. The
respective obligations of Parent and Acquisition Co. to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and as of
the Effective Time with the same effect as if made at and as of the Effective
Time (except to the extent such representations specifically relate to an
earlier date, in which case such representations shall be true and correct in
all material respects as of such earlier date) and, at the Closing, the Company
shall have delivered to Parent and Acquisition Co. a certificate to that effect,
executed by an executive officer of the Company;
(b) each of the covenants and obligations of the Company to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, the Company shall have delivered to
Parent and Acquisition Co. a certificate to that effect, executed by an
executive officer of the Company;
(c) the consents specified on Section 3.6(c) of the Company
Disclosure Schedule and any other material third party consents necessary to
consummate the transactions contemplated hereby shall have been given, obtained
or complied with as applicable;
(d) there shall have been no events, changes or effects,
individually or in the aggregate, with respect to the Company or its
subsidiaries having, or that would reasonably be expected to have, a Material
Adverse Effect on the Company;
(e) none of the Key Employees shall have terminated their employment
with the Company or given written or oral notice to the Company or Parent of
their intention to do so after the consummation of the Merger;
(f) the results of Parent's due diligence investigations of the
Company shall be satisfactory to Parent, as determined in a sole amount and
absolute discretion;
(g) the Company and the Shareholders, as the case may be, shall have
delivered all of the Closing deliveries set forth in Section 2.9(b) above;
(h) all proceedings taken by the Company and the Shareholders and
all instruments executed and delivered by the Company and the Shareholders on or
prior to the Closing in connection with the Contemplated Transactions shall be
reasonably satisfactory in form and substance to counsel for the Parent and
Acquisition Co.
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ARTICLE 8.
TERMINATION; AMENDMENT; WAIVER
8.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time whether before or after
approval and adoption of this Agreement:
(a) by written consent of Parent, Acquisition Co., and the Company;
(b) by Parent and Acquisition Co. or the Company if (i) any court of
competent jurisdiction in the United States or other United States federal or
state governmental entity shall have issued a final order, decree or ruling, or
taken any other final action, restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall have
become non-appealable, or (ii) the Merger has not been made effective by August
31, 2004 (the "Final Date"); provided that no party may terminate this Agreement
pursuant to this clause (ii) if such party's failure to fulfill any of its
obligations under this Agreement shall have been a principal reason that the
Effective Time shall not have occurred on or before said date.
(c) by the Company if (i) there shall have been a material breach of
any representations or warranties on the part of Parent or Acquisition Co. set
forth in this Agreement or if any representations or warranties of Parent or
Acquisition Co. shall have become untrue in any material respect, provided that
the Company has not breached any of its obligations hereunder in any material
respect; or (ii) there shall have been a breach by Parent or Acquisition Co. of
any of their respective covenants or agreements hereunder in any material
respect or materially adversely affecting (or materially delaying) the ability
of Parent, Acquisition Co. or the Company to consummate the Merger, and Parent
or Acquisition Co., as the case may be, has not cured such breach within ten
Business Days after notice by the Company thereof, provided that the Company has
not breached any of its obligations hereunder in any material respect; or
(d) by Parent and Acquisition Co. if (i) there shall have been a
breach of any representations or warranties on the part of the Company set forth
in this Agreement or if any representations or warranties of the Company shall
have become untrue in any material respect, provided that neither Parent nor
Acquisition Co. has breached any of their respective obligations hereunder in
any material respect; or (ii) there shall have been a breach by the Company of
one or more of its covenants or agreements hereunder in any material respect or
materially adversely affecting (or materially delaying) the ability of Parent,
Acquisition Co. or the Company to consummate the Merger, and the Company has not
cured such breach within ten Business Days after notice by Parent or Acquisition
Co. thereof, provided that neither Parent nor Acquisition has breached any of
their respective obligations hereunder in any material respect.
8.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 8.1 above, this Agreement shall forthwith
become void and have no effect without liability on the part of any party hereto
or its Affiliates, directors, officers or Shareholders other than the provisions
of this Section 8.2 and Sections 6.2, 6.3 and 6.4.
39
8.3 Amendment. This Agreement may be amended by action taken by the
Company, Parent and Acquisition Co. at any time before or after approval of the
Merger by the Shareholders of the Company but after any such approval no
amendment shall be made that requires the approval of such Shareholders under
applicable law without such approval. This Agreement (including the Company
Disclosure Schedule) may be amended only by an instrument in writing signed on
behalf of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, each party
hereto may, only by action taken in writing, (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document certificate or writing delivered pursuant
hereto or (iii) waive compliance by the other party with any of the agreements
or conditions contained herein. Any agreement on the part of any party hereto to
any such extension or waiver shall be valid only if set forth in an instrument,
in writing, signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
ARTICLE 9.
ACTIONS BY THE PARTIES AFTER THE CLOSING
9.1 Survival of Representations, Warranties, Etc. The representations,
warranties and covenants contained in or made pursuant to this Agreement or any
certificate, document or instrument delivered pursuant to or in connection with
this Agreement in the transactions contemplated hereby shall survive the
execution and delivery of this Agreement and the Closing hereunder
(notwithstanding any investigation, analysis or evaluation by any party hereto
or their designees of the Assets and Properties, business, operations or
condition (financial or otherwise) of the other party) until the third
anniversary of the Effective Time; provided, however, that the representations
and warranties of the parties contained in Sections 3.2, 3.3, 3.4, 3.23, 3.28,
3.34 and 5.2 shall continue to survive indefinitely in full force and effect
following the Effective Time.
9.2 Indemnification.
(a) By the Company and the Shareholders. The Company and the
Shareholders shall severally indemnify, defend and hold harmless Parent,
Acquisition Co. and the Surviving Corporation and their respective officers,
directors, employees, Affiliates, agents, successors, subsidiaries and assigns
(collectively the "Parent Group") from and against any and all costs, losses
(including, without limitation, diminution in value), liabilities, damages,
lawsuits, deficiencies, claims and expenses, including without limitation,
interest, penalties, costs of mitigation, lost profits and other losses
resulting from any shutdown or curtailment of operations, attorneys' fees and
all amounts paid in investigation, defense or settlement of any of the foregoing
(collectively, the "Damages"), incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any covenant, representation,
warranty or agreement or the inaccuracy of any representation, made by the
Company or the Shareholders in or pursuant to this Agreement, or in the other
documents delivered in connection with the Contemplated Transactions, (ii)
Actions or Proceedings set forth in the Company Disclosure Schedule or in the
other documents delivered in connection with the Contemplated Transactions and
(iii) Actions or Proceedings involving the Company whether disclosed in the
Company Disclosure Schedule or not.
40
(b) By Parent. Parent and Acquisition Co. shall, jointly and
severally, indemnify, defend and hold harmless the Company and the Shareholders
and their respective officers, employees, agents, successors and assigns from
and against any and all Damages incurred in connection with, arising out of,
resulting from or incident to any breach of any covenant, representation,
warranty or agreement or the inaccuracy of any representation, made by Parent in
or pursuant to this Agreement, or in any other documents delivered in connection
with the Contemplated Transactions.
(c) Third Party Claims; Defense of Claims. If any Action or
Proceeding is filed or initiated against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within ten days after the
service of the citation or summons); provided, however, that the failure of any
indemnified party to give timely notice shall not affect rights to
indemnification hereunder except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such Action or Proceeding, then the indemnifying
party shall be entitled, if it so elects, to take control of the defense and
investigation of such Action or Proceeding and to employ and engage attorneys of
its own choice to handle and defend the same, such attorneys to be reasonably
satisfactory to the indemnified party, at the indemnifying party's cost, risk
and expense (unless (i) the indemnifying party has failed to assume the defense
of such Action or Proceeding or (ii) the named parties to such Action or
Proceeding include both of the indemnifying party and the indemnified party, and
the indemnified party and its counsel determine in good faith that there may be
one or more legal defenses available to such indemnified party that are
different from or additional to those available to the indemnifying party and
that joint representation would be inappropriate), and to compromise or settle
such Action or Proceeding, which compromise or settlement shall be made only
with the written consent of the indemnified party, such consent not to be
unreasonably withheld. The indemnified party may withhold such consent if such
compromise or settlement would adversely affect the conduct of business or
requires less than an unconditional release to be obtained. If (i) the
indemnifying party fails to assume the defense of such Action or Proceeding
within 15 days after receipt of notice thereof pursuant to this Section 9.2, or
(ii) the named parties to such Action or Proceeding include both the
indemnifying party and the indemnified party and the indemnified party and its
counsel determine in good faith that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party and that joint representation would be
inappropriate, the indemnified party against which such Action or Proceeding has
been filed or initiated will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying party's
cost and expense, the defense, compromise or settlement of such Action or
Proceeding on behalf of and for the account and risk of the indemnifying party.
In the event the indemnified party assumes defense of the Action or Proceeding,
the indemnified party will keep the indemnifying party reasonably informed of
the progress of any such defense, compromise or settlement and will consult
with, when appropriate, and consider any reasonable advice from, the
indemnifying party of any such defense, compromise or settlement. The
indemnifying party shall be liable for any settlement of any action effected
pursuant to and in accordance with this Section 9.2 and for any final judgment
(subject to any right of appeal), and the indemnifying party agrees to indemnify
and hold harmless the indemnified party from and against any Damages by reason
of such settlement or judgment.
41
Regardless of whether the indemnifying party or the indemnified party
takes up the defense, the indemnifying party will pay reasonable costs and
expenses in connection with the defense, compromise or settlement for any Action
or Proceeding under this Section 9.2.
The indemnified party shall cooperate in all reasonable respects with the
indemnifying party and such attorneys in the investigation, trial and defense of
such Action or Proceeding and any appeal arising therefrom; provided, however,
that the indemnified party may, at its own cost, participate in the
investigation, trial and defense of such Action or Proceeding and any appeal
arising therefrom. The indemnifying party shall pay all expenses due under this
Section 9.2 as such expenses become due.
(d) Indemnity Claims. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the party from whom
indemnification is sought.
9.3 Right of Offset. In the event that Parent suffers Damages pursuant to
this Article 9, it shall have the right to offset such Damages against the
principal amount of the Notes in the event any Note is outstanding as of the
date hereof.
9.4 Non-Exclusivity. The parties hereto acknowledge and agree that the
indemnity obligations set forth above shall not be the exclusive remedy of the
indemnified parties with respect to the Contemplated Transactions.
ARTICLE 10.
ARBITRATION
10.1 Arbitration. In the event of any dispute among the parties hereto as
to the interpretation of any provision of this Agreement or the rights and
obligations of any party hereunder, such dispute shall be resolved through
binding arbitration as hereinafter provided. If arbitration is required to
resolve a dispute hereunder, any party may notify the American Arbitration
Association in Dallas, Texas ("AAA") and request AAA to select one person to act
as the arbitrator for resolution of the dispute. The arbitrator so selected
shall conduct any such proceedings using the International Arbitration Rules
(the "IAR") of the AAA and such rules will be binding upon all parties to the
arbitration proceeding. The arbitrator is encouraged to modify the application
of the IAR as the arbitrator deems appropriate to accomplish the arbitration in
the quickest and least expensive manner possible. Accordingly, the arbitrator
may (i) dispense with any formal rules of evidence and allow hearsay testimony
so as to limit the number of witnesses required, (ii) accept evidence of
property values without formal appraisals and upon such information provided by
the parties or other persons and otherwise minimize discovery procedures as the
arbitrator deems appropriate, (iii) act upon his understanding or interpretation
of the law on any issue without the obligation to research such issue or accept
or act upon briefs of the issue prepared by any party, (iv) limit the time for
presentation of any party's case as well as the amount of information or number
of witnesses to be presented in connection with any hearing, and (v) impose any
other rules which the arbitrator believes appropriate to effect a resolution of
the dispute as quickly and inexpensively as possible. The arbitrator will have
the exclusive authority to determine and award costs of arbitration and the
costs incurred by any party for their attorneys, advisors and consultants.
42
ARTICLE 11.
MISCELLANEOUS
11.1 Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as the other party
reasonably may request, all the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Article IX).
11.2 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission with answer back
confirmation or mailed (postage prepaid by certified or registered mail, return
receipt requested) or by overnight courier to the parties at the following
addresses or facsimile numbers:
If to Parent or Surviving Corporation:
Crdentia Corp.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with copies to:
Kane, Russell, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to Shareholders:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇
43
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 11.2, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 11.2, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section 11.2, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
11.3 Entire Agreement. This Agreement (and all exhibits and schedules
attached hereto, all other documents delivered in connection herewith) supersede
all prior discussions and agreements among the parties with respect to the
subject matter hereof and contains the sole and entire agreement among the
parties hereto with respect thereto, including, without limitation, the binding
provision of the letter of intent dated March 25, 2004.
11.4 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party
hereto of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
11.5 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
11.6 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article IX.
11.7 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so will
be void. This Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
11.8 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
11.9 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and mutually
acceptable to the parties herein.
44
11.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas applicable to contracts executed
and performed in such State, without giving effect to conflicts of laws
principles.
11.11 Consent to Jurisdiction and Forum Selection. Each of the Parent,
Acquisition Co., the Company and the Shareholders irrevocably agrees that any
legal action or proceeding with respect to this Agreement (including any legal
action or proceeding to enforce the arbitration provisions of this Agreement) or
for the recognition and enforcement of any judgment obtained through the
arbitration provisions of this Agreement will be brought and determined in the
federal or state courts or other courts located in Dallas County, Texas, and
each of the Parent, Acquisition Co., the Company and the Shareholders hereby
irrevocably submits with regard to any such action or proceeding for itself and
in respect to its property, generally and unconditionally, to the exclusive
jurisdiction of the aforesaid courts.
11.12 Construction. No provision of this Agreement shall be construed in
favor of or against any party on the ground that such party or its counsel
drafted the provision. Any remedies provided for herein are not exclusive of any
other lawful remedies which may be available to either party. This Agreement
shall at all times be construed so as to carry out the purposes stated herein.
11.13 Counterparts. This Agreement may be executed in any number of
counterparts and by facsimile, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.
11.14 Attorney's Fees. In the event any action is brought for enforcement
or interpretation of this Agreement, the prevailing party shall be entitled to
recover reasonable attorney's fees and costs incurred in said action.
11.15 Continued Representation. The Parent recognizes that, as of the
Closing Date, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. shall cease to represent the Company.
[Remainder of page intentionally left blank.]
45
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto, or their duly authorized officer, as of the date first above
written.
CRDENTIA CORP.
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
CPS ACQUISITION CORPORATION,
a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
CARE PROS STAFFING, INC.,
a Texas corporation
By: /s/ ▇▇▇ ▇▇▇▇
---------------------------
Name: ▇▇▇ ▇▇▇▇
Title: President
/s/ ▇▇▇ ▇▇▇▇
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▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
46
EXHIBIT A
ARTICLES OF MERGER
A-1
EXHIBIT B
FORM OF PROMISSORY NOTE
B-1
EXHIBIT C
ADDITIONAL MERGER
CONSIDERATION CALCULATION
C-1
EXHIBIT D
NON-COMPETITION AND NON-SOLICITATION AGREEMENT
D-1
EXHIBIT E
COMPANY SECRETARY CERTIFICATE
E-1
EXHIBIT F
RELEASE
F-1
EXHIBIT G
OPINION OF COMPANY COUNSEL TO COMPANY
G-1
EXHIBIT H
SUBORDINATION AGREEMENT
H-1
EXHIBIT I
PARENT SECRETARY CERTIFICATE
I-1
EXHIBIT J
ACQUISITION CO. SECRETARY CERTIFICATE
J-1