Exhibit 10.35
ACQUISITION AGREEMENT
THIS AMENDED AND RESTATED ACQUISITION AGREEMENT (this "Agreement") is
made this 22nd day of June, 2000, by and between Paramount International
Telecommunications, Inc., a Nevada corporation ("Buyer") and a wholly owned
subsidiary of Carnegie International Corporation, a Colorado corporation
("Carnegie"), and S. R. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇. ▇▇▇▇ (sometimes
referred to collectively as "Sellers" and each individually a "Seller").
RECITALS
A. On June 1, 2000, Buyer and Sellers entered into a certain Acquisition
Agreement, hereinafter defined, (together with all amendments, modifications,
addenda and supplements thereto, the "Acquisition Agreement").
▇. ▇▇▇▇▇▇▇ own all of the issued and outstanding shares ("the Shares") of
capital stock of Federation of Associated Health Systems, Inc., a Texas
corporation ("Company").
▇. ▇▇▇▇▇▇▇ and Company believe that it will be in the best interests of Sellers
and Company to sell all the Shares to Buyer.
▇. ▇▇▇▇▇▇▇ and Company desire to sell, and Buyer desires to purchase, all of the
Shares, as hereinafter set forth.
▇. ▇▇▇▇▇▇▇▇ is a public holding company whose stock is traded on the Over the
Counter Bulletin Board exchange ("OTCBB") under the OTCBB symbol "CGYC."
F. Capitalized terms used herein have the meanings set forth in Section 12 of
this Agreement.
G. The parties have agreed to modify and amend certain provisions of the
Acquisition Agreement and in connection therewith to restate, as amended, all of
the terms and condition of the Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and intending to be legally bound
hereby, the parties hereto agree that the Acquisition Agreement is further
amended and restated to read in its entirety as follows:
1. PURCHASE OF THE SHARES
On the terms and subject to the conditions set forth in this Agreement, Sellers
hereby agree to sell, transfer and assign to Buyer, and Buyer hereby agrees to
purchase from Sellers, on the Closing Date (as defined in Section 2 hereof), all
of the Shares. The Shares shall be conveyed free and clear of all Encumbrances.
2. CONSIDERATION; CLOSING
2.1. CONSIDERATION
The sole consideration for the Shares shall be paid in three hundred fifty
thousand (350,000) shares of Series G Convertible Preferred Stock, par value One
Dollar ($1.00) per share (the "Preferred Stock"), of Carnegie, for an aggregate
consideration of Three Million Five Hundred Thousand Dollars ($3,500,000), which
Preferred Stock shall be convertible into common stock, without par value of
Carnegie (the "Common Stock"), at a conversion price (the "Conversion Price") as
set forth below. The Preferred Stock and the Common Stock shall be restricted
securities (the "Restricted Securities") as defined in Securities and Exchange
Commission Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act").
2.1.1. The certificates representing the shares of Preferred Stock and
upon conversion of the Preferred Stock, the shares of Common Stock shall contain
one of the following restrictive legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS
AMENDED, "THE ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE PROVISIONS OF THAT ACT AND THE STATE SECURITIES LAWS
OR UPON PRESENTATION OF EVIDENCE SATISFACTORY TO THE CORPORATION THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
- OR-
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED AND ARE "RESTRICTED SECURITIES" AS THAT TERM
IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO THE EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF
COMPANY.
CONVERSION PRICE. If Company shall have and maintain in any full calendar
quarter during the initial four full calendar quarters following Closing Free
Cash Flow (as hereinafter defined) of not less than Three Hundred Seventy Five
Thousand ($375,000), then the applicable Conversion Price shall be equal to the
greater of (i) Three Million Five Hundred Thousand (3,500,000) shares of Common
Stock at the Trading Price (as hereinafter defined) or (ii) an amount of shares
of Common Stock equivalent to Three Million Five Hundred Thousand Dollars
($3,500,000). (Example: If Free Cash Flow was $375,000 as noted above and the
Trading Price was $1.00, all of the Series G Preferred Shares would be converted
into 3,500,000 common shares. $3,500,000 divided by $1.00).
In the event that Company does not maintain
Free Cash Flow in the amount set forth in Section 2.1.2 above in any of the
four full calendar quarters following Closing, then the applicable Conversion
Price shall be equal to actual Free Cash Flow for the fourth full calendar
quarter following Closing divided by the amount specified in Section 2.1.2
above, up to a maximum of one hundred percent (100%), and then multiplied by
purchase price and then divided by the Trading Price. Absent an election by
Company to extend conversion of the Preferred Stock, as set forth in Section
2.1.2.2 below, the Preferred Stock shall be converted into Common Stock on the
date which occurs ninety (90) days following the end of the fourth full calendar
quarter. (Example: If Free Cash Flow for the fourth calendar quarter were
$300,000 and Trading Price were $2.50, all of the Series G Preferred Shares
would be converted into 1,120,000 common shares. ($300,000 divided by $375,000
times $3,500,000, divided by $2.50)).
2.1.2.2. Company may, at its option, extend the determination
of the Conversion Price for a period extending until the earlier of (i) one year
following the Conversion Date, or (ii) until a quarter in the year following the
Conversion Date that Company maintains Free Cash Flow in the amount specified in
Section 2.1.2 above. In such event, the Conversion Date shall occur ninety (90)
days following the applicable period of extension at the then applicable
Conversion Price which shall be equal to Free Cash Flow for the last full
calendar quarter divided by the amount specified on Section 2.1.2 above, up to a
maximum of one hundred percent (100%).
2.1.2.3. If Company elects to determine the Conversion Price
during the year following the initially scheduled Conversion Date, Sellers may
nonetheless convert, as of the initially scheduled Conversion Date, up to sixty
percent (60%) of the Preferred Stock at the then applicable Conversion Price,
subject to further adjustment based on the actual Conversion Price, into shares
of Common Stock at the Trading Price.
2.1.3. PERFORMANCE BONUS. In the event that Company maintains
a Free Cash Flow of One Million Five Hundred Thousand ($1,500,000) annually (the
"Annual Free Cash Flow") in the second and third year following the Closing
Date, Carnegie shall issue to Sellers additional Common Stock (the "Bonus Common
Stock"), for each year, respectively, as shall be equal to One Million Dollars
($1,000,000) divided by the Trading Price as of the first and second
anniversaries, respectively, of the Conversion Date. For Free Cash Flow above,
$1,500,000 in year 2 and 3, the Company will issue additional shares on the same
basis for Free Cash Flow above. (Example: If Free Cash Flow in year two (2)
equals $2,150,000 then the Company will issue additional common stock for the
$650,000 using .6666 as the basis for the additional shares. Therefore, as an
example $650,000 x .6666 equals $433,290 divided by (again using $2.50) $2.50
share price or 173,316 shares of Common Stock).
2.1.4. DEFINITIONS. For purposes of this Agreement, the term
(i) Free Cash Flow shall have the meaning set forth in Section 12.5 hereof mean,
and (ii) Trading Price shall have the meaning set forth in Section 12.15 hereof.
CLOSING
The purchase and sale (the "Original Closing") provided for in the
Acquisition Agreement occurred at the offices of Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 12:00 noon
(local time) on June 1, 2000. The amendments to the Acquisition Agreement, as
set forth herein and effective as of date hereof, regarding the purchase and
sale (the "Closing") shall occur at such time and place as the parties may agree
(the "Closing Date"). Subject to the provisions of Section 9, failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
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2.3. CLOSING OBLIGATIONS
At the Closing:
2.3.1. Sellers will deliver to Buyer:
2.3.1.1. Certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers), with signatures guaranteed by a commercial bank or
by a member firm of the New York Stock Exchange, for transfer to Buyer;
2.3.1.2. All of the documents, certificates and instruments required to be
delivered, or caused to be delivered by such Seller pursuant to Section 7.4
hereof;
2.3.1.3. All records, documents and files of Company, including without
limitation, all minute books, stock records and internal accounting records.
2.3.2. Buyer will deliver to Sellers:
2.3.2.1. Statements of the Corporate Secretary of Carnegie reflecting that
certificates representing the Common Stock have been requested to be issued by
Carnegie's transfer Agent.
2.3.2.2. All of the documents, certificates and instruments required to be
delivered, or caused to be delivered by Buyer pursuant to Section 8.4 hereof.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as follows:
3.1. ORGANIZATION AND GOOD STANDING; SUBSIDIARIES
3.1.1. Schedule 3.1 contains a complete and accurate list for each of Company
and any Subsidiary (as defined in Section 3.1.1) of its name, its state or
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization. Company is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under all Contracts.
Company is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction (including Canada
and its Provinces) in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification.
3.1.2. Sellers have delivered to Buyer true and complete copies of the charter
and bylaws or other governing instruments (collectively, "Organizational
Documents") of Company as presently in effect, and Company is not in default in
the performance, observation of fulfillment of its Organizational Documents.
3.1.3. Trans Continental Communications, Inc., a Texas corporation, ("TCC") was
an affiliate of Company, which is now defunct. All of the Client contracts which
were owned or controlled by TCC have been transferred in their entirety to
Company.
3.1.4. Any further reference in this Agreement to the term "Acquired Company" or
"Acquired Companies" or "Subsidiary" shall only refer to Company, the Federation
of Associated Health Systems, Inc. Notwithstanding anything to the contrary
herein there are no subsidiaries and Company is the only entity being acquired
under this Agreement.
3.2. AUTHORITY; NO CONFLICT
3.2.1. This Agreement constitutes the legal, valid, and binding obligation of
Sellers, enforceable against Sellers in accordance with their terms. Upon the
execution and delivery by Sellers of all of the documents required to be
delivered in Section 7.4 herein (collectively, "Sellers' Closing Documents"),
Sellers' Closing Documents will constitute the legal, valid, and binding
obligations of Sellers, enforceable against Sellers in accordance with their
respective terms. Sellers have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and Sellers'
Closing Documents and to perform their obligations under this Agreement and
Sellers' Closing Documents.
3.2.2. Except as set forth in Schedule 3.2, the execution, delivery, and
performance of this Agreement and of the Schedules hereto and the consummation
of the transactions contemplated hereby and thereby will not violate (with or
without the giving of notice or the lapse of time, or both) or require any
registration, qualification, consent, approval, or filing under, any
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Legal Requirement. Except as set forth in Schedule 3.2, the execution, delivery,
and performance of this Agreement and the Schedules hereto and the consummation
of the transactions contemplated hereby and thereby will not conflict with,
require any consent or approval under, result in the breach or termination of
any provision of, constitute a default under, result in the acceleration of the
performance of Company's obligations under, or result in the creation of any
Encumbrance upon, any of Company's properties, assets, or businesses pursuant to
(i) the Organizational Documents of the Acquired Companies or any resolution
adopted by the board of directors or the stockholders of either Acquired
Company; (ii) any indenture, mortgage, deed of trust, license, permit,
franchise, lease, Contract, or other instrument or agreement to which either
Acquired Company is a party, or (iii) any Order by which either Acquired Company
or any of its assets or properties is bound.
3.2.2.1 Except as set forth in Schedule 4.2, Sellers are not
and will not be required to obtain any Consent from any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the transactions contemplated under this Agreement.
3.2.3. Sellers are acquiring the Common Stock for investment purposes, for their
own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act. Each Seller is an "accredited investor" as
such term is defined in Rule 501(a) under the Securities Act.
3.3. CAPITALIZATION
3.3.1. The authorized equity securities of Company consists of One Million
Shares (1,000,000) shares of common stock, no par value, of which One Hundred
(100) shares are issued and outstanding and constitute the Shares. Sellers are
and will be on the Closing Date the record and beneficial owners and holders of
all shares, free and clear of all Encumbrances. The names of Sellers and the
number of the Shares owned by each of them is set forth in Schedule 3.3.1 . No
legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of Company. All of the outstanding
equity securities of each Acquired Company have been duly authorized and validly
issued and are fully paid and non-assessable. There are no Contracts relating to
the issuance, sale, or transfer of any equity securities or other securities of
either Acquired Company. None of the outstanding equity securities or other
securities of each Acquired Company was issued in violation of the Securities
Act or any other legal requirement. Except for the Subsidiary, Company does not
own, or have any Contract to acquire, any debt or equity investment or interest,
direct or indirect, in any corporation, association, partnership, joint venture
or other entity. Delivery of the Shares by Sellers at the Closing pursuant to
Section 2 of this Agreement will transfer to Buyer the legal and valid title to
One Hundred Percent (100%) of the issued and outstanding capital stock of
Company free and clear of all Encumbrances.
3.3.2. Except as set forth in Schedule 3.3.2 , neither Acquired Company has any
outstanding or authorized options, warrants, calls, subscriptions, rights,
convertible securities, commitments, agreements, or understandings of any
character obligating it to issue the Shares of its capital stock or securities
convertible into or evidencing the right to purchase the Shares of its capital
stock. Except as set forth in Schedule 3.3.2 hereto, the number of the Shares
issuable upon exercise or conversion of the options, warrants, calls,
subscriptions, rights, convertible securities, commitments, agreements, and
understandings set forth in Schedule 3.3.2 hereto is not subject to adjustment
by reason of the issuance of any of the Shares pursuant to this Agreement, the
conversion of any convertible securities outstanding on the date hereof or to be
outstanding immediately after the Closing Date, or the exercise of any warrants
or options outstanding on the date hereof or to be outstanding immediately after
the Closing Date. Neither Sellers nor either Acquired Company is a party to any
Contract, or bound by any certificate or incorporation or by-law provision,
which creates any rights in any person or entity with respect to the Shares of
each Acquired Company's capital stock, or which relates to the voting, sale, or
transfer of any the Shares of each Acquired Company's capital stock.
3.4. FINANCIAL STATEMENTS
3.4.1. Sellers have (or will) delivered to Buyer (a) unaudited management level
balance sheets of Company as of December 31, 1995, 1996, 1997, 1998, 1999
(including the notes thereto, the "Balance Sheet"), and the related consolidated
statements of operations, statements of stockholders' deficiency, and cash flow
for the fiscal year then ended, together with the report thereon of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, III, CPA, ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, independent
certified public accountants, and (b) an unaudited consolidated balance sheet of
Company as of March 31, 2000 (the "Interim Balance Sheet") and the related
unaudited consolidated statements of operations, statements of stockholders'
deficiency, and cash flow for the nine months then ended, including in each case
the notes thereto. Such financial statements and notes fairly present the
financial condition and the results of operations, changes in stockholders'
equity, and cash flow of Company as at the respective dates of and for the
periods referred to in such financial
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statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse); the
financial statements referred to in this Section 3.4 reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. No financial
statements of any Person other than Company are required by GAAP to be included
in the consolidated financial statements of Company.
3.4.2. In the event that Company is audited and said audited financial
statements reflect a difference in revenue or gross profit of ten percent (10%)
or more from the unaudited statements prepared prior hereto Sellers shall
indemnify and pay to Buyers the difference between said ten percent (10%) and
the actual difference in revenue or gross profit, whichever shall be greater
(hereinafter referred to as the "Differential Payment"). The Differential
Payment shall be satisfied by the return of such number of the Common Stock
consideration securities referred to in Section 2.1.3 hereof equal to the dollar
value of the Differential Payment divided by the share price of Carnegie Stock
established in Section 2.1 of this Agreement.
3.4.3. Sellers and Company represent to Buyer that Company, as of the Closing
Date, does not maintain the Free Cash Flow Quarterly Average.
3.4.4. Sellers and Company represent to Buyer that as of the date of and
pursuant to the Interim Balance Sheet, all accounts payable of the Acquired
Companies as of March 31, 2000 (collectively, the "Accounts Payable"), shall not
exceed all accounts receivable, including commissions, of the Acquired Companies
as of March 31, 2000 (collectively, the "Accounts Receivable"), by an amount
greater than Twenty Thousand Dollars ($20,000).
3.5. BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records of the
Acquired Companies, all of which have been made available to Buyer, are complete
and correct and have been maintained in accordance with sound business practices
and the requirements of Section 13(b)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (regardless of whether or not Company is subject
to that Section), including the maintenance of an adequate system of internal
controls. The minute books of the Acquired Companies contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Acquired Companies, and no meeting of any such stockholders, Board of
Directors, or committee has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of those books
and records will be in the possession of the Acquired Companies.
3.6. TITLE TO PROPERTIES; ENCUMBRANCES
3.6.1. Company does not own any real property. Schedule 3.6.1 contains a
complete and accurate list of all Company's interest in any leasehold property,
together with all improvements and structures thereon (the "Leased Premises").
The Leased Premises are all of the real property used in the business of
Company. Company has good and marketable leasehold title to the Leased Premises,
free of any Encumbrances. Sellers have delivered or made available to Buyer
copies of Company's leases.
3.6.2. Schedule 3.6.2 contains a complete and accurate list of all personal
property, including but not limited to all equipment, machinery and fixtures,
owned by Company or used by Company in the conduct of its business (the
"Personal Property"), indicating whether it is owned or leased by Company.
Company has good and marketable title to the Personal Property owned by it, free
and clear of Encumbrances of any nature except (i) matters specified in Schedule
3.6.2; (ii) materialmen's, mechanics', carriers', workmen's, warehousemen's,
repairmen's or other like Encumbrances arising in the Ordinary Course of
Business; and (iii) Encumbrances for current taxes not yet due.
3.7. CONDITION AND SUFFICIENCY OF ASSETS
The Leased Premises and equipment of the Acquired Companies are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such Leased Premises or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The Leased Premises and equipment of the
Acquired Companies are sufficient for the continued conduct of the Acquired
Companies' businesses after the Closing in substantially the same manner as
conducted prior to the Closing.
3.8. ACCOUNTS RECEIVABLE
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Schedule 3.8 contains a complete and accurate list of the Accounts Receivable,
which list sets forth the aging of such Accounts Receivable. All Accounts
Receivable represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible. Each of the Accounts Receivable
either has been or will be collected in full, without any set-off, within ninety
days after the day on which it first becomes due and payable. 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 any Accounts Receivable
relating to the amount or validity of such Accounts Receivable.
3.9. INVENTORY
All inventory of the Acquired Companies, whether or not reflected in the Balance
Sheet or the Interim Balance Sheet, consists of a quality and quantity usable
and salable in the Ordinary Course of Business, except for obsolete items and
items of below-standard quality, all of which have been written off or written
down to net realizable value in the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Acquired Companies as of the Closing Date,
as the case may be. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
3.10. NO UNDISCLOSED LIABILITIES
Except as set forth in Schedule 3.10, the Acquired Companies have no liabilities
or obligations of any nature (whether known or unknown to the best of the
Acquired Companies knowledge, and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the respective dates thereof.
3.11. TAXES
3.11.1. The Acquired Companies have filed or caused to be filed all Federal,
state, local and foreign tax returns that are or were required to be filed by or
with respect to it. Sellers have delivered to Buyer copies of, and Schedule 3.11
, contains a complete and accurate list of, all such tax returns filed since the
year ended December 31, 1995. The Acquired Companies have paid, or made
provision for the payment of, all taxes that have or may have become due
pursuant to those tax returns or otherwise, or pursuant to any assessment
received by Sellers or the Acquired Companies, except such taxes, if any, as are
listed in Schedule 3.11, and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in the
Balance Sheet and the Interim Balance Sheet.
3.11.2. Except as set forth in Schedule 3.11, none of the Federal, state, local
or foreign tax returns have been audited by any taxing authority, including,
without limitation the United States Internal Revenue Service ("IRS") or
relevant state tax authorities. Schedule 3.11 , contains a complete and accurate
list of all audits of all such tax returns, including a reasonably detailed
description of the nature and outcome of each audit. All deficiencies proposed
as a result of such audits have been paid, reserved against, settled, or, as
described in Schedule 3.11, are being contested in good faith by appropriate
proceedings. Schedule 3.11 describes all adjustments to the United States
Federal income tax returns filed by either Acquired Company or any group of
corporations including either Acquired Company for all taxable years since
December 31, 1996, and the resulting deficiencies proposed by the IRS. Except as
described in Schedule 3.11, no Seller or Acquired Company has given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of taxes of either Acquired Company or for which Company may be
liable.
3.11.3. The charges, accruals, and reserves with respect to taxes on the books
of each Acquired Company are adequate (determined in accordance with GAAP) and
are at least equal to that Acquired Company's liability for taxes. There exists
no proposed tax assessment against any of the Acquired Companies except as
disclosed in the Balance Sheet or in Schedule 3.11. No consent to the
application of Section 341(f)(2) of the Internal Revenue Code ("IRC") has been
filed with respect to any property or assets held, acquired, or to be acquired
by any of the Acquired Companies. All taxes that either Acquired Company is or
was required by legal requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
governmental body.
3.11.4. All tax returns filed by (or that include on a consolidated basis)
either Acquired Company are true, correct, and complete. There is no tax sharing
agreement that will require any payment by either Acquired Company after the
date of this Agreement.
3.12. NO MATERIAL ADVERSE CHANGE
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Since the date of the Balance Sheet, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or condition
of either Acquired Company, and no event has occurred or circumstance exists
that may result in such a material adverse change.
3.13. EMPLOYEE BENEFITS. Schedule 3.13 contains a complete and correct list of
all stock option, stock purchase, stock appreciation right, bonus, incentive,
deferred compensation, severance, profit sharing, vacation, retirement, health,
life or disability insurance, employee benefit plan, program or arrangement
(including, without limitation, any "employee benefit plan," as defined in
Section 3(3) of ERISA of each Acquired Company, true and correct copies of each
of which were delivered to Buyer prior to the date hereof. Neither Acquired
Company maintains, and has no obligation or liability with respect to, any
employee welfare benefit plan or any employee pension benefit plan, as such
terms are defined in Sections 3(1) and 3(2), respectively, of ERISA. All
reasonably anticipated obligations of the Acquired Companies, whether arising by
operation of law, by Contract, by past custom or practice or otherwise, for
salaries, vacation and holiday pay, bonuses and other forms of compensation
which were payable to its officers, directors or employees as of the date of the
Balance Sheet or properly accruable as at such date have been paid as of the
date hereof or adequate accruals have been made therefor in such Balance Sheet.
3.14. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
3.14.1. Except as set forth in Schedule 3.14:
3.14.1.1. Each Acquired Company is, and at all times since August 3, 1995 has
been, in full compliance with any 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;
3.14.1.2. 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 either
Acquired Company of, or a failure on the part of either Acquired Company to
comply with, any Legal Requirement, or (B) may give rise to any obligation on
the part of either Acquired Company to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature; and
3.14.1.3. Neither Acquired Company has received, at any time since August 3,
1995, any notice or other communication (whether oral or written) from any
Governmental Body 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 either
Acquired Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
3.14.2. Each Acquired Company has all Governmental Authorizations, including
those in Canada, that are required in order to permit them to own or lease their
properties and to conduct their businesses as presently conducted. Schedule
3.14.2 contains a complete and accurate list of each Governmental Authorization
that is held by either Acquired Company or that otherwise relates to the
business of, or to any of the assets owned or used by, either Acquired Company.
Each Governmental Authorization is in full force and effect and, to each
Seller's and each Acquired Company's knowledge, no suspension or cancellation of
any of them is threatened. The Governmental Authorizations listed in Schedule
3.14 collectively constitute all of the Governmental Authorizations necessary to
permit the Acquired Companies to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
3.15. LEGAL PROCEEDINGS; ORDERS
Except as set forth in Schedule 3.15:
3.15.1. There is no (i) Order of any Governmental Body or arbitrator to which
either of the Acquired Companies, or any of the assets owned or used by either
Acquired Company, is subject; (ii) Order to which any of Sellers is subject that
relates to the business of, or any of the assets owned or used by, either
Acquired Company; or (iii) Proceeding pending that has been commenced by or
against either Acquired Company or that otherwise relates to or may affect the
business of, or any of the assets owned or used by, either Acquired Company or
that challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions contemplated by
this Agreement (the "Contemplated Transactions");
3.15.2. To the knowledge of Sellers and the Acquired Companies, there is no (i)
Order against or affecting any officer, director or employee of either Acquired
Company relating to such Acquired Company or its business; (ii) Proceeding
threatened against
7
or affecting either Acquired Company or its properties, assets or business;
(iii) Proceeding threatened against either Acquired Company's officers,
directors or employees relating to such Acquired Company or its business or (iv)
basis for the commencement of any Proceeding against either Acquired Company or
any of such Acquired Company's officers, directors or employees or assets owned
or used by either Acquired Company.
3.15.3. Sellers have delivered to Buyer copies of all
pleadings, correspondence, and other documents relating to each Proceeding
listed in Schedule 3.15. The Proceedings listed in Schedule 3.15, will not have
a material adverse effect on the business, operations, assets, condition, or
prospects of either Acquired Company.
3.16. ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Schedule 3.16, since the date of the Balance Sheet, the
Acquired Companies have conducted their businesses only in the Ordinary Course
of Business and there has not been any:
3.16.1. Change in the Acquired Company's authorized or issued capital stock;
grant of any stock option or right to purchase the Shares of capital stock of
either Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by either Acquired Company of any the Shares of any such
capital stock; or declaration or payment of any dividend or other distribution
or payment in respect of the Shares of capital stock;
3.16.2. Amendment to the Organizational Documents of either Acquired Company;
3.16.3. Payment or increase by either Acquired Company of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
3.16.4. Adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of either
Acquired Company;
3.16.5. Damage to or destruction or loss of any asset or property of either
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Acquired Companies, taken as a whole;
3.16.6. Entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to either Acquired Company of at least $5,000;
3.16.7. Sale, lease, or other disposition of any asset or property of either
Acquired Company or mortgage, pledge, or imposition of any Encumbrance on any
material asset or property of either Acquired Company, including the sale,
lease, or other disposition of any of the Registered Rights and Proprietary
Information (as defined in Section 3.22);
3.16.8. Cancellation or waiver of any claims or rights with a value to either
Acquired Company in excess of $5,000;
3.16.9. Material change in the accounting methods used by either Acquired
Company; or
3.16.10. Agreement, whether oral or written, by either Acquired Company to do
any of the foregoing.
3.17. CONTRACTS; NO DEFAULTS
3.17.1. Schedule 3.17 contains a complete and accurate list, and Sellers have
delivered to Buyer true and complete copies, of:
3.17.1.1. Each Contract that involves performance of services or delivery of
goods or materials to one or more Acquired Companies of an amount or value in
excess of $5,000;
3.17.1.2. Each Contract that involves the performance of services by either
Acquired Company to the hospital, clinic or rehabilitation facility industries
in the Ordinary Course of Business;
3.17.1.3. Each Contract that was not entered into in the Ordinary Course of
Business and that involves expenditures or receipts of one or more Acquired
Companies in excess of $5,000;
8
3.17.1.4. Each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other Contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate payments of
less than $5,000 and with terms of less than one year);
3.17.1.5. Each Contract containing covenants that in any way purport to restrict
the business activity of either Acquired Company or limit the freedom of either
Acquired Company to engage in any line of business or to compete with any
Person;
3.17.1.6. Each Contract providing for payments to or by any Person based on
sales, purchases, or profits, other than direct payments for goods;
3.17.1.7. Each power of attorney that is currently effective and outstanding;
3.17.1.8. Each Contract entered into other than in the Ordinary Course of
Business that contains or provides for an express undertaking by either Acquired
Company to be responsible for consequential damages;
3.17.1.9. Each Contract for capital expenditures in excess of $5,000;
3.17.1.10. Each written warranty, guaranty, and or other similar undertaking
with respect to contractual performance extended by either Acquired Company
other than in the Ordinary Course of Business; and
3.17.1.11. Each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
3.17.2. Each Contract is in full force and effect, is valid and binding
upon each of the parties thereto and enforceable in accordance with its terms,
subject (as to the enforcement of remedies) to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and (as to the
availability of equitable remedies) to the discretion of the equity tribunal
having jurisdiction, no Seller has any reason to believe that there is or has
been any actual or contemplated termination, cancellation or limitation of, or
any modification or change in, any of the Contracts. There has not occurred any
default or any event which, with the lapse of time or the election of any Person
other than an Acquired Company, or any combination thereof, will become a
default, by either Acquired Company or any other party under any of the
Contracts. Each Acquired Company has the right to quiet enjoyment of the Leased
Premises for the full term of the lease thereof. There are no Legal Requirements
or Orders, existing or proposed, which adversely affect or might adversely
affect either Acquired Company's rights under any of the Contracts.
3.18. INSURANCE
Schedule 3.18 contains a list of all insurance policies to which either Acquired
Company is a party or that provide coverage to Sellers, either Acquired Company
or any director or officer of an Acquired Company, setting forth the name of the
insurer, a description of the policy, the amount of coverage, the amount of the
premium and the expiration date of the policy. Sellers have delivered to Buyer
true and complete copies of all policies of insurance to which either Acquired
Company is a party or under which either Acquired Company, or any director of
either Acquired Company, is or has been covered at any time within the three
years preceding the date of this Agreement. Each insurance policy relating to
the insurance referred to in this Section 3.18 is valid and enforceable; will
continue in full force and effect following the consummation of the Contemplated
Transactions; and does not provide for any retrospective premium adjustment or
other experienced-based liability on the part of either Acquired Company.
Neither Acquired Company has failed to give any notice or to present any claim
under any insurance policy in a due and timely fashion, nor has it permitted a
lapse in any of its insurance policies at any time. Schedule 3.18 contains a
list and brief description of all claims filed or threatened to be filed by the
insured's or third parties under any insurance policies.
3.19. ENVIRONMENTAL MATTERS.
Except as set forth in Schedule 3.19, neither the conduct nor operation of
either Acquired Company nor any condition of any property presently or
previously owned, leased or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them holds an
Encumbrance, violates or violated during the period of such ownership, lease or
operation Environmental Laws and no condition has existed or event has occurred
with respect to any of them or any such property that, with notice or the
passage of time, or both, is reasonably likely to result in liability under
Environmental Laws. Neither Acquired Company has received any notice from any
person or entity that either Acquired Company or the operation or condition of
any property ever owned, leased, operated, or held as collateral or in a
fiduciary capacity by
9
any of them are or were in violation of or otherwise are alleged to have
liability under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or other
remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such property.
3.20 EMPLOYEES.
3.20.1. Schedule 3.20 contains a complete and accurate list of the following
information for each employee or director of the Acquired Companies: employer;
name; job title; current compensation paid or payable and any change in
compensation since his or her initial hire date; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under either
Acquired Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, or any other employee benefit
plan or any director plan.
3.20.2. No employee or director of either Acquired Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of the Acquired Companies, or (ii) the ability of either
Acquired Company to conduct its business, including any Proprietary Rights
Agreement with Sellers or the Acquired Companies by any such employee or
director. To Sellers' knowledge, no director, officer, or other key employee of
either Acquired Company intends to terminate his employment with such Acquired
Company.
3.21. LABOR RELATIONS; COMPLIANCE.
Neither Acquired Company is a party to or is bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is either Acquired Company the subject of a proceeding
asserting that it has committed an unfair labor practice (within the meaning of
the National Labor Relations Act). Each Acquired Company has complied in all
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. Neither Acquired Company is liable for the
payment of any compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.22. INTELLECTUAL PROPERTY.
3.22.1. The term "Registered Rights" includes: all letters patent, patent
applications, trade names, trademarks, service marks, trademark and service ▇▇▇▇
registrations and applications, copyrights, copyright registrations and
applications, grants of a license or a right of one or more of the Acquired
Companies with respect to the foregoing, both domestic and foreign, claimed by
one or more of the Acquired Companies or used or proposed to be used by one or
more of the Acquired Companies in the conduct of its business, whether
registered or not. Schedule 3.22.1 contains a true and complete list of all
Registered Rights. The Contemplated Transactions will not adversely affect the
right, title and interest of one or more of the Acquired Companies in and to the
Registered Rights. To Sellers' knowledge, the Registered Rights do not infringe
on or conflict with the rights or intellectual property of any third party.
3.22.2. The term "Proprietary Information" includes: every trade secret,
know-how, process, discovery, development, design, technique, customer and
supplier list, promotional idea, marketing and purchasing strategy, invention,
process, confidential data, and other information. Except as described in
Schedule 3.22.2, one or more of the Acquired Companies own and have the
unrestricted right to use the Registered Rights and Proprietary Information
required for or incident to the design, development, manufacture, operation,
sale and use of all products and services sold or rendered or proposed to be
sold or rendered by one or more of the Acquired Companies, free and clear of any
right, equity or claim of others. Each Acquired Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all
Proprietary Information.
3.22.3. Schedule 3.22.3 contains a true and complete list and description of all
licenses of or rights to Proprietary Information or Registered Rights granted to
one or more of the Acquired Companies by others or to others by one or more of
the Acquired Companies. Except as described in Schedule 3.22.3, (i) neither
Acquired Company has sold, transferred, assigned, licensed or subjected to any
Encumbrance, any Registered Right or Proprietary Information or any interest
therein, and (ii) neither Acquired Company is obligated or under any liability
whatever to make payments by way of royalties, fees or otherwise to any owner or
licensor of, or other claimant to, any Registered Right or Proprietary
Information.
10
3.22.4. There is no claim or demand of any Person pertaining to, or any
Proceeding that is pending, or to Sellers' knowledge, threatened, which
challenges the rights of one or more of the Acquired Companies in respect of any
Registered Right or Proprietary Information.
3.23. CERTAIN PAYMENTS.
Since August 3, 1995, the date of inception of Company, neither Acquired Company
or director, officer, agent, or employee of either Acquired Company, or to
Sellers' knowledge any other Person associated with or acting for or on behalf
of either Acquired Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business;
(ii) to pay for favorable treatment for business secured; (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of either Acquired Company or any Affiliate (as such term is defined by
Rule 12b-2 of the regulations promulgated pursuant to the Exchange Act) of an
Acquired Company; or (iv) in violation of any Legal Requirement; or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Acquired Companies.
3.24. DISCLOSURE.
3.24.1. No representation or warranty of Sellers in this Agreement (including
the Schedules hereto) omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
3.24.2. No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
3.24.3. There is no fact known to either Seller that has specific application to
either Seller or either Acquired Company (other than general economic or
industry conditions) and that materially adversely affects or, as far as any
Seller can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the Acquired
Companies (on a consolidated basis) that has not been set forth in this
Agreement.
3.25. RELATIONSHIPS WITH AFFILIATES.
No Seller or any Affiliate of Sellers or of either Acquired Company has, or
since the first day of the next to last completed fiscal year of the Acquired
Companies has had, any interest in any property (whether real, personal, or
mixed and whether tangible or intangible), used in or pertaining to the Acquired
Companies' businesses. No Seller or any Affiliate of Sellers or of either
Acquired Company is, or since the first day of the next to last completed fiscal
year of the Acquired Companies has owned (of record or as a 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 either Acquired Company, other than business dealings or transactions
conducted in the Ordinary Course of Business with the Acquired Companies at
substantially prevailing market prices and on substantially prevailing market
terms, or (ii) engaged in competition with either Acquired Company with respect
to any line of the products or services of such Acquired Company (a "Competing
Business") in any market presently served by such Acquired Company except for
less than one percent of the outstanding capital stock of any Competing Business
that is publicly traded on any recognized exchange or in the over-the-counter
market. Except as set forth in Schedule 3.25, no Seller or any Affiliate of
Sellers or of either Acquired Company is a party to any Contract with, or has
any claim or right against, either Acquired Company.
3.26. BROKERS OR FINDERS.
Sellers and their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders fees or agent's commissions or other similar
payments in connection with this Agreement. Sellers hereby agree to indemnify
and hold Buyer harmless from any claims resulting from any brokers.
3.27. YEAR 2000 COMPLIANCE.
The Acquired Companies have exercised due care in assessing the Year 2000
compliance status of all material computer software and hardware used in the
Ordinary Course of Business and in assessing the Year 2000 compliance status of
their customers and counterparties. Each Acquired Company has taken reasonable
steps necessary for its software and hardware used in the business of such
Acquired Company to be Year 2000 compliant within thirty (30) days following the
date of Closing and Company does not expect the future cost of addressing such
issues to be material.
11
3.28. INVESTMENT INTENT
Sellers are acquiring the consideration securities reflected herein for
investment purposes only, for their own account and not with a view to the
distribution of those securities within the meaning of Section 2(11) of the
Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers as follows:
4.1. ORGANIZATION AND GOOD STANDING.
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada.
4.2. AUTHORITY; NO CONFLICT.
4.2.1. This Agreement constitutes the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of all of the documents required to be delivered
in Section 8.4 herein (collectively, the "Buyer's Closing Documents"), Buyer's
Closing Documents will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement and Buyer's Closing Documents and to perform its
obligations under this Agreement and Buyer's Closing Documents.
4.2.2. Except as set forth in Schedule 4.2, neither the execution and delivery
of this Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:
4.2.2.1. Any provision of Buyer's Organizational Documents;
4.2.2.2. Any resolution adopted by the board of directors or the stockholders of
Buyer;
4.2.2.3. Any Legal Requirement or Order to which Buyer may be subject; or
4.2.2.4. Any Contract to which Buyer is a party or by which Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
4.3. INVESTMENT INTENT.
Buyer is acquiring the Shares for investment purposes only, for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
4.4. CERTAIN PROCEEDINGS.
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's
knowledge, no such Proceeding has been threatened.
4.5. BROKERS OR FINDERS.
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Sellers harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.
5. COVENANTS OF SELLERS.
5.1. ACCESS AND INVESTIGATION.
Sellers shall cause each Acquired Company and any Representatives to (a) afford
Buyer and its Representatives and prospective lenders and their Representatives
full and free access to each Acquired Company's personnel, properties (including
subsurface testing), contracts, books and records, and other documents and data,
(b) furnish Buyer with copies of all such contracts, books and records, and
other existing documents and data as Buyer may reasonably request, and (c)
12
furnish Buyer with such additional financial, operating, and other data and
information as Buyer may reasonably request.
5.2. OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES.
Sellers shall cause each Acquired Company to:
5.2.1. Conduct the business of such Acquired Company only in the Ordinary Course
of Business;
5.2.2. Use their best efforts to preserve intact the current business
organization of such Acquired Company, keep available the services of the
current officers, employees, and agents of such Acquired Company, and maintain
the relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with such Acquired
Company;
5.2.3. Confer with Buyer concerning operational matters of a material nature;
and
5.2.4. Otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of such Acquired Company.
5.3. NEGATIVE COVENANT.
Except as otherwise expressly permitted by this Agreement, Sellers shall not
cause each Acquired Company to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4. REQUIRED APPROVALS.
As promptly as practicable after the date of this Agreement, Sellers will, and
will cause each Acquired Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Sellers shall cause each Acquired Company to, (a) cooperate with
Buyer with respect to all filings that Buyer elects to make or is required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(b) cooperate with Buyer in obtaining all consents identified in Schedule 4.2.
5.5. NOTIFICATION.
Each Seller shall promptly notify Buyer in writing if such Seller or either
Acquired Company becomes aware of any fact or condition that causes or
constitutes a Breach of any of Sellers' representations and warranties as of the
date of this Agreement, or if such Seller or either Acquired Company becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Schedules if the Schedules were dated the date of the occurrence or
discovery of any such fact or condition, Sellers will promptly deliver to Buyer
a supplement to the Schedules specifying such change. During the same period,
each Seller will promptly notify Buyer of the occurrence of any Breach of any
covenant of Sellers in this Section 5 or of the occurrence of any event that may
make the satisfaction of the conditions in Section 7 impossible or unlikely.
5.6. PAYMENT OF INDEBTEDNESS BY AFFILIATES.
5.6.1. Except as expressly provided in this Agreement, Sellers will cause all
indebtedness owed to an Acquired Company by any Seller or any Affiliate of any
Seller to be paid in full prior to Closing.
5.6.2. Except as expressly provided in this Agreement, Sellers hereby represent
that one hundred percent (100%) of the assets of Company are free and clear of
all liens and encumbrances of any kind. Sellers hereby further represent and
warrant that the Shares of Company are and will remain free and clear of all
liens and encumbrances.
5.7. NO NEGOTIATION.
Until such time, if any, as this Agreement is terminated pursuant to Section 9,
Sellers will not, and will cause each Acquired Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
13
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of either Acquired Company, or any of the capital stock of either
Acquired Company, or any merger, consolidation, business combination, or similar
transaction involving either Acquired Company.
5.8. BEST EFFORTS.
Sellers shall use their best efforts to cause the conditions in Sections 7 and 8
to be satisfied.
5.9. BOARD OF DIRECTOR SEATS.
Sellers shall cause Company to elect E. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ to the Board of Directors of Company.
5.10. ATTORNEY'S FEES
In the event Buyer is caused to retain counsel for the purpose of enforcing any
part of this Agreement Sellers hereby agree to pay Buyer's reasonable attorney's
fees plus expenses relating thereto.
5.11. EFFECTIVE DATE
Seller hereby acknowledges that upon closing, Buyer shall be deemed to have
owned the Shares for financial reporting purposes and for management control of
Company as of the date of the Head of Agreement dated March 28, 2000 by and
between Buyer and Company (the "Head of Agreement").
5.12. BUDGET
Buyer hereby acknowledges that Company shall submit a Budget Plan to Buyer which
shall be negotiated and approved, subject to modifications by Buyer and its
parent, Carnegie, and thereafter Buyer shall fund the operations of Company as
required to operate under said approved Budget Plan.
6. COVENANTS OF BUYER.APPROVALS OF GOVERNMENTAL BODIES
6.1. As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Affiliates to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and will
cause each Affiliate to, (i) cooperate with Sellers with respect to all filings
that Sellers are required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with Sellers in obtaining all
consents identified in Schedule 3.2; provided that this Agreement will not
require Buyer to dispose of or make any change in any portion of its business or
to incur any other burden to obtain a Governmental Authorization.
6.2. BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Buyer will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
6.3. OPERATION OF COMPANY
Buyer acknowledges that Company shall maintain its current management,
consistent with the Consulting Agreements referred to in subsection 6.3.3 hereof
and any Employment Agreements referred to in Section 7.4 hereof provided Company
reasonably performs in accordance with its Projections which projections shall
be agreed upon by Company and Buyer and are attached hereto and incorporated
herein as Schedule 6.3. Buyer hereby acknowledges that it has no present
intention of changing the management of Company, dismantling Company or selling
off its assets as long as Company reasonably performs in accordance with its
Projections.
6.3.1. For purposes herein the projections referred to as Schedule 6.3
(hereinafter referred to as the "Projections") shall be reviewed and compared
with the actual financial statements of Company prepared by Company not less
often than on a quarterly basis. In the event the actual statements reflect the
performance of Company to be less than eighty percent (80%) of Projections,
Buyer shall have the absolute discretion to make changes in management and
terminate any Consulting Agreements without further payments of base
compensation.
6.3.2. Seller hereby acknowledges that it shall facilitate the appointment of
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ as Observers to the Board of Directors of Company
to assist in making business decisions. Upon the closing hereof, Buyer shall
facilitate the appointment of a representative
14
of Vacco, Inc. to become a Member of the Advisory Committee of Buyer to assist
in the making of management decisions as it relates to Company.
6.3.3. CONSULTING AGREEMENTS: At Closing, Company shall execute Consulting
Agreements reflecting that Rangeland Investments, Inc. and Vacco, Inc. have been
hired as consultants to Company. Said Agreements shall be in the form attached
hereto as Schedule 6.3.3.
6.4. PIGGYBACK REGISTRATION RIGHTS
The parties hereby acknowledge that Buyer shall facilitate its parent company to
provide piggyback registration rights in the event Carnegie files a registration
statement which benefits any persons to whom registration rights have not been
previously granted. Carnegie shall, subject to the underwriter's approval,
provide Sellers with such registration rights in proportion to all such other
persons to whom registration rights have not been previously granted or benefit
from any such registration statement.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions required
to be taken by Buyer at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer, in whole or in part):
7.1. ACCURACY OF REPRESENTATIONS
All of Sellers' representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Schedules.
7.2. SELLERS' PERFORMANCE
7.2.1. All of the covenants and obligations that Sellers are required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
7.2.2. Each document required to be delivered pursuant to Section 2.3 must have
been delivered, and each of the other covenants and obligations in Sections 5.4
and 5.8 must have been performed and complied with in all respects.
7.3. CONSENTS
Each of the Consents identified in Schedule 3.2 and each Consent identified in
Schedule 4.2 must have been obtained and must be in full force and effect.
7.4. ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
7.4.1. An opinion of Sellers legal counsel dated the Closing Date, in the form
of Schedule 7.4.1;
7.4.2. Employment agreements in the form of Schedule 7.4.2, executed by Sellers
(collectively, "Employment Agreements");
7.4.3. Certificate executed by each Seller and Company representing and
warranting to Buyer that each of Sellers' representations and warranties in this
Agreement was accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the Closing Date
(giving full effect to any supplements to the Schedules that were delivered by
Sellers to Buyer prior to the Closing Date in accordance with Section 5.5);
7.4.4. A good standing certificate for each Acquired Company from the
jurisdiction of its incorporation and from every jurisdiction in which it is
required to qualify to do business as a foreign corporation dated not earlier
than 10 days prior to Closing;
7.4.5. Certified copies of resolutions of Company's Board of Directors
appointing E. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ by Buyer to the Board
of Directors of Company; and
7.4.6. Such other documents as Buyer may reasonably request for the purpose of
(i) enabling its counsel to provide the opinion referred to in Section 8.4.1,
(ii) evidencing the accuracy of any of Sellers' representations and warranties,
(iii) evidencing the performance by either Seller of,
15
or the compliance by either Seller with, any covenant or obligation required to
be performed or complied with by such Seller, (iv) evidencing the satisfaction
of any condition referred to in this Section 7, or (v) otherwise facilitating
the consummation or performance of any of the Contemplated Transactions hereby.
7.5. NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Acquired Companies, or (b)
is entitled to all or any portion of the Purchase Price payable for the Shares.
7.7. NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions required to
be taken by Sellers at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Sellers, in whole or in part):
8.1. ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
8.2. BUYER'S PERFORMANCE.
8.2.1. All of the covenants and obligations that Buyer is required to perform or
to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been performed and complied with in all material
respects.
8.2.2. Buyer must have delivered each of the documents required to be delivered
by Buyer pursuant to Section 2.3 and must have made the cash payments required
to be made by Buyer pursuant to Sections 2.2 and 2.3.2.1.
8.3. CONSENTS
Each of the Consents identified in Schedule 3.2 must have been obtained and must
be in full force and effect.
8.4. ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Sellers:
8.4.1. An opinion of Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP dated the Closing Date,
in the form of Schedule 8.4.1.
The Employment Agreements, executed by Buyer.
Stock Certificates evidencing the Preferred Stock.
8.4.4. A certificate executed by Buyer to the effect that, except as otherwise
stated in such certificate, each of Buyer's representations and warranties in
this Agreement was accurate in all
16
respects as of the date of this Agreement and is accurate in all respects as of
the Closing Date as if made on the Closing Date.
8.4.5. A good standing certificate for Buyer from the State of Nevada or the
State of California as the jurisdiction in which it is required to qualify to do
business as a foreign corporation.
8.4.6. Such other documents as Sellers may reasonably request for the purpose of
(i) enabling their counsel to provide the opinion referred to in Section 7.4.1,
(ii) evidencing the accuracy of any representation or warranty of Buyer, (iii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (ii)
evidencing the satisfaction of any condition referred to in this Section 8, or
(v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.5. NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and (b) has
been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
9. TERMINATION
9.1. TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be terminated:
9.1.1. By either Buyer or Sellers if a material breach of any provision of this
Agreement has been committed by the other party and such breach has not been
waived.
9.1.2. (i) By Buyer if any of the conditions in Section 7 has not been satisfied
as of the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions in Section
8 has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date.
9.1.3. By mutual consent of Buyer and Sellers.
9.2. EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the breach of this Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this Agreement,
the Schedules, the supplements to the Schedules, the certificates delivered
pursuant to Section 7.4.3 and 8.4.3, and any other certificate or document
delivered pursuant to this Agreement will survive the Closing and the
consummation of the Contemplated Transactions hereby (and any examination or
investigation by or on behalf of any party hereto) until the expiration of any
applicable statute of limitations. A claim for indemnification or reimbursement
not based upon any representation or warranty or any covenant or obligation to
be performed and complied with prior to the Closing Date, may be made at any
time. The right to indemnification, payment of damages or other remedy based on
such representations, warranties, covenants, and obligations will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or
17
obligation, will not affect the right to indemnification, payment of damages, or
other remedy based on such representations, warranties, covenants, and
obligations.
10.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers, jointly and severally, will indemnify and hold harmless Buyer for, and
will pay to Buyer the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
10.2.1. Any breach of any representation or warranty made by Sellers in this
Agreement (without giving effect to any supplement to the Schedules), the
Schedules, the supplements to the Schedules, or any other certificate or
document delivered by Sellers pursuant to this Agreement;
10.2.2. Any breach of any representation or warranty made by Sellers in this
Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Schedules, other
than any such Breach that is disclosed in a supplement to the Schedules and is
expressly identified in the certificate delivered pursuant to Section 7.4.3 as
having caused the condition specified in Section 7.1 not to be satisfied; and
10.2.3. Any breach by any Seller of any covenant or obligation of such Seller in
this Agreement.
The remedies provided in this Section 10.2 will not be exclusive of or limit any
other remedies that may be available to Buyer.
10.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
or (b) any breach by Buyer of any covenant or obligation of Buyer in this
Agreement.
10.4. PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
10.4.1. Promptly after receipt by an indemnified party under Section 10.2 or
10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
10.4.2. If any Proceeding referred to in Section 10.4.1 is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
18
10.4.3. Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its Affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
10.4.4. Sellers hereby consent to the non-exclusive jurisdiction of any court in
which a Proceeding is brought against any Indemnified Person for purposes of any
claim that an Indemnified Person may have under this Agreement with respect to
such Proceeding or the matters alleged therein, and agree that process may be
served on Sellers with respect to such a claim anywhere in the world.
10.5. PROCEDURE FOR INDEMNIFICATION--OTHER 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.
11. GENERAL PROVISIONS
11.1. EXPENSES
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Sellers will cause the Acquired Companies not to incur
any out-of-pocket expenses in connection with this Agreement. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
11.2. PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Carnegie determines. Unless consented to by Buyer in advance or
required by Legal Requirements, prior to the Closing Sellers shall, and shall
cause the Acquired Companies to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person.
11.3. CONFIDENTIALITY
Subject to the provisions of Section 11.2, between the date of this Agreement
and the Closing Date, Buyer and Sellers will maintain in confidence, and will
cause the directors, officers, employees, agents, and advisors of Buyer and the
Acquired Companies to maintain in confidence, and not use to the detriment of
another party or an Acquired Company, any written, oral, or other information
obtained in confidence from another party or an Acquired Company in connection
with this Agreement or 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 Contemplated Transactions, or (c) the furnishing or use of
such information is required by or necessary or appropriate in connection with
legal proceedings.
If the Contemplated Transactions are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request. Whether or not the Closing takes place, Sellers waive, and will upon
Buyer's request cause the Acquired Companies to waive, any cause of action,
right, or claim arising out of the access of Buyer or its Representatives to any
trade secrets or other confidential information of the Acquired Companies except
for the intentional competitive misuse by Buyer of such trade secrets or
confidential information.
11.4. NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
19
Sellers: Federation of Associated Health Systems, Inc.
▇▇▇ ▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇. ▇▇▇▇'▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer: Paramount International Telecommunications, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
And to
▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇, Esquire
Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 410.659.1414
11.5. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Maryland, County of Baltimore, or, if it has or
can acquire jurisdiction, in the United States District Court for the District
of Maryland (Northern Division), and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world. THE PARTIES HEREBY WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING.
11.6. FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7. WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8. RESTATED AGREEMENT AND MODIFICATION. This Agreement restates, modifies,
amends and replaces in all respects, the Acquisition Agreement. Upon the
execution of this Agreement, the terms and conditions of the Acquisition
Agreement shall terminate and be of no further force and effect and shall have
been merged into and shall be governed solely by this Agreement. This
20
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
11.9. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, which will not be unreasonably withheld,
except that Buyer may assign any of its rights under this Agreement to any
Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
11.9.1. Notwithstanding anything to the contrary herein each of Sellers shall
have the right to assign a portion of the consideration received or to be
received in accordance with the terms of this Agreement to such member or
members of that Seller's family including spouses, children, grandchildren,
spouses of children or grandchildren, nieces or nephews or such other entity
provided such assignment or transfer is performed to facilitate appropriate
gift, estate and/or income tax planning goals and not contrary to Sellers'
statement of investment intent as warranted in section 3.28 of this Agreement.
Each of Sellers shall also have the right to assign a portion of said
consideration to not more than five (5) non-related persons or entities with
Buyer's prior written consent, which shall not be unreasonably withheld.
11.10. SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.11. SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
11.12. TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.13. GOVERNING LAW
This Agreement will be governed by the laws of the State of Maryland without
regard to conflicts of laws principles.
11.14. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
12. DEFINITIONS
The following terms, as used herein, have the following meanings:
12.1. "Contract" shall mean any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
12.2. "Encumbrance" shall mean any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
12.3. "Environmental Laws" shall mean all Legal Requirements pertaining to the
protection of the environment, the treatment, emission and discharge of gaseous,
particulate and effluent pollutants and the use, handling, storage, treatment,
removal, transport, transloading, cleanup, decontamination, discharge and
disposal of "hazardous substances" or "hazardous materials", as
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such terms are defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
12.4. "ERISA" shall mean the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
12.5. "Free Cash Flow" shall mean earnings of Company from operations, excluding
sales of capital assets and other extraordinary items, net of applicable income
taxes, as adjusted to reflect depreciation and amortization.
12.6. "GAAP" shall mean generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4(b) were prepared.
12.7. "Governmental Authorization" shall mean any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
12.8. "Governmental Body" shall mean any:
12.8.1. Nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
12.8.2. Federal, state, local, municipal, foreign, or other government;
12.8.3. Governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
12.8.4. Multi-national organization or body; or
12.8.5. Body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any
nature.
12.9. "Legal Requirement" shall mean all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees.
12.10. "Order" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
12.11. "Ordinary Course of Business" shall mean an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if:
12.11.1. Such action is 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;
12.11.2. Such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority) [and is not required to be specifically authorized by the parent
company (if any) of such Person]; and
12.11.3. Such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.
12.12. "Person" shall mean any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
12.13. "Proceeding" shall mean any actual or threatened claim, action, suit,
arbitration, audit, hearing, inquiry, litigation, proceeding, complaint, charge
or investigation by or before any Governmental Body or arbitrator.
12.14. "Representative" shall mean, with respect to a particular Person, any
director, officer, employee, agent, Consulting, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
12.15. "Trading Price" shall mean, as of the applicable date, the average of the
closing price for the thirty (30) trading days immediately preceding such date.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
WITNESS: SELLERS:
/s/
S. R. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
/s/
▇▇▇▇▇ ▇. ▇▇▇▇
WITNESS: BUYER:
PARAMOUNT INTERNATIONAL
TELECOMMUNICATIONS, INC.
/s/
By:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
ACKNOWLEDGMENT BY COMPANY
FEDERATION OF ASSOCIATED HEALTH SYSTEMS, INC.
The undersigned officer acknowledges on behalf of Federation of Associated
Health Systems, Inc. that it consents to the transfer and terms effectuated
herein.
FEDERATION OF ASSOCIATED
HEALTH SYSTEMS, INC.
By: /s/
ACKNOWLEDGMENT BY COMPANY
CARNEGIE INTERNATIONAL CORPORATION
The undersigned officer acknowledges on behalf of Carnegie International
Corporation that it consents to the transfer and terms effectuated herein.
By: /s/
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
LIST OF SCHEDULES TO STOCK PURCHASE AGREEMENT AMONG PARAMOUNT INTERNATIONAL
TELECOMMUNICATIONS, INC. AND FEDERATION OF ASSOCIATED HEALTH SYSTEMS, INC.
SCHEDULES
Schedule 3.1 Organization
Schedule 3.2 Sellers' Conflicts and Consents
Schedule 3.3.1 List of Sellers/Capitalization
Schedule 3.3.2 Options, Warrants and Other Rights
Schedule 3.6.1 Leased Premises
Schedule 3.6.2 Personal Property
Schedule 3.8 Accounts Receivable
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Schedule 3.10 Liabilities
Schedule 3.11 Taxes
Schedule 3.13 Employee Benefits
Schedule 3.14 Exceptions to Governmental Compliance
Schedule 3.14.1 Compliance with Legal Requirements
Schedule 3.14.2 Governmental Authorizations
Schedule 3.15 Legal Proceedings
Schedule 3.16 Certain Changes and Events
Schedule 3.17 Contracts
Schedule 3.18 Insurance
Schedule 3.19 Environmental Laws
Schedule 3.20 Employees
Schedule 3.22.1 Registered Rights
Schedule 3.22.2 Rights to Registered Rights and Proprietary Information
Schedule 3.22.3 Licenses Granted for Use of Registered Rights and Proprietary
Information
Schedule 3.25 Relationships with Affiliates
Schedule 4.2 Buyer's Conflicts and Consents
Schedule 6.3 Operation of Company: Projections
Schedule 6.3.3 Consulting Agreements
Schedule 7.4.1 Form of Opinion of Sellers' Counsel
Schedule 7.4.2 Form of Employment Agreements if required.
Schedule 8.4.1 Form of Opinion of Buyer's Counsel
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