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Search Agreement and Plan of Merger by:
EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND
AMONG
GENTIVA HEALTH
SERVICES, INC.,
TARA
ACQUISITION SUB CORP.,
THE HEALTHFIELD
GROUP, INC.,
RODNEY D. WINDLEY, IN HIS CAPACITY
AS STOCKHOLDER REPRESENTATIVE, AND
THE
SECURITYHOLDERS NAMED HEREIN
Dated as of
January 4, 2006
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<PAGE>
TABLE OF
CONTENTS
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<S> <C>
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PAGE
Article I The
Merger............................................................................1
1.1. The
Merger............................................................................1
1.2.
Closing...............................................................................1
1.3. Effective
Time........................................................................2
1.4. Effects of the Merger.................................................................2
1.5. Certificate of Incorporation and Bylaws of
the Surviving Corporation..................2
1.6. Directors and Officers of the Surviving
Corporation...................................2
Article II Effect on Capital
Stock, Company Stock Options and Company Warrants; Payment and
Adjustment of Merger
Consideration....................................................3
2.1. Effect on Capital
Stock...............................................................3
2.2. Payment of Merger
Consideration.......................................................4
2.3. Delivery of
Certificates..............................................................8
2.4. Company Stock Options and Company
Warrants............................................9
2.5. Merger Consideration
Adjustment......................................................10
Article III Representations and
Warranties Relating to the Principal Securityholders.............14
3.1. Authorization of
Agreement...........................................................14
3.2. Conflicts; Consents of Third
Parties.................................................14
3.3.
Ownership............................................................................15
3.4.
Litigation...........................................................................15
3.5. Financial
Advisors...................................................................15
3.6. Investment
Representations...........................................................15
Article IV Representations and Warranties Relating to
the Company...............................16
4.1. Organization and Good
Standing.......................................................16
4.2. Authorization of Agreement...........................................................17
4.3. Conflicts; Consents of Third
Parties.................................................17
4.4.
Capitalization.......................................................................18
4.5. Company Subsidiaries and Affiliated
Entities.........................................19
4.6. Corporate
Records....................................................................19
4.7. Financial Statements.................................................................20
4.8. No Undisclosed
Liabilities...........................................................21
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TABLE OF CONTENTS
(CONTINUED)
PAGE
4.9. Absence of Certain
Developments......................................................21
4.10.
Taxes................................................................................23
4.11. Real
Property........................................................................26
4.12. Tangible Personal
Property...........................................................27
4.13. Intellectual
Property................................................................28
4.14. Material Contracts...................................................................31
4.15. Employee Benefit
Plans...............................................................33
4.16. Labor and Employment
Matters.........................................................34
4.17.
Litigation...........................................................................36
4.18. Compliance with Laws;
Permits........................................................36
4.19. Environmental Matters................................................................37
4.20.
Insurance............................................................................37
4.21. Accounts and Notes Receivable and
Payable............................................37
4.22. Related Party
Transactions...........................................................38
4.23. Customers and
Suppliers..............................................................38
4.24. Banks; Power of
Attorney.............................................................39
4.25. Financial
Advisors...................................................................39
4.26. Certain Regulatory Matters...........................................................39
Article V Representations and
Warranties of Parent and Merger Sub..............................43
5.1. Organization and Good
Standing.......................................................43
5.2. Authorization of
Agreement...........................................................43
5.3. Conflicts; Consents of Third
Parties.................................................44
5.4. Litigation...........................................................................44
5.5. Parent Capital
Structure.............................................................44
5.6. Ownership and Operations of Merger
Sub...............................................45
5.7. Parent SEC
Documents.................................................................45
5.8.
Financing............................................................................46
5.9.
No Parent Material Adverse
Effect....................................................46
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<PAGE>
TABLE OF
CONTENTS
(CONTINUED)
PAGE
Article VI Additional Covenants
and Agreements..................................................46
6.1. Conduct of Business..................................................................46
6.2. Access to Information;
Confidentiality...............................................50
6.3. Regulatory
Approvals.................................................................51
6.4. Further
Assurances...................................................................51
6.5. No
Shop..............................................................................51
6.6. Confidentiality......................................................................52
6.7. Public
Announcements.................................................................53
6.8. Notification of Certain
Matters......................................................53
6.9. Related-Party Transactions with
Non-Management Affiliates............................54
6.10. Parent
Board.........................................................................54
6.11. Actions with Respect to
Financing....................................................54
6.12. Certain Litigation
Recoveries........................................................54
6.13. Payment under CHMG Agreement.........................................................55
6.14. Hospice Services
Overpayment.........................................................55
Article VII Conditions to
Closing................................................................55
7.1. Conditions to Each Party's Obligation to
Effect the Merger...........................55
7.2. Conditions to Obligations of Parent and
Merger Sub...................................55
7.3. Conditions to Obligations of the Company
and the Securityholders.....................57
7.4. Frustration of Closing
Conditions....................................................58
Article VIII
Termination..........................................................................59
8.1.
Termination..........................................................................59
8.2. Procedure Upon
Termination...........................................................60
8.3. Termination
Fee......................................................................60
8.4. Effect of
Termination................................................................61
Article IX Indemnification......................................................................61
9.1. Survival of Representations and
Warranties...........................................61
9.2.
Indemnification......................................................................62
9.3. Indemnification
Procedures...........................................................63
9.4. Limitations on Indemnification for
Breaches of Representations and Warranties........65
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TABLE OF
CONTENTS
(CONTINUED)
PAGE
9.5. Escrow...............................................................................67
9.6. Working Capital
Reserve..............................................................68
9.7. Tax Treatment of Indemnity Payments..................................................69
Article X Tax
Matters..........................................................................69
10.1. Tax
Indemnification..................................................................69
10.2. Filing of Tax Returns; Payment of
Taxes..............................................69
10.3. Straddle
Period......................................................................71
10.4. Tax Audits...........................................................................71
10.5.
Disputes.............................................................................72
10.6. Time
Limits..........................................................................72
10.7.
Exclusivity..........................................................................73
10.8. Refunds and Tax
Credits..............................................................73
Article XI Definitions..........................................................................73
11.1. Certain
Definitions..................................................................73
11.2. Terms Defined Elsewhere in this Agreement............................................79
11.3.
Interpretation.......................................................................81
Article XII
Miscellaneous........................................................................82
12.1. Stockholder
Representative...........................................................82
12.2. Fees and
Expenses....................................................................84
12.3. Amendment or Supplement..............................................................84
12.4. Extension of Time, Waiver,
Etc.......................................................84
12.5.
Assignment...........................................................................84
12.6. Entire Agreement; No Third-Party
Beneficiaries.......................................85
12.7. Governing Law; Jurisdiction; Waiver of Jury
Trial....................................85
12.8.
Specific
Enforcement.................................................................85
12.9.
Notices..............................................................................85
12.10. Severability.........................................................................86
12.11.
Counterparts.........................................................................86
</TABLE>
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ANNEX
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Annex A List of Securityholders
SCHEDULES
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Schedule 2.2(a) Reductions of Merger Consideration
Schedule 2.5(a)(i) Target Working Capital
Schedule 3.2(b) Consents of Third Parties
Schedule 3.3 Ownership of Company Securities
Schedule 3.4 Litigation Affecting Principal
Stockholders
Schedule 3.5 Financial Advisors to Principal
Stockholders
Schedule 4.3(a) Consents of Third Parties
Schedule 4.3(b) Consents of Third Parties
Schedule 4.4(a) Capitalization Schedule of the
Company
Schedule 4.4(b) Holders of Options and Warrants
Schedule 4.5 List of Subsidiaries Of the
Company
Schedule 4.8 Undisclosed Liabilities Since
September 30, 2005
Schedule 4.9 Absence Of Certain Developments
Schedule 4.10 Taxes
Schedule 4.11 Real Property
Schedule 4.12(a) Liens on Personal Property
Schedule 4.12(b) Personal Property
Schedule 4.13 Intellectual Property
Schedule 4.13(a) Intellectual Property Owned or Used
Schedule 4.13(b) Intellectual Property Owned by the
Company
Schedule 4.13(d) Intellectual Property License Payments
Schedule 4.13(e) Intellectual Property Licenses and
Liens
Schedule 4.13(l) Software Owned or Used by the Company
Schedule 4.14(a) Material Agreements
Schedule 4.14(b) Non-Continuing Contracts
Schedule 4.15 Employee Benefit Plans
Schedule 4.15 (h) Payment Due to Employees
Schedule 4.16 Labor And Employment Matters
Schedule 4.16 (b) Audits, Complaints or Investigations
Schedule 4.16 (c) List of Collective Bargaining
Agreements
Schedule 4.16 (d) Employment -Related Complaints and
Claims
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Schedule 4.17 Litigation
Schedule 4.18 Company Permits
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance Policies
Schedule 4.22 Related Party Transactions
Schedule 4.23 Customers And Suppliers
Schedule 4.24 Banks
Schedule 4.25 Financial Advisors To The Company
Schedule 4.26 Certain Regulatory Matters
Schedule 4.26(a) Permits, Licenses, Accreditations
Schedule 4.26(b) Violations, Defaults, Orders, or
Deficiencies
Schedule 4.26(c) Medicare Liability Under Government
and Private
Programs
Schedule 4.26(e) Reimbursements Under Government and
Private
Programs
Schedule 4.26(f) Remuneration
Schedule 5.3 Conflicts/Consents of Third
Parties
Schedule 5.8 Financing Commitment Letter and
Term Sheet
Schedule
6.1(b)(xv) Related Persons
Schedule 6.9 Continuing Affiliate Contracts
Schedule 7.2(f) Non-Competition Agreements
Schedule 7.2(g) Retention of Key Employees
Schedule 10.2(d) Stock Options
EXHIBITS
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Exhibit A Form of Joinder Agreement
Exhibit B Form of Escrow Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Confidentiality,
Non-Competition and Intellectual Property Agreement
Exhibit E Form of Greenberg Traurig Opinion
Exhibit F Form of Weil, Gotshal & Manges LLP
Opinion
</TABLE>
vi
<PAGE>
AGREEMENT AND
PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as
of January 4, 2006 (this
"Agreement"), is by and among the following (the
"Parties"):
(i) Gentiva Health Services,
Inc., a Delaware corporation ("Parent");
(ii) Tara Acquisition Sub Corp.,
a Delaware corporation and a
wholly-owned Subsidiary of Parent ("Merger Sub");
(iii) The Healthfield Group,
Inc., a Delaware corporation (the
"Company");
(iv) Rodney D. Windley, as the
representative for the Securityholders
(as defined below) of the Company (including any successor as representative
for
the Securityholders, the "Stockholder Representative"); and
(v) the holders of Company
Securities (the "Securityholders") who
become Parties to this Agreement by executing joinder agreements in
substantially the form attached hereto as Exhibit A (each, a "Joinder
Agreement").
WHEREAS, certain terms used in
this Agreement are used as defined in
Article XI herein;
WHEREAS, the respective Boards
of Directors of the Company and Merger
Sub have approved and declared advisable, and the Board of Directors of Parent
has approved, this Agreement and the merger of Merger Sub with and into the
Company (the "Merger"), on the terms and subject to the conditions
provided for
in this Agreement; and
NOW, THEREFORE, in
consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
THE
MERGER
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1.1. The Merger. Upon the
terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, at the Effective
Time,
Merger Sub shall be merged with and into the Company, and the separate
corporate
existence of Merger Sub shall thereupon cease, and the Company shall continue
its corporate existence and be the surviving corporation in the Merger (the
"Surviving Corporation").
1.2. Closing. The closing of
the Merger (the "Closing") shall take
place at 10:00 a.m. (New York City time) on a date to be specified by Parent
and
the Company (the "Closing Date"), which date shall be on or prior to
the Outside
Date (as the same may be extended pursuant to Section 8.1(b)(i)) after
satisfaction or waiver of the conditions set forth in Article VII (other than
1
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those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of those conditions at such time), at the
offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York
10153, unless another time, date or place is agreed to in writing by such
Parties.
1.3. Effective Time. Subject
to the provisions of this Agreement, as
soon as practicable on the Closing Date, Parent and the Company shall file with
the Secretary of State of the State of Delaware, a certificate of merger,
executed, acknowledged and filed in accordance with the relevant provisions of
the DGCL (the "Certificate of Merger"). The Merger shall become
effective upon
the due filing of the Certificate of Merger or at such later time as is agreed
to by Parent and the Company and specified in the Certificate of Merger (the
time at which the Merger becomes effective is herein referred to as the
"Effective Time").
1.4. Effects of the Merger.
The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and
subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger
Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.5. Certificate of
Incorporation and Bylaws of the Surviving
Corporation. The certificate of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until amended as provided therein or
by applicable Law. The Company shall take all lawful requisite action so that
the bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be, from and after the Effective Time, the bylaws of the Surviving
Corporation until thereafter amended as provided therein or by applicable Law.
1.6. Directors and Officers of
the Surviving Corporation.
(a) Directors. The directors
of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation immediately
following the Effective Time, until their respective successors are duly
elected
or appointed and qualified or their earlier death, resignation or removal in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation.
(b) Officers. The officers of
the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until their
respective successors are duly appointed and qualified or their earlier death,
resignation or removal in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation.
2
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ARTICLE II
EFFECT ON CAPITAL STOCK, COMPANY
STOCK OPTIONS AND COMPANY WARRANTS;
--------------------------------------------------------------------
PAYMENT AND ADJUSTMENT
OF MERGER CONSIDERATION
----------------------------------------------
2.1. Effect on Capital Stock.
At the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any shares of
common
stock, par value $0.001, of the Company ("Company Common Stock"), any
shares of
preferred stock, par value $0.001 per share, of the Company ("Company
Preferred
Stock" and together with the Company Common Stock, the "Company
Stock") or any
shares of capital stock of Merger Sub:
(a) Capital Stock of Merger
Sub. Each issued and outstanding share of
capital stock of Merger Sub immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and non-assessable
share of common stock, par value $0.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury
Stock. Any shares of Company Stock that
are owned by the Company as treasury stock shall be automatically canceled and
shall cease to exist and no consideration shall be delivered in exchange
therefor.
(c) Conversion of Company
Stock.
(i) Each issued and
outstanding share of Company Stock
immediately prior to the Effective Time (other than Dissenting Shares pursuant
to Section 2.1(c)(iii) and shares to be canceled in accordance with Section
2.1(b)) shall be converted into the right to receive an amount, payable in
accordance with Section 2.2, equal to the Adjusted Final Total Merger
Consideration divided by the Total Company Share Amount (the "Merger
Consideration"). For purposes of this Agreement, (A) "Final Total
Merger
Consideration" means the Estimated Total Merger Consideration plus or
minus the
True-Up Amounts, (B) "Adjusted Final Total Merger Consideration"
means the Final
Total Merger Consideration plus the aggregate exercise prices of all
unexercised
Company Stock Options and Company Warrants, (C) the "Total Company Share
Amount"
means, as of immediately prior to the Effective Time (and immediately prior to
any cancellation of Company Stock Options and Company Warrants pursuant to
Section 2.4), the sum of (1) the number of issued and outstanding shares of
Company Stock and (2) the number of shares of Company Stock issuable upon the
exercise of outstanding Company Stock Options and Company Warrants (whether or
not then vested or exercisable), and (D) the "Total Principal Share
Amount"
means, as of immediately prior to the Effective Time (and immediately prior to
any cancellation of Company Stock Options and Company Warrants pursuant to
Section 2.4), the sum of (1) the number of issued and outstanding shares of
Principal Capital Stock and (2) the number of shares of capital stock issuable
upon the exercise of outstanding Principal Options and Principal Warrants
(whether or not then vested or exercisable). Annex A attached hereto sets forth
a complete list of all Securityholders and identifies those Securityholders who
are Principal Stockholders and/or Principal Securityholders.
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(ii) As of the Effective
Time, all shares of Company Stock
converted pursuant to clause (c)(i) above, shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each holder of a
certificate (or evidence of shares in book-entry form) which immediately prior
to the Effective Time represented any such shares of Company Stock (each, a
"Certificate") shall cease to have any rights with respect thereto,
except the
right to receive the Merger Consideration and any cash in lieu of any
fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2, in each case to be issued or paid in consideration therefor upon
surrender of such Certificate in accordance with Section 2.3, without interest.
(iii) Notwithstanding
anything in this Agreement to the
contrary, shares of Company Stock that are issued and outstanding immediately
prior to the Effective Time and which are held by a stockholder who did not
vote
in favor of the Merger or consent thereto in writing and who is entitled to
demand and properly demands appraisal of such shares pursuant to, and who
complies in all respects with, the provisions of Section 262 of the DGCL (the
"Dissenting Stockholders"), shall not be converted into or be
exchangeable for
the right to receive the Merger Consideration (the "Dissenting
Shares"). Instead
such holder shall be entitled to payment of the fair value of such shares in
accordance with the provisions of Section 262 of the DGCL (and at the Effective
Time, such Dissenting Shares shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and such holder shall cease
to have any rights with respect thereto, except the right to receive the fair
value of such Dissenting Shares in accordance with the provisions of Section
262
of the DGCL), unless and until such holder shall have failed to perfect or
shall
have effectively withdrawn or lost rights to appraisal under the DGCL. If any
Dissenting Stockholder shall have failed to perfect or shall have effectively
withdrawn or lost such right, such holder's shares shall thereupon be treated
as
if they had been converted into and become exchangeable for the right to
receive, as of the Effective Time, the Merger Consideration for each such
share,
in accordance with this Article II, without any interest thereon. The Company
shall give Parent (A) prompt notice of any written demands for appraisal of any
shares of Common Stock, attempted withdrawals of such demands and any other
instruments served pursuant to the DGCL and received by the Company relating to
stockholders' rights of appraisal, and (B) the opportunity to participate in
all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to, or settle, or offer or agree to
settle, any such demand for payment.
2.2. Payment of Merger Consideration.
(a) Estimated Total Merger
Consideration. The amount to be paid by
Parent at the Closing (the "Estimated Total Merger Consideration") is
equal to
(i) $450,000,000 plus (ii) fifty percent (50%) of the transaction expenses and
debt prepayment expenses incurred by the Company in connection with the Merger,
up to a maximum of $4,000,000, less (iii) the amounts set forth on Schedule
2.2(a), less (iv) the Estimated Net Debt (as defined in Section 2.5(c) below)
plus or minus (v) the Estimated Working Capital Adjustment, if any (as defined
in Section 2.5(c) below). "Adjusted Estimated Total Merger
Consideration" is
equal to the Estimated Total Merger Consideration plus the aggregate exercise
prices of all unexercised Company Stock Options and Company Warrants held by
Securityholders. Transaction expenses and debt prepayment expenses incurred by
the Company will be paid as of the Closing Date.
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(b) Payment of Liquidation
Preference.
(i) At the Closing, for
each share of Company Preferred Stock to
be converted pursuant to
Section 2.1(c), Parent shall deliver to the
holders of the Company
Preferred Stock an amount in cash equal to (A)
$3,600,000 (the
"Liquidation Preference"), divided by (B) the number
of shares of Company Preferred
Stock and the number of shares of
Company Stock subject to
Company Warrants to be converted in the
Merger; and
(ii) At the Closing, for
each Company Warrant to be terminated
pursuant to Section 2.4, Parent
shall deliver to the holders of the
Company Warrants an amount in
cash equal to (A) the Liquidation
Preference, divided by (B) the
number of shares of Company Preferred
Stock and the number of shares
of Company Stock subject to Company
Warrants to be converted in the
Merger, multiplied by (C) the number
of shares of Company Stock subject
to any such Company Warrants.
(c) Conversion of Company
Stock held by Principal Stockholders.
At the Closing, for each share of Company Stock to be converted pursuant to
Section 2.1(c), Parent shall deliver to such holder of Company Stock listed on
Annex A hereto and identified as a Principal Stockholder thereon (the
"Principal
Stockholders" and together with the holders of Principal Warrants and
Principal
Options, the "Principal Securityholders"), or, with respect to any
amounts to be
deposited into escrow, to the Escrow Agent on behalf of each such Principal
Stockholder:
(i) an amount in cash
equal to (A) (1) eighty percent (80%) of
the Estimated Total Merger
Consideration less (2) the Liquidation
Preference less (3) the aggregate amount of
cash payable pursuant to
Sections 2.2(e) and (f), plus
(4) the aggregate exercise prices of all
unexercised Company Stock
Options and Company Warrants held by
Principal Securityholders
divided by (5) (a) the aggregate number of
shares of Company Stock held by
Principal Stockholders (the "Principal
Capital Stock"), plus (b)
the aggregate number of shares of Company
Stock subject to Company Stock
Options held by Principal
Securityholders (such Company
Stock Options, the "Principal Options"),
plus (c) the aggregate number
of shares of Company Stock subject to
Company Warrants held by
Principal Securityholders (such Company
Warrants, the "Principal
Warrants", collectively with the Principal
Capital Stock and the Principal
Options, the "Principal Securities")
minus (B) (1) such Principal
Stockholder's proportionate share (based
on the Total Company Share
Amount) of the Working Capital Reserve (as
defined in Section 9.6),
divided by (2) (a) the number of shares of
Company Stock held by such
Principal Stockholder, plus (b) the number
of shares of Company Stock
subject to Company Stock Options held by
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such Principal Stockholder,
plus (c) the aggregate number of shares of
Company Stock subject to
Company Warrants held by such Principal
Stockholder minus (C) (1) such
Principal Securityholder's
proportionate share (based on
the Total Principal Share Amount) of
$5,000,000 in cash (the
"Cash Escrow Amount"), divided by (2) (a) the
number of shares of Company
Stock held by such Principal Stockholder,
plus (b) the number of shares
of Company Stock subject to Company
Stock Options held by such
Principal Stockholder, plus (c) the
aggregate number of shares of
Company Stock subject to Company
Warrants held by such Principal
Stockholder plus (D) any cash due to
such Principal Stockholder in
lieu of fractional shares that otherwise
would have been issued under
Section 2.2(c)(ii) in accordance with
Section 2.2(h); and
(ii) a number of validly
issued, fully paid and non-assessable
shares of common stock, par
value $.10 per share, of Parent ("Parent
Common Stock") equal to
(A) (1) twenty percent (20%) of the Estimated
Total Merger Consideration minus (B) (1)
the Principal Stockholder's
proportionate share (based on
the Total Principal Share Amount) of a
number of shares of Parent
Common Stock equal to $30,000,000 valued at
the Parent Per Share Value (the
"Stock Escrow Amount"), divided by (2)
the number of shares of Company
Stock held by such holder, divided by
(C) the Parent Per Share Value
minus (D) any cash due to such
Principal Stockholder in lieu
of fractional shares in accordance with
Section 2.2(h), subject to
adjustment in accordance with Section
2.2(j). For purposes of this
Agreement, the per share value of Parent
Common Stock (the "Parent
Per Share Value") shall be equal to the
average of the average per
share closing price of Parent Common Stock
on the Nasdaq (as reported by
The Wall Street Journal, Eastern
Edition, or, if not reported
thereby, any other authoritative source)
for (i) the ten (10) trading
days ending with the second trading day
immediately preceding the date
hereof, and (ii) the ten (10) trading
days ending with the second
trading day immediately preceding the
Closing Date, as equitably
adjusted for any Organic Change to Parent
Common Stock that occurs after
the date hereof, but prior to the
Effective Time.
(d) Conversion of Company
Stock Options and Company Warrants held by
Principal Securityholders. At Closing, for each Company Stock Option and
Company
Warrant held by Principal Securityholders to be terminated pursuant to Section
2.4 below, Parent shall deliver to such Principal Securityholder or, with
respect to any amounts to be deposited into escrow, to the Escrow Agent on
behalf of such holder:
(i) an amount in cash
equal to (A) the excess of (1) (a) eighty
percent (80%) of the Estimated
Total Merger Consideration less (b) the
Liquidation Preference plus (c)
the aggregate exercise prices of all
unexercised Company Stock
Options and Company Warrants held by
Principal Securityholders less
(d) the aggregate amount of cash
payable pursuant to Sections
2.2(e) and (f), divided by (e) the number
of shares of Company Stock
subject to such Company Stock Option or
Company Warrant held by such
holder over (2) the per-share exercise
price of such Company Stock
Option or Company Warrant, minus (3) such
Principal Securityholder's
proportionate share (based on the Total
Company Share Amount) of the
Working Capital Reserve, divided by the
6
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number of shares of Company
Stock subject to such Company Stock Option
or Company Warrant held by such
Principal Stockholder minus (4) such
Principal Securityholder's
proportionate share (based on the Total
Principal Share Amount) of the
Cash Escrow Amount, divided by the
number shares of Company Stock
subject to such Company Stock Option or
Company Warrant held by such
Principal Securityholder plus (5) any
cash due to such Principal
Securityholder in lieu of fractional shares
that otherwise would have been
issued under Section 2.2(d)(ii) in
accordance with Section 2.2(h),
multiplied by (B) the number of shares
subject to such Company Stock
Option or Company Warrant; and
(ii) a number of validly
issued, fully paid and non-assessable
shares of Parent Common Stock
equal to (A) the excess of (1) (a)
twenty percent (20%) of the
Estimated Total Merger Consideration,
divided by (b) the number of
shares of Company Stock subject to such
Company Stock Option or Company Warrant,
over (2) the per-share
exercise price of such Company
Stock Option or Company Warrant minus
(3) such Principal
Securityholder's proportionate share (based on the
Total Principal Share Amount)
of the Stock Escrow Amount, divided by
the number of shares of Company
Stock subject to such Company Stock
Option or Company Warrant held
by such Principal Securityholder,
divided by (4) the Parent Per
Share Value, minus (5) any cash due to
such Principal Securityholder
in lieu of fractional shares in
accordance with Section 2.2(h),
subject to adjustment in accordance
with Section 2.2(j) multiplied
by (B) the number of shares subject to
such Company Stock Option or
Company Warrant.
(e) Conversion of Company
Stock held by Securityholders (other than
the Principal Stockholders). At Closing, for each share of Company Stock to be
converted pursuant to Section 2.1(c), Parent shall deliver to the
Securityholders (other than the Principal Stockholders) or, with respect to any
amounts to be deposited into escrow, to the Escrow Agent on behalf of such
Securityholder, an amount in cash equal to (i) (A) the Adjusted Estimated Total
Merger Consideration, less (B) the Liquidation Preference, divided by (ii) the
Total Company Share Amount less (iii) such Securityholder's proportionate share
(based on the Total Company Share Amount) of the Working Capital Reserve,
divided by the number of shares of Company Stock held by such Securityholder.
In
addition, Parent shall deliver to the Escrow Agent such Securityholder's
proportionate share (based on the Total Company Share Amount) of the Working
Capital Reserve.
(f) Conversion of Company
Stock Options held by Securityholders
(other than the Principal Securityholders). At Closing, for each Company Stock
Option to be terminated pursuant to Section 2.4 below, Parent shall deliver to
such holder (other than holders of Company Stock Options that are Principal
Securityholders) or, with respect to any amounts to be deposited into escrow,
to
the Escrow Agent on behalf of such holder, an amount in cash equal to (i) the
excess of (A) (1) the Adjusted Estimated Total Merger Consideration, less (2)
the Liquidation Preference, divided by (3) the Total Company Share Amount, over
(B) the per-share exercise price of such Company Stock Option, multiplied by
(ii) the number of shares subject to such Company Stock Option minus (iii) such
Securityholder's proportionate share (based on the Total Company Share Amount)
of the Working Capital Reserve, divided by the number of shares of Company
Stock
subject to Company Stock Options held by such Securityholder and to be
converted
in the Merger.
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(g) Payment of True-Up
Amounts. The True-Up Amounts, if any, owed
after the Closing by either Parent or the Securityholders under Section 2.5
shall be paid at such times and in such manner as provided for in Section
2.5(d).
(h) Fractional Shares. No
fractional shares of Parent Common Stock
shall be issued in the Merger. Each record holder of Principal Securities shall
be entitled to receive in lieu of any fractional shares of Parent Common Stock
to which such holder otherwise would have been entitled pursuant to this
Agreement (after taking into account all shares of Principal Securities then
held of record by such holder) a cash payment in an amount equal to the product
of (i) the fractional interest in a share of Parent Common Stock to which such
holder otherwise would have been entitled and (ii) the Parent Per Share Value.
(i) Withholding Taxes. Parent
shall be entitled to deduct and
withhold from the consideration otherwise payable to a holder of Company Stock
or Company Warrants pursuant to this Agreement such amounts as may be required
to be deducted and withheld with respect to the making of such payment under
the
Code, or under any provision of Tax Law. To the extent amounts are so withheld
and paid over to the appropriate Taxing Authority, Parent shall be treated as
though it withheld from the type of consideration from which withholding is
required, an appropriate amount otherwise payable pursuant to this Agreement to
any holder of Company Stock or Company Warrants in order to provide for such
withholding obligation and such withheld amounts shall be treated for the
purposes of this Agreement as having been paid to the former holder of Company
Stock or Company Warrants. If withholding is required from shares of Parent
Common Stock, Parent shall be treated as having sold such consideration for an
amount of cash equal to the fair market value of such consideration at the time
of such deemed sale and paid such cash proceeds to the appropriate Taxing
Authority.
(j) Adjustments. If at the
Effective Time, (x) the sum of (i) the
number of shares of Parent Common Stock delivered to the Principal
Securityholders or deposited into escrow pursuant to Section 2.2(c)(ii) and
(d)(ii) exceeds (y) twenty percent of the aggregate number of shares of Parent
Common Stock then issued and outstanding, then the number of shares of Parent
Common Stock delivered to the Principal Securityholders pursuant to Section
2.2(c)(ii) and (d)(ii) shall be reduced so that clause (x) above equals 19.9%
of
clause (y) above and the amount of cash delivered to the Principal
Securityholders pursuant to Section 2.2(c)(i) and (d)(i) shall be increased
proportionately so the Principal Stockholders shall receive the same economic
effect as contemplated by this Agreement prior to such action.
2.3. Delivery of Certificates.
(a) Delivery Procedures. At
the Effective Time or promptly
thereafter, each record holder of shares of Company Stock (other than
Dissenting
Shares) shall surrender to Parent, all Certificates held by such holder which
immediately prior to the Effective Time evidenced issued and outstanding shares
of Company Stock. No interest shall accrue or be paid on any amount payable upon
8
<PAGE>
surrender of the certificates. Parent shall distribute a letter of transmittal,
a form of Joinder Agreement and other customary documents to all stockholders
of
record of the Company at least five (5) Business Days in advance of the
scheduled Closing Date. As promptly as practicable following surrender of a
Certificate to Parent, together with such letter of transmittal and the Joinder
Agreement, each duly executed, and such other customary documents as may be
required by applicable Laws, the holder of such Certificate shall be entitled
to
receive in exchange therefor the Merger Consideration, paid in accordance with
Section 2.2. If any Certificate shall have been lost, stolen or destroyed, in
lieu of delivering such Certificate, a record holder may make an affidavit of
that fact claiming such Certificate is lost, stolen or destroyed and, if
required by Parent, post a bond, in such reasonable amount as Parent may
direct,
as indemnity against any claim that may be made against Parent on account of
the
alleged loss, theft or destruction of any such Certificate.
(b) No Further Rights in
Company Stock, Company Stock Option or
Company Warrant. All shares of Parent Common Stock issued and cash paid in
accordance with Section 2.2 upon conversion of the shares of Company Stock
(other than Dissenting Shares) and cancellation of the Company Stock Options
and
the Company Warrants in accordance with the terms hereof shall be deemed to
have
been issued or paid in full satisfaction of all rights pertaining to such
shares
of Company Stock, such Company Stock Options and Company Warrants.
(c) No Liability. Neither
Parent nor the Surviving Corporation shall
be liable to any holder of shares of Company Stock, Company Stock Option or
Company Warrant for any shares of Parent Common Stock (or dividends or
distributions with respect thereto) or any cash to be paid in accordance with
Section 2.2, which is delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
2.4. Company Stock Options and
Company Warrants.
(a) Immediately prior to the
Effective Time, each then outstanding
warrant to purchase Company Preferred Stock (a "Company Warrant") and
each then
outstanding option to purchase Company Common Stock (a "Company Stock
Option"
and, together with the Company Warrants and the Company Stock, collectively,
the
"Company Securities"), whether or not then exercisable, shall be
cancelled by
the Company, and in consideration of such cancellation (and except to the
extent
that Parent or Merger Sub and the holder of any such Company Warrant or Company
Stock Option otherwise agree), such holder shall be entitled to receive for
each
Company Warrant or Company Stock Option an amount, payable in accordance with
Section 2.2, equal to (i) the excess of (A) Adjusted Final Total Merger
Consideration, divided by the Total Company Share Amount over (B) the per-share
exercise price of such Company Warrant or Company Stock Option multiplied by
(ii) the number of shares subject to such Company Warrant or Company Stock
Option.
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(b) The Company shall take all
actions necessary and appropriate so
that all stock option or other equity based plans maintained with respect to
the
Company Stock (each, a "Company Stock Option Plan"), shall terminate
as of the
Effective Time and the provisions in any other benefit plan providing for the
issuance, transfer or grant of any capital stock of the Company or any interest
in respect of any capital stock of the Company shall be deleted as of the
Effective Time, and the Company shall take all actions to ensure that following
the Effective Time no holder of a Company Warrant or a Company Stock Option or
any participant in any Company Stock Option Plan shall have any right
thereunder
to acquire any stock of the Company, Parent, Merger Sub or the Surviving
Corporation.
2.5. Merger Consideration
Adjustment.
(a) Set forth on Schedule
2.5(a)(i) is a reasonably detailed
calculation of the target $13,100,000 in working capital (the "Working
Capital")
of the Company and the Company Subsidiaries on a consolidated basis as of the
Closing Date (the "Target Working Capital"), prepared in accordance
with (i) the
books and records of the Company and the Company Subsidiaries and (ii) the
accounting principles set forth in Schedule 2.5(a)(i) (the "Accounting
Principles"). For the avoidance of doubt, for purposes of this Agreement,
Working Capital shall not include cash or short-term Indebtedness.
(b) For purposes of this
Agreement, "Net Debt" shall mean the amount
of Indebtedness (including any prepayment penalty) of the Company and the
Company Subsidiaries on a consolidated basis less the amount of cash held by
the
Company and the Company Subsidiaries immediately prior to the Closing. For the
avoidance of doubt, any asset or liability included in the calculation of
Working Capital will not be included in the calculation of Net Debt so that the
calculation of Working Capital and Net Debt do not double count any asset or
liability.
(c) At least two days prior to
the Closing Date, the Company shall
prepare and deliver to Parent a statement setting forth a reasonably detailed
calculation of the Company's good faith estimate of: (i) the Working Capital of
the Company and the Company Subsidiaries on a consolidated basis as of the
Closing Date (or, if the Closing Date occurs after February 28, 2006 and on or
before March 3, 2006, then such amount shall be calculated as of February 28,
2006) ("Estimated Working Capital") prepared in accordance with (A)
the books
and records of the Company and the Company Subsidiaries and (B) the Accounting
Principles; (ii) the amount by which Estimated Working Capital is greater than
or less than Target Working Capital (such amount, if and to the extent it
exceeds $1,000,000, the "Estimated Working Capital Adjustment") and
(iii) the
Net Debt of the Company and the Company Subsidiaries on a consolidated basis as
of the Closing Date (the "Estimated Net Debt") prepared in accordance
with (A)
the books and records of the Company and the Company Subsidiaries and (B) the
Accounting Principles. Notwithstanding the foregoing, if Parent disagrees with
such working capital calculations, then there shall not be an Estimated Working
Capital Adjustment.
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(d) Post-closing adjustment.
Parent shall prepare and deliver to the
Stockholder Representative, within ninety (90) days following the Closing Date,
a statement (the "Closing Statement") setting forth a reasonably
detailed
calculation of:
(i) the Working Capital
of the Company and the Company
Subsidiaries on a consolidated basis (the "Final Working Capital") as
of the
Closing Date (or February 28, 2006, as the case may be) prepared in accordance
with (A) the books and records of the Company and the Company Subsidiaries and
(B) the Accounting Principles;
(ii) the Net Debt of the
Company and the Company Subsidiaries on
a consolidated basis (the "Final Net Debt") as of the Closing Date,
prepared in
accordance with (A) the books and records of the Company and the Company
Subsidiaries and (B) the Accounting Principles;
(iii) the "Working
Capital True-Up Amount", which for purposes
of this Agreement, shall be defined as follows: (A) to the extent that there
was
an Estimated Working Capital Adjustment, the amount by which Final Working
Capital is greater than or less than Estimated Working Capital, or (B) to the
extent that there was not an Estimated Working Capital Adjustment, the amount
by
which Final Working Capital is greater than or less than Target Working Capital
(provided that for purposes of (B) only, there shall only be a True-Up Amount
if
and to the extent that such amount exceeds $1,000,000);
(iv) an aggregate
adjustment to the Estimated Total Merger
Consideration (such adjustment, the "Net Debt True-Up Amount", and
together with
the Working Capital True-Up Amount, the "True-Up Amounts"), which may
be
positive or negative, and which shall be equal to the Final Net Debt minus the
Estimated Net Debt.
(e) The Stockholder
Representative shall have thirty (30) days from
its receipt of the Closing Statement (the "Objection Period") to
review the
Closing Statement. Parent shall grant the Stockholder Representative and his
Affiliates and representatives access at reasonable times and places and upon
reasonable advance notice to all books, records and employees of the Surviving
Corporation that is reasonably requested by the Stockholder Representative in
connection with his review of the Closing Statement. Upon the expiration of the
Objection Period, the Stockholder Representative, on behalf of all
Securityholders, shall be deemed to have accepted, and shall be bound by, the
Closing Statement and the calculation therein of the True-Up Amounts, unless
the
Stockholder Representative shall have informed Parent in writing of its
disagreement with the Closing Statement prior to the expiration of the
Objection
Period (the "Objection"), specifying each disputed item and setting
forth in
reasonable detail the basis for each such dispute (each, a "Disputed
Item").
Parent shall have thirty (30) days from the date on which it receives the
Objection (the date on which such thirty (30) day period ends, the
"Response
Date") to review and respond to such Objection. If Parent and the
Stockholder
Representative are able to negotiate a mutually agreeable resolution of each
Disputed Item, and each signs a certificate to that effect, the Closing
Statement and the calculation therein of the True-Up Amounts, as adjusted to
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<PAGE>
reflect such resolution, shall be deemed final, non-appealable and binding for
purposes of this Agreement. If within thirty (30) days of the Response Date any
Disputed Items have not been resolved, Parent and the Stockholder
Representative
shall refer such Disputed Items to the New York office of Deloitte & Touche
LLP
(the "Accounting Referee") (or if unable or unwilling to accept such
mandate, an
independent accounting firm to be mutually agreed upon by the Stockholder
Representative and Parent) and who shall accept its appointment within seven
(7)
days after such referral, to make a final, non-appealable and binding
determination as to such remaining Disputed Items pursuant to the terms hereof.
If Parent and the Stockholder Representative cannot agree on the selection of
an
independent accounting firm to act as the Accounting Referee within sixty (60)
days of the Response Date, Parent and the Stockholder Representative shall
petition a court of competent jurisdiction, to appoint such an independent
accounting firm (which must be a nationally recognized accounting firm with
substantial experience with complex financial transactions of the type set
forth
in this Agreement) and such appointment shall be conclusive and binding on the
Parties. The Accounting Referee shall be directed to make a determination in
accordance with Section 2.5(f) below of the Disputed Items promptly, but no
later than sixty (60) days, after acceptance of its appointment. Parent and the
Stockholder Representative agree to use their commercially reasonable efforts
to
effect the selection and appointment of the Accounting Referee pursuant to this
Section 2.5(e), including executing an engagement agreement with the Accounting
Referee providing for reasonable and customary compensation and other terms of
such engagement. Parent and the Stockholder Representative shall make readily
available to the Accounting Referee all relevant books, records and employees
of
the Company and the Surviving Corporation that are reasonably requested by the
Accounting Referee in connection with the Accounting Referee's review of any
Disputed Items; provided that Parent, the Stockholder Representative and their
respective Affiliates shall not be obligated to provide any information the
disclosure of which would jeopardize any privilege available to such Person
relating to such information or which would cause such Person to breach a
confidentiality obligation to which it is bound; and provided further that
Parent, the Stockholder Representative and their respective Affiliates shall
use
their best efforts to minimize the effects of any such limitations.
(f) If Disputed Items are
referred to the Accounting Referee for
resolution pursuant to Section 2.5(e) above, the Accounting Referee (i) shall
determine only with respect to the Disputed Items submitted whether and to what
extent, if any, the True-Up Amounts set forth in the Closing Statement requires
adjustment, (ii) shall utilize the Accounting Principles without modification
and (iii) shall not assign a value to any item greater than the greatest value
for such item claimed by either Party or less than the smallest value for such
item claimed by either Party. Any finding by the Accounting Referee shall be a
reasoned award stating in reasonable detail the findings of fact on which it is
based, shall be final, non-appealable and binding upon the Parties and shall be
the sole and exclusive remedy between the Parties regarding the Disputed Items
so presented. The fees and expenses of the Accounting Referee shall be borne by
Parent and the Securityholders in the same proportion that the dollar amount of
Disputed Items which are not resolved in favor of Parent or the
Securityholders,
as applicable, bears to the total dollar amount of Disputed Items resolved by
the Accounting Referee.
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<PAGE>
For illustration purposes only, (A) if the total amount of Disputed Items by
the
Stockholder Representative is $1,000, and the Stockholder Representative, on
behalf of all Securityholders, is awarded $500 by the Accounting Referee,
Parent
and the Securityholders shall bear the Accounting Referee's fees and expenses
equally; or (B) if the total amount of Disputed Items by the Stockholder
Representative is $1,000, and the Stockholder Representative, on behalf of all
Securityholders, is awarded $250 by the Accounting Referee, the Securityholders
shall bear seventy five percent (75%) and Parent shall bear twenty five percent
(25%) of the Accounting Referee's fees and expenses. Each of Parent and the
Securityholders shall bear the fees, costs and expenses of its own accountants
and all of its other expenses incurred in connection with matters contemplated
by this Section 2.5.
(g) Payment of the True-Up
Amounts.
(i) Payment of the
True-Up Amounts shall be made (i) if no
Objection is made by the Stockholder Representative during the Objection
Period,
within five (5) Business Days following the expiration of the Objection Period
or (ii) if the Stockholder Representative submits an Objection within the
Objection Period, within five (5) Business Days following final resolution of
all Disputed Items by either Parent and the Stockholder Representative or the
Accounting Referee.
(ii) If the True-Up
Amounts, when added together, yield a
positive number, then Parent shall pay such net amount in cash to the
Securityholders in the same proportion as the payment of the Estimated Merger
Consideration pursuant to Section 2.2 hereof.
(iii) If the True-Up
Amounts, when added together, yield a
negative number, then the Securityholders shall pay such net amount to Parent
in
accordance with the provisions of Section 9.6 hereof.
(iv) In addition, if the
True-Up Amounts, when added together,
yield a positive number, then the Escrow Agent shall release to the Stockholder
Representative for benefit of the Securityholders all cash in the Working
Capital Reserve in their proportionate share (based on the Total Company Share
Amount) of such amount. If the True-Up Amounts, when added together, yield a
negative number but less than the Working Capital Reserve, then the Escrow
Agent
shall release to the Stockholder Representative for benefit of the
Securityholders all cash in the Working Capital Reserve Account in excess of
the
net True-Up Amounts and such amounts shall be released to the Securityholders
in
their proportionate share (based on the Total Company Share Amount) of such
amount.
(v) Prior to payment
being made in accordance with this Section
2.5, the True-Up Amounts shall be adjusted to include interest accruing on such
True-Up Amounts from and including the Closing Date through and including the
day before the date of such payment, at a per annum rate equal to the prime
lending rate as reported in The Wall Street Journal, Eastern Edition (under the
heading "Money Rates") as at the Closing Date, calculated on the
basis of a year
of 365 days and the actual number of days elapsed.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
RELATING TO THE PRINCIPAL SECURITYHOLDERS
------------------------------------------------------------------------
Each Principal Securityholder,
severally and not jointly, hereby
represents and warrants to Parent and Merger Sub that:
3.1. Authorization of
Agreement. Such Principal Securityholder has
all requisite power, authority and legal capacity to execute and deliver this
Agreement and each other agreement, document, or instrument or certificate
contemplated by this Agreement or to be executed by such Principal
Securityholder in connection with the consummation of the transactions
contemplated by this Agreement, including the Joinder Agreement (the
"Principal
Securityholder Documents"), and to consummate the transactions
contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and each of the Principal Securityholder Documents, and the consummation of the
transactions contemplated hereby and thereby, has been duly authorized and
approved by all required action on the part of such Principal Securityholder.
This Agreement has been, and each of the Principal Securityholder Documents
will
be at or prior to the Closing, duly and validly executed and delivered by such
Principal Securityholder and (assuming due authorization, execution and
delivery
by Parent) this Agreement constitutes, and each of the Principal Securityholder
Documents when so executed and delivered will constitute, legal, valid and
binding obligations of such Principal Securityholder, enforceable against such
Principal Securityholder in accordance with its terms, except as enforcement
may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
3.2. Conflicts; Consents of
Third Parties.
(a) None of the execution and
delivery by such Principal
Securityholder of this Agreement or the Principal Securityholder Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by such Principal Securityholder with any of the provisions hereof or thereof
will conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination
or cancellation under any provision of (i) if applicable, the certificate of
incorporation and bylaws or comparable organizational documents of such
Principal Securityholder; (ii) any material Contract or Permit to which any
Principal Securityholder is a party or by which any of the properties or assets
of such Principal Stockholder are bound; (iii) any material Order of any
Governmental Body applicable to such Principal Securityholder or by which any
of
the properties or assets of such Principal Securityholder are bound; or (iv)
any
applicable Law.
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(b) Except as set forth on Schedule
3.2(b), no consent, waiver,
approval, Order, Permit or authorization of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on the part of
such
Principal Securityholder in connection with the execution and delivery of this
Agreement, the Principal Securityholder Documents, the compliance by such
Principal Securityholder with any of the provisions hereof, or the consummation
of the transactions contemplated hereby.
3.3. Ownership. Except as set forth on
Schedule 3.3, such Principal
Securityholder is the record and beneficial owner of the Company Securities
indicated as being owned by such Principal Securityholder on Schedule 3.3, free
and clear of any and all Liens.
3.4. Litigation. Except as set
forth on Schedule 3.4 or as disclosed
in the Joinder Agreement, there is no Legal Proceeding pending or, to the
Knowledge of such Principal Securityholder, threatened against such Principal
Securityholder or to which such Principal Securityholder is otherwise a party
relating to this Agreement, the Principal Securityholder Documents or the
transactions contemplated hereby or thereby.
3.5. Financial Advisors.
Except as set forth on Schedule 3.5 or as
disclosed in the Joinder Agreement, no Person has acted, directly or
indirectly,
as a broker, finder or financial advisor for such Principal Securityholder in
connection with the transactions contemplated by this Agreement and no Person
is
or will be entitled to any fee or commission or like payment in respect
thereof.
3.6. Investment
Representations.
(a) The shares of Parent
Common Stock are being acquired pursuant to
the terms and subject to the conditions of this Agreement for such Principal
Securityholder's own account for investment purposes only and not with a view
to
the distribution thereof in violation of the Securities Act or any state
securities or "blue sky" law.
(b) The shares of Parent
Common Stock, at the time of issuance
hereunder, are not being registered under the Securities Act or any state
securities or "blue sky" law and such shares will not be sold or
otherwise
disposed of except in compliance with the Securities Act or in reliance upon an
exemption therefrom.
(c) Such Principal
Securityholder, either alone or with such
Principal Securityholder's representative, has such knowledge and experience in
financial and business matters that such Principal Securityholder is capable of
evaluating the merits and risks of the prospective investment in the shares of
Parent Common Stock and able to bear the economic consequences thereof and such
Principal Securityholder qualifies as an "accredited investor" as
such term is
defined in Rule 501(a) of Regulation D under the Securities Act.
(d) In making such Principal
Securityholder's decision to invest in
the shares of Parent Common Stock, such Principal Securityholder has relied
upon
independent investigations made by such Principal Securityholder and, to the
extent believed by such Principal Securityholder to be appropriate, such
Principal Securityholder's representatives, including such Principal
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<PAGE>
Securityholder's own professional, tax and other advisors, and has not relied
upon any representation or warranty from Parent, the Company or any of their
respective directors, officers, employees, agents, affiliates or
representatives
with respect to the value of the shares of Parent Common Stock.
(e) Neither Parent nor the
Company has made any representation,
warranty, acknowledgment or covenant, in writing or otherwise, to such
Principal
Securityholder regarding the tax consequences, if any, of the Merger or of the
resale of the shares of Parent Common Stock by such Principal Securityholder.
Such Principal Securityholder and such Principal Securityholder's
representatives have been given a full opportunity to examine all documents
relating to the transactions contemplated hereby, including this Agreement, and
to ask questions of, and to receive answers from, Parent, the Company and their
respective representatives concerning, the terms of the this Agreement, such
Principal Securityholder's investment in the shares of Parent Common Stock and
the business of Parent and such other information as such Principal
Securityholder desires in order to evaluate an investment in the shares of
Parent Common Stock, and all such questions have been answered to the full
satisfaction of such Principal Securityholder.
(f) Such Principal
Securityholder has been furnished with all
publicly available information about Parent's assets, operations, and business
activities which such Principal Securityholder has requested and which such
Principal Securityholder considers necessary or relevant to enable such
Principal Securityholder to make a decision about such Principal
Securityholder's acquisition of the shares of Parent Common Stock.
(g) Such Principal
Securityholder has evaluated the merits and risks
of an investment in the shares of Parent Common Stock and has determined that
the shares of Parent Common Stock are a suitable investment for such Principal
Securityholder in light of such Principal Securityholder's overall financial
condition and prospects.
(h) Such Principal
Securityholder has been advised, and is aware,
that market prices of shares of stock of publicly traded companies fluctuate
and
that there can be no assurance as to the future performance of any given
securities, including the shares of Parent Common Stock.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES RELATING TO THE COMPANY
------------------------------------------------------
The Company hereby represents
and warrants to Parent and Merger Sub
that:
4.1. Organization and Good
Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now conducted.
The Company is duly qualified or authorized to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which
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it owns or leases real property and each other jurisdiction in which the
conduct
of its business or the ownership of its properties requires such qualification
or authorization, except where the failure to be so qualified, authorized or in
good standing would not have a Material Adverse Effect on the Company (a
"Company Material Adverse Effect").
4.2. Authorization of
Agreement. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and each
other agreement, document, or instrument or certificate contemplated by this
Agreement or to be executed by the Company in connection with the transactions
contemplated by this Agreement (the "Company Documents"), and subject
to
o