Agreement and Plan of Reorganization and Merger among Medical Resources Management, Inc., Emergent Group Inc., and MRM Acquisition Inc. dated January 23, 2001

Summary

This agreement is between Medical Resources Management, Inc., Emergent Group Inc., and MRM Acquisition Inc. It outlines the terms for merging Medical Resources Management, Inc. with MRM Acquisition Inc., a subsidiary of Emergent Group Inc. The agreement covers the merger process, exchange of shares, treatment of stock, and the rights of shareholders. It also details the responsibilities of each party, conditions for completing the merger, and procedures for termination. The merger is subject to shareholder and regulatory approvals, and includes provisions for employee benefits and financial matters.

EX-2.1 2 a2036380zex-2_1.txt EXHIBIT 2.1 EXHIBIT 2.1 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER AMONG MEDICAL RESOURCES MANAGEMENT, INC., EMERGENT GROUP INC. AND MRM ACQUISITION INC. DATED AS OF JANUARY 23, 2001 EXHIBIT 2.1 TABLE OF CONTENTS

i PAGE ---- (c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES; VOTING ............. 4 (d) TRANSFERS ............................................................ 5 (e) TERMINATION OF EXCHANGE FUND ......................................... 5 (f) LOST, STOLEN OR DESTROYED CERTIFICATES ............................... 5 (g) AFFILIATES ........................................................... 5 4.3 DISSENTERS' RIGHTS ................................................... 6 4.4 ADJUSTMENTS TO PREVENT DILUTION ...................................... 6 Article V. REPRESENTATIONS AND WARRANTIES ....................................... 6 5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ........................ 6 (a) ORGANIZATION, GOOD STANDING AND QUALIFICATION ........................ 6 (b) CAPITAL STRUCTURE .................................................... 7 (c) CORPORATE AUTHORITY; APPROVAL......................................... 8 (d) GOVERNMENTAL FILINGS; CONSENTS AND APPROVALS; NO VIOLATIONS .......... 8 (e) COMPANY REPORTS; FINANCIAL STATEMENTS ................................ 9 (f) ABSENCE OF CERTAIN CHANGES ........................................... 10 (g) LITIGATION AND LIABILITIES ........................................... 10 (h) EMPLOYEE BENEFITS .................................................... 10 (i) COMPLIANCE WITH LAWS; PERMITS ........................................ 12 (j) TAKEOVER STATUTES .................................................... 13 (k) ENVIRONMENTAL MATTERS ................................................ 13

ii PAGE ---- (l) ACCOUNTING AND TAX MATTERS ........................................... 14 (m) TAXES ................................................................ 14 (n) LABOR MATTERS ........................................................ 15 (o) INSURANCE ............................................................ 15 (p) INTELLECTUAL PROPERTY ................................................ 15 (q) MATERIAL CONTRACTS ................................................... 17 (r) ASSETS AND PROPERTIES................................................. 17 (s) BROKERS AND FINDERS .................................................. 17 (t) OWNERSHIP OF PARENT COMMON STOCK ..................................... 17 (u) DISCLOSURE............................................................ 17 5.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY ....... 18 (a) ORGANIZATION, GOOD STANDING AND QUALIFICATION ........................ 18 (b) PARENT CAPITAL STRUCTURE ............................................. 18 (c) CAPITALIZATION OF MERGER SUBSIDIARY................................... 19 (d) CORPORATE AUTHORITY; APPROVAL......................................... 19 (e) GOVERNMENTAL FILINGS; NO VIOLATIONS .................................. 19 (f) PARENT REPORTS; FINANCIAL STATEMENTS ................................. 20 (g) ABSENCE OF CERTAIN CHANGES ........................................... 21 (h) LITIGATION AND LIABILITIES ........................................... 21 (i) COMPLIANCE WITH LAWS; PERMITS ........................................ 21 (j) EMPLOYEE BENEFIT PLANS................................................ 22 (k) LABOR MATTERS......................................................... 22 (l) ENVIRONMENTAL MATTERS................................................. 22 (m) ACCOUNTING AND TAX MATTERS ........................................... 22 (n) BROKERS AND FINDERS .................................................. 23
iii PAGE ---- (o) OWNERSHIP OF COMPANY COMMON STOCK .................................... 23 (p) DISCLOSURE............................................................ 23 Article VI. COVENANTS ............................................................ 23 6.1 INTERIM OPERATIONS ................................................... 23 6.2 ACQUISITION PROPOSALS ................................................ 25 6.3 INFORMATION SUPPLIED ................................................. 26 6.4 STOCKHOLDERS MEETINGS ................................................ 26 6.5 FILINGS; OTHER ACTIONS; NOTIFICATION ................................. 27 6.6 TAXATION AND ACCOUNTING .............................................. 28 6.7 ACCESS ............................................................... 28 6.8 AFFILIATES; LOCKUP LETTERS ........................................... 28 6.9 STOCK EXCHANGE LISTING ............................................... 29 6.10. PUBLICITY ............................................................ 29 6.11. STOCK OPTIONS ........................................................ 29 6.12 EMPLOYEE BENEFITS .................................................... 30 6.13. EXPENSES ............................................................. 30 6.14. TAKEOVER STATUTE ..................................................... 30 Article VII. CONDITIONS ........................................................... 31 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER ........... 31 (a) STOCKHOLDER APPROVAL ................................................. 31
iv PAGE ---- (b) LISTING .............................................................. 31 (c) REGULATORY CONSENTS .................................................. 31 (d) LITIGATION ........................................................... 31 (e) S-4 .................................................................. 31 (f) BLUE SKY APPROVALS ................................................... 31 7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY ............ 31 (a) REPRESENTATIONS AND WARRANTIES ....................................... 31 (b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY ............................ 32 (c) CONSENTS ............................................................. 32 (d) AFFILIATES LETTERS ................................................... 32 (e) LOCKUP LETTERS ....................................................... 32 7.3 CONDITIONS TO OBLIGATION OF THE COMPANY .............................. 32 (a) REPRESENTATIONS AND WARRANTIES ....................................... 32 (b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY ........... 33 Article VIII. TERMINATION .......................................................... 33 8.1 TERMINATION BY MUTUAL CONSENT ........................................ 33 8.2 TERMINATION BY EITHER PARENT OR THE COMPANY .......................... 33
v PAGE ---- 8.3 TERMINATION BY THE COMPANY ........................................... 33 8.4 TERMINATION BY PARENT ................................................ 34 8.5 EFFECT OF TERMINATION AND ABANDONMENT ................................ 34 Article IX. MISCELLANEOUS AND GENERAL ............................................ 35 9.1 SURVIVAL ............................................................. 36 9.2 MODIFICATION OR AMENDMENT ............................................ 36 9.3 WAIVER OF CONDITIONS ................................................. 36 9.4 COUNTERPARTS ......................................................... 36 9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL ........................ 36 9.6 NOTICES .............................................................. 37 9.7 ENTIRE AGREEMENT; NO OTHER REPRESENTATIONS ........................... 38 9.8 NO THIRD PARTY BENEFICIARIES ......................................... 38 9.9 OBLIGATIONS OF PARENT AND OF THE COMPANY ............................. 38 9.10. SEVERABILITY ......................................................... 38 9.11. INTERPRETATION ....................................................... 38 9.12. ASSIGNMENT ........................................................... 38 SIGNATURES............................................................................ 39 EXHIBITS
vi EXHIBIT 2.1 DEFINITIONS CROSS-REFERENCE SHEET
TERM SECTION - ---- ------- Acquisition Proposal .................................. 6.2 affiliates ............................................ 6.8(a) Affiliates ............................................ 6.1(a)(viii) Affiliates Letter ..................................... 6.8(a) Agreement ............................................. Preamble Average Price ......................................... 4.2(e) Bankruptcy and Equity Exception ....................... 5.1(c)(i) By-Laws ............................................... 2.2 Certificate ........................................... 4.1(a) Charter ............................................... 2.1 Closing ............................................... 1.2 Closing Date .......................................... 1.2 Code .................................................. Recitals Company ............................................... Preamble Company Disclosure Letter ............................. 5.1 Company Material Adverse Effect ....................... 5.1(a)(iii) Company Option ........................................ 5.1(b) Company Reports ....................................... 5.1(e)(i) Company Requisite Vote ................................ 5.1(c)(i) Company Stock Plans ................................... 5.1(b) Compensation and Benefit Plans ........................ 5.1(h)(i) Constituent Corporations .............................. Preamble
DEFINITIONS CROSS-REFERENCE SHEET
TERM SECTION - ---- ------- Contracts ............................................. 5.1(d)(ii) Costs ................................................. 6.13(a) Effective Time ........................................ 1.3 Environmental Law ..................................... 5.1(k) ERISA ................................................. 5.1(h)(ii) ERISA Affiliate ....................................... 5.1(h)(iii) Exchange Act .......................................... 5.1(d)(i) Exchange Agent ........................................ 4.2(a) Exchange Fund ......................................... 4.2(a) Excluded Shares ....................................... 4.1(a) Expenses .............................................. 8.5(b) GAAP .................................................. 5.1(e)(i) Governmental Consents ................................. 7.1(c) Governmental Entity ................................... 5.1(d)(i) Hazardous Substance ................................... 5.1(k) Health Benefit Law .................................... 5.1(i)(ii) Indemnified Parties ................................... 6.13(a) Intellectual Property ................................. 5.1(p) IRS ................................................... 5.1(h)(ii) knowledge of the executive officer .................... 5.1(f) Law ................................................... 5.1(d)(ii) Liens ................................................. 5.1(b) Material Company Contract ............................. 5.1(q) Medicaid .............................................. 5.1(i)(ii)
DEFINITIONS CROSS-REFERENCE SHEET
TERM SECTION - ---- ------- Medicare .............................................. 5.1(i)(ii) Merger ................................................ Recitals Merger Consideration .................................. 4.1(a) Merger Subsidiary ..................................... Preamble Nevada Certificate of Merger .......................... 1.3 NGCL .................................................. 1.1 Order ................................................. 7.1(d) Parent ................................................ Preamble Parent Common Stock ................................... 4.1(a) Parent Companies ...................................... 4.1(a) Parent Disclosure Letter .............................. 5.2 Parent Material Adverse Effect ........................ 5.2(b) Parent Preferred Shares ............................... 5.2(c) Parent Reports ........................................ 5.2(f)(i) Parent Stock Plans .................................... 5.2(c) Parent Voting Debt .................................... 5.2(c) Pension Plan .......................................... 5.1(h)(ii) Person ................................................ 5.1(d)(i) Preferred Shares ...................................... 5.1(b) Prospectus/ Proxy Statement ........................... 6.3 Representatives ....................................... 6.2 S-4 Registration Statement ............................ 6.3 SEC ................................................... 5.1(e)(i) Securities Act ........................................ 5.1(d)(i)
DEFINITIONS CROSS-REFERENCE SHEET
TERM SECTION - ---- ------- Share ................................................. 4.1(a) Shares ................................................ 4.1(a) Stockholders Meeting .................................. 6.4 Subsidiary ............................................ 5.1(a)(iii) Superior Proposal ..................................... 6.2 Surviving Corporation ................................. 1.1 Takeover Statute ...................................... 5.1(j) Tax ................................................... 5.1(m) Tax Return ............................................ 5.1(m) Taxable ............................................... 5.1(m) Taxes ................................................. 5.1(m) Termination Date ...................................... 8.2 Termination Fee ....................................... 8.5(b) Third Party Confidentiality Agreement ................. 6.2
EXHIBIT 2.1 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (hereinafter called this "AGREEMENT"), dated as of January 23, 2001, among Medical Resources Management, Inc., a Nevada corporation (the "COMPANY"), Emergent Group Inc., a Nevada corporation ("PARENT"), and MRM Acquisition Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("MERGER SUBSIDIARY," and together with the Company, the "CONSTITUENT CORPORATIONS"). ------------------------------ The respective Boards of Directors of each of Parent, Merger Subsidiary and the Company have determined that the merger of Merger Subsidiary with and into the Company (the "MERGER") upon the terms and subject to the conditions set forth in this Agreement is advisable and in the best interests of their corporations and have approved the Merger; and It is intended that, for federal income tax purposes, the Merger shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the "Code"); and Concurrently with the execution and delivery of this Agreement and as a condition and inducement to Parent's willingness to enter into this Agreement, Parent and certain stockholders of the Company have executed and delivered Voting Agreements, dated as of the date hereof. NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I. THE MERGER; CLOSING; EFFECTIVE TIME 1.1. THE MERGER. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3) Merger Subsidiary shall be merged with and into the Company and the separate corporate existence of Merger Subsidiary shall thereupon cease. The Company, Medical Resources Management, Inc., a Nevada corporation, shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the "SURVIVING CORPORATION"), and the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger, except as set forth in Article II. The Merger shall have the effects specified in the applicable provisions of the General Corporation Law of the State of Nevada, Chapter 92A of the Nevada Revised Statutes, the Mergers and Share Exchange Law, and any successor statutes thereto (the "NGCL"). 1.2. CLOSING. The closing of the Merger (the "Closing") shall take place (i) at the offices 1 of Sonnenschein Nath & Rosenthal, 1221 Avenue of the Americas, 26th floor, New York, New York at 10:00 a.m. New York City time on the first business day on which the last to be fulfilled or waived of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) shall be satisfied or waived in accordance with this Agreement or (ii) at such other place and time and/or on such other date as the Company and Parent may agree in writing (the "CLOSING DATE"). 1.3. EFFECTIVE TIME. As soon as practicable following the Closing, the Company and Parent will cause articles of merger (the "ARTICLES OF MERGER") to be executed, acknowledged and filed with the Secretary of State of the State of Nevada in accordance with the applicable provisions of the NGCL. The Merger shall become effective at the time when the Articles of Merger has been duly filed with the Secretary of State of Nevada or at such later time as agreed by the parties and established under the Articles of Merger (the "EFFECTIVE TIME"). ARTICLE II. ARTICLES OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION 2.1. THE ARTICLES OF INCORPORATION. The articles of incorporation of the Company as in effect immediately prior to the Effective Time shall be the articles of incorporation of the Surviving Corporation (the "Charter"), until duly amended as provided therein or by applicable law. 2.2. THE BY-LAWS. The by-laws of the Company in effect at the Effective Time shall be the by-laws of the Surviving Corporation (the "By-Laws"), until thereafter amended as provided therein or by applicable law. ARTICLE III. DIRECTORS OF THE SURVIVING CORPORATION 3.1. DIRECTORS. The directors of the Company at the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Charter and the By-Laws. ARTICLE IV. EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES 4.1. EFFECT ON CAPITAL STOCK. At the Effective Time, as a result of the Merger and without any action on the part of the holder of any capital stock of the Company: (a) MERGER CONSIDERATION. Each share of the Common Stock, par value $0.001 per share, of the Company (a "SHARE" or, collectively, the "SHARES") issued and 2 outstanding immediately prior to the Effective Time (other than Dissenting Shares, Shares owned by Parent, Merger Subsidiary or any other direct or indirect subsidiary of Parent (collectively, the "PARENT COMPANIES") and Shares that are owned by the Company or any direct or indirect subsidiary of the Company and in each case not held on behalf of third parties (collectively, "EXCLUDED SHARES")) shall be converted into, and become exchangeable for, the Merger Consideration (as defined below). Notwithstanding the immediately preceding sentence, no fractional shares of Parent Common Stock (as defined below) will be issuable pursuant to this Section 4.1(a); rather, in the event that the aggregate Merger Consideration to which any holder of Shares is otherwise entitled pursuant to this Section 4.1(a) and Section 4.2 includes a fractional share of Parent Common Stock, the number of shares of Parent Common Stock comprising the Merger Consideration to which such holder of Shares is entitled shall be rounded up to the nearest whole number. At the Effective Time, all Shares shall no longer be outstanding and shall be canceled and retired and shall cease to exist, and each certificate (a "CERTIFICATE") formerly representing any of such Shares (other than Excluded Shares) shall thereafter represent only the right to receive the Merger Consideration and the right, if any, to receive any distribution or dividend pursuant to Section 4.2(c). As used herein, the term "MERGER CONSIDERATION shall mean that number of shares of Common Stock, par value $0.001 per share, of Parent ("PARENT COMMON STOCK") determined as follows: (i) in the event that the Parent Average Stock Price (as defined below) is equal to or greater than $0.27, the Merger Consideration shall be 0.37 shares of Parent Common Stock; and (ii) in the event that the Parent Average Stock Price is less than $0.27, the Merger Consideration shall be equal to that number of shares of Parent Common Stock which when multiplied by the Parent Average Stock Price is equal to 0.10; provided, however, that in no event shall the Merger Consideration exceed 0.60 shares of Parent Common Stock. As used herein, the term "PARENT AVERAGE STOCK PRICE" shall mean the average closing price of a share of Parent Common Stock as reported on the Nasdaq OTC Bulletin Board (or, in the event that the Parent Common Stock is not quoted on the OTC Bulletin Board, as quoted in the "pink sheets") for the ten (10) trading days ending on the trading day immediately prior to the Closing Date; provided, however, that no trades of Parent Common Stock need have been made on a trading day in order for such trading day to constitute a "trading day" for purposes of determining the Parent Average Stock Price. (b) CANCELLATION OF EXCLUDED SHARES. Each Excluded Share shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding, shall be canceled and retired without payment of any consideration therefor and shall cease to exist. (c) MERGER SUBSIDIARY. At the Effective Time, each share of Common Stock, par value $0.001 per share, of Merger Subsidiary issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation. 3 4.2. EXCHANGE OF CERTIFICATES FOR SHARES. (a) EXCHANGE AGENT. Promptly after the Effective Time, Parent shall deposit, or shall cause to be deposited, with American Stock Transfer & Trust Company or such other exchange agent selected by Parent and reasonably acceptable to the Company (the "EXCHANGE AGENT"), for the benefit of the holders of Shares, certificates representing the shares of Parent Common Stock and, after the Effective Time, if applicable, any cash, dividends or other distributions with respect to the Parent Common Stock to be issued or paid pursuant to the last sentence of Section 4.1(a) in exchange for Shares outstanding immediately prior to the Effective Time upon due surrender of the Certificates (or affidavits of loss in lieu thereof) pursuant to the provisions of this Article IV (such certificates for shares of Parent Common Stock, together with the amount of any dividends or other distributions payable with respect thereto, being hereinafter referred to as the "EXCHANGE FUND"). (b) EXCHANGE PROCEDURES. Promptly after the Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail to each holder of record of Shares (other than holders of Excluded Shares) (i) a letter of transmittal specifying that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or affidavits of loss in lieu thereof) to the Exchange Agent, such letter of transmittal to be in such form and have such other provisions as Parent and the Exchange Agent may reasonably agree, and (ii) instructions for use in effecting the surrender of the Certificates in exchange for (A) certificates representing shares of Parent Common Stock and (B) any unpaid dividends and other distributions. Subject to Section 4.2(g), upon surrender of a Certificate for cancellation to the Exchange Agent together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor (x) a certificate representing that number of whole shares of Parent Common Stock that such holder is entitled to receive pursuant to this Article IV, (y) a check in the amount (after giving effect to any required tax withholdings) of any unpaid non-stock dividends and any other dividends or other distributions that such holder has the right to receive pursuant to the provisions of this Article IV, and the Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on any amount payable upon due surrender of the Certificates. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, a certificate representing the proper number of shares of Parent Common Stock, together with a check for any cash to be paid upon due surrender of the Certificate and any other dividends or distributions in respect thereof, may be issued and/or paid to such a transferee if the Certificate formerly representing such Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. If any certificate for shares of Parent Common Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that the Person (as defined below) requesting such exchange shall pay any transfer or other taxes required by reason of the issuance of certificates for shares of Parent Common Stock in a name other than that of the registered holder of the Certificate surrendered, or shall establish to the satisfaction of Parent or the Exchange Agent that such tax has been paid or is not applicable. (c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. All shares of Parent Common Stock to be issued pursuant to the Merger shall be deemed issued and 4 outstanding as of the Effective Time and whenever a dividend or other distribution is declared by Parent in respect of the Parent Common Stock, the record date for which is at or after the Effective Time, that declaration shall include dividends or other distributions in respect of all shares issuable pursuant to this Agreement. No dividends or other distributions in respect of the Parent Common Stock shall be paid to any holder of any unsurrendered Certificate until such Certificate is surrendered for exchange in accordance with this Article IV. Subject to the effect of applicable Laws (as defined in Section 5.1(d)), following surrender of any such Certificate, there shall be issued and/or paid to the holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (A) at the time of such surrender, the dividends or other distributions with a record date after the Effective Time theretofore payable with respect to such whole shares of Parent Common Stock and not paid and (B) at the appropriate payment date, the dividends or other distributions payable with respect to such whole shares of Parent Common Stock with a record date after the Effective Time but with a payment date subsequent to surrender. (d) TRANSFERS. After the Effective Time, there shall be no transfers on the stock transfer books of the Company of the Shares that were outstanding immediately prior to the Effective Time. (e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund (including the proceeds of any investments thereof and any Parent Common Stock) that remains unclaimed by the stockholders of the Company for one year after the Effective Time shall be paid or returned to Parent. Any stockholders of the Company who have not theretofore complied with this Article IV shall thereafter look only to Parent for payment of their shares of Parent Common Stock and any cash, dividends and other distributions in respect thereof payable and/or issuable pursuant to Section 4.1 and Section 4.2(c) upon due surrender of their Certificates (or affidavits of loss in lieu thereof), in each case, without any interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving Corporation, the Exchange Agent or any other Person (as defined in Section 5.1(d)) shall be liable to any former holder of Shares for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (f) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond in customary amount as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the shares of Parent Common Stock and any cash payable and any unpaid dividends or other distributions in respect thereof pursuant to Section 4.2(c) upon due surrender of and deliverable in respect of the Shares represented by such Certificate pursuant to this Agreement (g) AFFILIATES. Notwithstanding anything herein to the contrary, Certificates surrendered for exchange by any "AFFILIATE" (as defined in Section 6.8(a)) of the Company shall not be exchanged until Parent has received a written agreement from such Person as provided in Section 6.8 hereof. 5 4.3. DISSENTERS' RIGHTS. (a) Notwithstanding any other term or provision of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time which are held by shareholders who (i) have not consented to the Merger, (ii) have demanded appraisal for such Shares in accordance with the provisions of Section 92A.300 to 92A.500, inclusive, of the NGCL (if such provisions provide for appraisal rights for such Shares) and (iii) have not failed to perfect or effectively withdrawn such demand or otherwise lost their appraisal rights (the "Dissenting Shares"), shall not be converted into or represent the right to receive the Merger Consideration pursuant to Section 4.1(a) hereof. Such shareholders shall be entitled to have such Shares held by them appraised in accordance with the provisions of Section 92A.300 to 92A.500, inclusive, of the NGCL, except that all Dissenting Shares held by shareholders who have failed to perfect or have effectively withdrawn or otherwise lost their right to appraisal of such Shares under such provisions of the NGCL shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration issuable in exchange therefor pursuant to Section 4.1(a) hereof, upon surrender in accordance with Section 4.2(b) hereof of the Certificate(s) that formerly represented such Shares. (b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of demands for appraisal, and any other instruments served pursuant to the NGCL and received by the Company, and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the NGCL. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal, or offer to settle, or settle, any such demand for appraisal rights. 4.4. ADJUSTMENTS TO PREVENT DILUTION. In the event that the Company changes the number of Shares or securities convertible or exchangeable into or exercisable for Shares, or Parent changes the number of shares of Parent Common Stock or securities convertible or exchangeable into or exercisable for shares of Parent Common Stock, issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse split), stock dividend or distribution, recapitalization, or other similar transaction, the Merger Consideration shall be appropriately adjusted. ARTICLE V. REPRESENTATIONS AND WARRANTIES 5.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in the corresponding sections or subsections (or by appropriate cross-reference) of the disclosure letter delivered to Parent by the Company prior to entering into this Agreement (the "COMPANY DISCLOSURE LETTER"), the Company hereby represents and warrants to Parent and Merger Subsidiary that: (a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. (i) The Company is a corporation duly organized, validly existing and in good 6 standing under the laws of the State of Nevada, and each of its Subsidiaries (as defined below) is a corporation or other entity duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization, and the Company and each of its Subsidiaries has all requisite corporate or similar power and authority to own and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its properties or conduct of its business requires such qualification, except where the failure to have such corporate or similar power and authority or to be so qualified or in good standing, when taken together with all other such failures, is not reasonably likely to have a Company Material Adverse Effect (as defined below). The Company has made available to Parent a complete and correct copy of the Company's and each of its Subsidiaries' articles of incorporation and by-laws or comparable governing instruments, each as amended to date. The Company's and its Subsidiaries' articles of incorporation and by-laws or comparable governing instruments so delivered are in full force and effect. (ii) Section 5.1(a) of the Company Disclosure Letter sets forth each Subsidiary of the Company and its jurisdiction of incorporation. Except for the Company's or any of its Subsidiaries' interest in any of the Company's Subsidiaries, neither the Company nor its Subsidiaries owns directly or indirectly any interest or investment (whether equity or debt) in any Person. (iii) As used in this Agreement, the term (A) "SUBSIDIARY" means, with respect to the Company, Parent or Merger Subsidiary, as the case may be, any entity, whether incorporated or unincorporated, of which such party is the general partner or managing member or of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions is directly or indirectly owned or controlled by such party or by one or more of its respective Subsidiaries, or by such party and any one or more of its respective Subsidiaries, and (B) "COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial condition, properties, business or results of operations of the Company and its Subsidiaries taken as a whole. (b) CAPITAL STRUCTURE. The authorized capital stock of the Company consists of 100,000,000 Shares, of which 14,292,155 Shares were outstanding as of the close of business on December 31, 2000, and 5,000,000 shares of Preferred Stock, par value $1.00 per share (the "PREFERRED SHARES"), of which none were outstanding as of the close of business on December 31, 2000. All of the outstanding Shares have been duly authorized and are validly issued, fully paid and nonassessable. The Company has no Shares or Preferred Shares reserved for issuance, except that, as of December 31, 2000, there were 2,177,228 Shares reserved for issuance pursuant to the Company's 1986 and 2000 Stock Incentive Plans (collectively, the "COMPANY STOCK PLANS"). Section 5.1(b) of the Company Disclosure Letter contains a correct and complete list of each outstanding option to purchase or acquire Shares under each of the Company Stock Plans (each a "COMPANY OPTION") as of the close of business on December 31, 2000, including the holder, date of grant, exercise price and number of Shares subject thereto. Each of the outstanding shares of capital stock or other securities of each of the Company's Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and owned by the Company or a direct or indirect wholly owned Subsidiary of the 7 Company, free and clear of any lien, pledge, security interest, claim, third-party right or other encumbrance ("LIENS") except for immaterial Liens imposed under local Laws that do not relate to obligations that are past due. Except as set forth above, as of the date hereof there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements or commitments to issue or sell any shares of capital stock or other securities of the Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or are exercisable for securities having the right to vote) with the stockholders of the Company on any matter. (c) CORPORATE AUTHORITY; APPROVAL. (i) The Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate, subject only to approval of this Agreement by the holders of at least a majority of the outstanding Shares (the "COMPANY REQUISITE VOTE"), the Merger and the other transactions contemplated hereby. This Agreement is a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (the "BANKRUPTCY AND EQUITY EXCEPTION"). (ii) The Board of Directors of the Company has unanimously approved this Agreement and the Merger and the other transactions contemplated hereby. (d) GOVERNMENTAL FILINGS; CONSENTS AND APPROVALS; NO VIOLATIONS. (i) Other than the filings, notices, consents, registrations, approvals, permits and authorizations (A) pursuant to Section 1.3, (B) under the the Securities Exchange of 1934, as amended (the "EXCHANGE ACT") and the Securities Act of 1933, as amended (the "SECURITIES ACT"), (C) required under any Health Benefit Law (as defined in Section 5.1(i)) or (D) to comply with state securities or "blue-sky" laws, no notices, reports or other filings are required to be made by the Company or any of its Subsidiaries with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company or any of its Subsidiaries from, any governmental or regulatory authority, agency, commission, body or other governmental or regulatory entity ("GOVERNMENTAL ENTITY") or any other individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or other entity of any kind or nature ("PERSON"), in connection with the execution and delivery of this Agreement by the Company and the consummation by the Company of the Merger and the other transactions contemplated hereby, except those the failure to make or obtain are not, individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect or prevent, materially 8 delay or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. (ii) The execution, delivery and performance of this Agreement by the Company do not, and the consummation by the Company of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, the articles of incorporation or by-laws or comparable governing instruments of the Company or any of its Subsidiaries, (B) a breach or violation of, or a default under, or the acceleration of any obligations under, or the termination of, or the loss of a material benefit under, or the creation of a Lien on the assets of the Company or any of its Subsidiaries (with or without notice, lapse of time or both) pursuant to, any agreement, lease, contract, note, mortgage, indenture, arrangement, license or other obligation ("CONTRACTS") binding upon the Company or any of its Subsidiaries or any of their respective assets, or (assuming, as to consummation, that the filings and notices are made, and approvals are obtained, as referred to in Section 5.1(d)(i)) any applicable federal, state, local or foreign law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, arbitration award, agency requirement, license or permit of, or agreement or written understanding with, any Governmental Entity ("LAW") to which the Company or any of its Subsidiaries or any of their respective assets is subject or (C) any change in the rights or obligations of any party under any of the Contracts, except, in the case of clause (B) or (C) above, for any breach, violation, default, acceleration, termination, creation or change that, individually or in the aggregate, is not reasonably likely to have a Company Material Adverse Effect or prevent, materially delay or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. (e) COMPANY REPORTS; FINANCIAL STATEMENTS. The Company has made available to Parent each registration statement, report, proxy statement or information statement prepared by it since October 31, 1998, including (i) the Company's Annual Reports on Form 10-K for the years ended October 31, 1998 and October 31, 1999 and (ii) the Company's Quarterly Report on Form 10-Q for the period ended July 31, 2000, each in the form (including exhibits, annexes and any amendments thereto) filed with the Securities and Exchange Commission (the "SEC") (collectively, including any such reports filed subsequent to the date hereof, the "COMPANY REPORTS"). As of their respective dates, the Company Reports did not, and any Company Reports filed with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presents in all material respects, or, in the case of Company Reports filed with the SEC subsequent to the date hereof, will fairly present in all material respects, the consolidated financial position of the Company and its Subsidiaries as of its date and each of the consolidated statements of income and of changes in financial position included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents in all material respects, or, in the case of Company Reports filed with the SEC subsequent to the date hereof, will fairly present in all material respects, the results of operations, retained earnings and changes in financial position, as the case may be, of the Company and its Subsidiaries on a consolidated basis for the periods set forth therein (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments that will not be material in amount or effect), in each case in accordance 9 with generally accepted accounting principles ("GAAP") consistently applied during the periods involved, except as may be noted therein. (f) ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Company Reports filed prior to the date hereof, since October 31, 1999 the Company and each of its Subsidiaries have conducted their respective businesses only in, and have not engaged in any material transaction other than according to, the ordinary and usual course of such businesses, and there has not been (i) any change in the financial condition, properties, business or results of operations of the Company and its Subsidiaries, or any development or combination of developments of which the executive officers of the Company have knowledge, that, individually or in the aggregate, has had or is reasonably likely to have a Company Material Adverse Effect; (ii) any material damage, destruction or other casualty loss with respect to any material asset or property owned, leased or otherwise used by the Company or any of its Subsidiaries, whether or not covered by insurance; (iii) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of the Company; (iv) any change by the Company in accounting policies, practices, procedures, methods, assumptions or principles of the Company or any of its Subsidiaries; or (v) any increase in the compensation payable or that could become payable by the Company or any of its Subsidiaries to executive officers, other than increases in the ordinary course, or, other than as required by Law, any amendment of any of the Compensation and Benefit Plans (as defined in Section 5.1(h)) or the adoption of any new Compensation and Benefit Plan. For purposes of this Agreement, "KNOWLEDGE OF THE EXECUTIVE OFFICERS" or any variation thereof means, in the case of the Company, knowledge of the executive officers of the Company (or its Subsidiaries) and, in the case of Parent, knowledge of the executive officers of Parent (or its Subsidiaries), in each case after due inquiry. (g) LITIGATION AND LIABILITIES. Except as disclosed or reserved for in the Company Reports filed prior to the date hereof, there are no (i) civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of the executive officers of the Company, threatened against, or otherwise adversely affecting the Company or any of its Subsidiaries, (ii) obligations or liabilities of any nature, whether accrued, contingent or otherwise and whether or not required to be disclosed, or (iii) facts or circumstances of which the executive officers of the Company have knowledge that could result in any claims against, or obligations or liabilities of, or limitations on the conduct of the business by, or otherwise adversely affect, the Company or any of its Subsidiaries, except for any of the foregoing that are not, individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect or prevent or materially burden or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. (h) EMPLOYEE BENEFITS. (i) A copy of each bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, stock option, employment, termination, severance, change of control, compensation, medical, health or other plan, agreement, policy or arrangement that covers employees, directors, former employees or former directors of the Company or any of its Subsidiaries, including in each case any amendments or supplements thereto (the "COMPENSATION AND BENEFIT PLANS") and 10 any trust agreement or insurance contract forming a part of such Compensation and Benefit Plans has been made available to Parent prior to the date hereof. The Compensation and Benefit Plans are listed in Section 5.1(h) of the Company Disclosure Letter and any "change of control" or similar provisions therein are specifically identified in Section 5.1(h) of the Company Disclosure Letter. (ii) All Compensation and Benefit Plans are in material compliance with all applicable Law, including the Code and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Each Compensation and Benefit Plan that is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA (a "PENSION PLAN") and that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service (the "IRS"), with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39) and the Company is not aware of any circumstances likely to result in revocation of any such favorable determination letter. There is no pending or, to the knowledge of the executive officers of the Company, threatened material litigation relating to the Compensation and Benefit Plans. Neither the Company nor any of its Subsidiaries has engaged in a transaction with respect to any Compensation and Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would subject the Company or any of its Subsidiaries to a material tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA. No entity other than an ERISA Affiliate (as defined below) participates in any Compensation and Benefit Plan. (iii) As of the date hereof, no liability under Subtitle C or D of Title IV of ERISA has been or is reasonably expected to be incurred by the Company or any Subsidiary with respect to any ongoing, frozen or terminated "single-employer plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA AFFILIATE"). The Company and its Subsidiaries have not incurred and do not expect to incur any withdrawal liability with respect to a multiemployer plan under Subtitle E to Title IV of ERISA. No notice of a "reportable event", within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Pension Plan or by any ERISA Affiliate within the 12-month period ending on the date hereof. (iv) All contributions required to be made under the terms of any Compensation and Benefit Plan as of the date hereof have been timely made or have been appropriately reflected on the Company's balance sheet. Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has an "accumulated funding deficiency" (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding waiver. Neither the Company nor its Subsidiaries has provided, or is required to provide, security to any Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code. (v) Under each Pension Plan which is a single-employer plan, as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all "benefit liabilities", within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the Pension Plan's most recent 11 actuarial valuation), did not exceed the then current value of the assets of such Pension Plan, and there has been no material change in the financial condition of such Pension Plan since the last day of the most recent plan year. (vi) Neither the Company nor its Subsidiaries have any obligations for retiree health and life benefits under any Compensation and Benefit Plan. The Company or its Subsidiaries may amend or terminate any such plan under the terms of such plan at any time without incurring any material liability thereunder. (vii) The consummation of the Merger and the other transactions contemplated by this Agreement will not (x) entitle any employees of the Company or its Subsidiaries to severance pay, (y) accelerate the time of payment or vesting or trigger any payment of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the Compensation and Benefit Plans or (z) result in any breach or violation of, or a default under, any of the Compensation and Benefit Plans. (viii) All Compensation and Benefit Plans covering current or former non-U.S. employees or former employees of the Company and its Subsidiaries comply in all material respects with applicable local Law. The Company and its Subsidiaries have no material unfunded liabilities with respect to any Pension Plan that covers such non-U.S. employees and is required to be funded. (ix) No compensation payable by the Company to any of its employees under any existing Compensation and Benefit Plan (including by reason of the transactions contemplated hereby) will be subject to disallowance under Section 162(m) of the Code. (x) Any amount that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer, director or independent contractor of the Company who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any Compensation and Benefit Plan would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). (xi) Neither the Company nor any of its Subsidiaries has made or committed to make any material increase of contributions or benefits under any Compensation and Benefit Plan which would become effective after the date hereof. (i) COMPLIANCE WITH LAWS; PERMITS. (i) Except as set forth in the Company Reports filed prior to the date hereof, the businesses of each of the Company and its Subsidiaries have been, and are being, conducted in compliance with all Laws, including all Health Benefit Laws (as defined below), except for any failure to comply that, individually or in the aggregate, would not be reasonably likely to have a Company Material Adverse Effect or prevent or materially burden or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement, and neither the Company nor any of its Subsidiaries has received any written notice or communication of any material failure to comply with any such Laws that has not been cured (as evidenced by a written notice to such effect, a copy of which has been provided to Parent) as of 12 the date hereof. Except as set forth in the Company Reports filed prior to the date hereof, no investigation, examination, audit or review by any Governmental Entity with respect to the Company or any of its Subsidiaries has occurred, is pending or, to the knowledge of the executive officers of the Company, threatened, except for those the outcome of which are not, individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect or prevent or materially burden or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. The Company and each of its Subsidiaries have all permits, licenses, trademarks, patents, trade names, copyrights, service marks, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals necessary to conduct their businesses as presently conducted, except for those the absence of which would not be reasonably likely to result in a Company Material Adverse Effect. Since October 31, 1998, no material Subsidiary of the Company has had any license or certificate of authority revoked nor has any State denied any of their applications for a license or certificate of authority. (ii) For purposes of this Agreement, the term "HEALTH BENEFIT LAW" means all Laws relating to the licensure, certification, qualification or authority to transact business relating to the provision of and/or payment for health benefits and insurance, including but not limited to ERISA, the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, the Health Insurance Portability and Accounting Act of 1996, and Laws relating to the regulation of HMOs, workers compensation, managed care organizations, insurance, PPOs, point-of-service plans, certificates of need, third-party administrators, utilization review, coordination of benefits, hospital reimbursement, Medicare and Medicaid participation, fraud and abuse and patient referrals; the term "MEDICAID" means the applicable provision of Title XIX of the Social Security Act and the regulations promulgated thereunder and the state laws and regulations implementing the Medicaid program; and the term "MEDICARE" means the applicable provisions of Title XVIII of the Social Security Act and the regulations promulgated thereunder. (j) TAKEOVER STATUTES. No restrictive provision of any "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation (including Sections 78.378 - 78.3793 and 78.411 - 78.444 of the NRS) (each a "TAKEOVER STATUTE") or restrictive provision of any applicable anti-takeover provision in the Company's articles of incorporation and by-laws is, or at the Effective Time will be, applicable to the Company, Parent, Merger Subsidiary, the Shares, the Merger or any other transactions contemplated by this Agreement. (k) ENVIRONMENTAL MATTERS. Except as disclosed in the Company Reports filed prior to the date hereof and except for such matters that, individually or in the aggregate, are not reasonably likely to have a Company Material Adverse Effect: (i) the Company and its Subsidiaries are and have been in compliance with all applicable Environmental Laws; (ii) neither the Company nor any of its Subsidiaries is subject to any liability under any Environmental Law (as defined below); (iii) neither the Company nor any of its Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that the Company or any of its Subsidiaries may be in violation of or liable under any Environmental Law; (iv) neither the Company nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or 13 other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances; and (v) there are no circumstances or conditions involving the Company or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use, or transfer of any property of the Company pursuant to any Environmental Law. For purposes of this Agreement, the term "ENVIRONMENTAL LAW" means any Law relating to: (A) the protection, investigation or restoration of the environment, health and safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property; and the term "HAZARDOUS SUBSTANCE" means any substance that is: (A) listed, classified or regulated pursuant to any Environmental Law; (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any other substance which may be the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law. (l) ACCOUNTING AND TAX MATTERS. As of the date hereof, neither the Company nor any of its affiliates has taken or agreed to take any action, nor do the executive officers of the Company have any knowledge of any fact or circumstance relating to the Company or any of its Subsidiaries, that would prevent the Merger and the other transactions contemplated by this Agreement from qualifying as a "reorganization" within the meaning of Section 368(a) of the Code. (m) TAXES. The Company and each of its Subsidiaries (i) have prepared in good faith and duly and timely filed (taking into account any extension of time within which to file) all material Tax Returns (as defined below) required to be filed by any of them and all such filed Tax Returns are complete and accurate in all material respects; (ii) have paid all material Taxes (as defined below) that are required to be paid or that the Company or any of its Subsidiaries are obligated to withhold from amounts owing to any employee, creditor or third party, except with respect to matters contested in good faith; and (iii) have not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. As of the date hereof, there are not pending or, to the knowledge of the executive officers of the Company threatened in writing, any audits, examinations, investigations or other proceedings in respect of Taxes or Tax matters. There are no unresolved questions or claims concerning the Company's or any of its Subsidiaries' Tax liability that (A) were raised by any Taxing authority in a communication to the Company or any Subsidiary and (B) are reasonably likely to have a Company Material Adverse Effect. The Company has made available to Purchaser true and correct copies of the United States federal income Tax Returns filed by the Company and its Subsidiaries for each of the years ended October 31, 1997, 1998 and 1999. Neither the Company nor any of its Subsidiaries has any material liability with respect to income, franchise or similar Taxes that accrued on or before October 31, 1999 in excess of the amounts accrued with respect thereto that are reflected in the financial statements included in the Company Reports filed on or prior to the date hereof. As used in this Agreement, (i) the term "TAX" (including, with correlative meaning, the terms "TAXES" and "TAXABLE") includes all federal, state, local and foreign income, profits, franchise, gross receipts, premium, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, 14 withholding, excise, production, value added, occupancy and other taxes, duties or governmental assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and (ii) the term "TAX RETURN" includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes. (n) LABOR MATTERS. (i) The Company and each of its Subsidiaries is in compliance with all applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practices, except where failure to be in compliance of the engagement in such unfair labor practice could not have a Company Material Adverse Effect. Except as set forth in the Company Reports, there are no material pending claims against the Company or any of its Subsidiaries under any workers compensation plan or policy or for long term disability. Neither the Company nor any of its Subsidiaries has obligations under COBRA with respect to any former employees or qualifying beneficiaries thereunder, except for obligations that could not have a Company Material Adverse Effect. There are no controversies pending, or to the best knowledge of the Company, threatened, between the Company or any of its Subsidiaries and any of its employees, which controversies have or could reasonably be expected to have a Company Material Adverse Effect. (ii) Neither the Company nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or written understanding with a labor union or labor organization involving employees of the Company or its Subsidiaries. To the knowledge of the executive officers of the Company, there are no current efforts to organize the Company's workforce or certify a collective bargaining unit at the Company. (o) INSURANCE. All material fire and casualty, general liability, business interruption, product liability, directors' and officers', and sprinkler and water damage insurance policies maintained by the Company or any of its Subsidiaries are with reputable insurance carriers and are customary and reasonable in amount and scope for the business in which the Company and its Subsidiaries are engaged, except for any such failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a Company Material Adverse Effect. (p) INTELLECTUAL PROPERTY. (i) Section 5.1(p) of the Company Disclosure Letter sets forth a complete and correct list in all material respects of all inventions, patents, trademarks, tradenames, service marks, service names, brand names and copyright registrations, and applications therefor, applicable to or used in the business of the Company and its Subsidiaries, together with a complete list of all licenses granted by or to the Company or its Subsidiaries with respect to any of the above (collectively, "Company Intellectual Property"). Other than as set forth in Section 5.1(p) of the Company Disclosure Schedule, all Company Intellectual Property is owned by the Company, free and clear of all liens, claims, security interests and encumbrances of any nature whatsoever, except where the failure to own or use such Company Intellectual Property would not have a Company Material Adverse Effect, or is used by the Company or its Subsidiaries pursuant to valid licenses. Neither the Company nor any 15 of its Subsidiaries is currently in receipt of any notice of any violation or infringement of, and neither the Company nor any of its Subsidiaries is knowingly violating or infringing in any material respect, the rights of others in, or to any patent, unpatented invention, trademark, tradename, service mark, copyright, trade secret, know-how, design, process or other intangible asset. To the knowledge of the executive officers of the Company, no third party is violating or infringing in any material respect the rights of the Company or any of its Subsidiaries in any of the Company Intellectual Property Neither the Company nor any of its Subsidiaries has received with respect to any patent application comprising a part of the Company Intellectual Property any verbal or written communication , either that (i) a patent will likely not be granted or (ii) the scope of the patent or the several claims enumerated thereunder will be materially reduced. (ii) Except as set forth on Schedule 5.1(p) of the Company Disclosure Letter, the Company has title to all material computer software owned by the Company or its Subsidiaries (other than "off-the-shelf" software not customized for its use ("Owned Software")) free and clear of all liens, claims, security interests and encumbrances whatsoever. Except as set forth in Section 5.1(p) of the Company Disclosure Letter, the Owned Software is not dependent on any Licensed Software (as defined in subsection (iii) below) in order to operate fully in the manner in which it is intended. The source code of any Owned Software has not been published or knowingly disclosed to any other parties, except pursuant to contracts requiring such other parties to keep the source code of any Owned Software confidential. (iii) Section 5.1(p) of the Company Disclosure Schedule sets forth a list of the agreements which require the payment of license fees, rents, royalties or other charges by the Company or its Subsidiaries with respect to all material software (other than "off-the-shelf" software that has not been customized for its use) under which the Company (or its Subsidiaries, as the case may be) is a licensee, lessee or otherwise has obtained the right to use (the "Licensed Software"). The Company, as applicable, has the right and license to use, sublicense, modify and copy Licensed Software, free and clear of any limitations or encumbrances, except as may be set forth in Section 5.1(p) of the Company Disclosure Letter or in the agreements referenced therein. The Company is in material compliance with all provisions of each license, lease or other similar agreement pursuant to which it has rights to use the Licensed Software. Except as disclosed on Section 5.1(p) of the Company Disclosure Letter, none of the Licensed Software has been incorporated into or made a part of any Owned Software or any other Licensed Software. The Company has not published or knowingly disclosed any Licensed Software to any other party except, in the case of Licensed Software which the Company leases or markets to others, in accordance with and as permitted by any license, lease or similar agreement relating to the Licensed Software and except pursuant to contracts requiring such other parties to keep the Licensed Software confidential. As of the date hereof, to the knowledge of the executive officers of the Company, no party to whom the Company has disclosed Licensed Software has breached such obligation of confidentiality. (iv) The Owned Software and Licensed Software constitute all software used in the business of the Company and its Subsidiaries (collectively, the "Company Software") other than "off the shelf" software. The transactions contemplated herein will not cause a breach or default under any license, lease or similar agreement relating to the Company Software or impair the ability of the Surviving Corporation and the Company to use the Company Software subsequent to the Closing Date in the same manner as the Company Software is currently used 16 by the Company and its Subsidiaries. The Company is not knowingly infringing in any material respect any intellectual property rights of any other person or entity with respect to the Company Software, and, to the knowledge of the executive officers of the Company, no other person or entity is infringing any intellectual property rights of the Company with respect to the Company Software. (q) MATERIAL CONTRACTS. Section 5.1(q) of the Company Disclosure Letter sets forth a list of all material Contracts of the Company and its Subsidiaries ("Material Company Contracts"). The Company has made available to Parent true and complete copies of all the Material Company Contracts. The Material Company Contracts are in full force and effect and are enforceable against the Company or its Subsidiaries that are parties thereto and, to the knowledge of the executive officers of the Company, against the other parties thereto in accordance with their respective terms. Except to the extent reflected in the financial statements of the Company Reports, neither the Company nor any of its Subsidiaries nor, to the knowledge of the executive officers of the Company, any other party is in breach of or in default under any such Material Company Contract. There is no pending or, to the knowledge of the executive officers of the Company, threatened, cancellation of any Material Company Contract. Neither the Company nor any of its Subsidiaries is a party to any Contract containing any provision limiting in any material respect the ability of the Company or any of its Subsidiaries or, assuming the consummation of the transactions contemplated by this Agreement, Parent or any of its Subsidiaries, to (A) to sell any products or services of or to any other Person, (B) to engage in any line of business (including geographical limitations) or (C) to compete with or to obtain products or services from any Person, or limiting the ability of any Person to provide products or services to the Company or any of its Subsidiaries. (r) ASSETS AND PROPERTIES. Each of the Company and its Subsidiaries has good and valid title to all their respective properties and assets and has good title to all their respective leasehold interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (i) the lien of current taxes not yet due and payable and (ii) possible minor liens and encumbrances, which do not in any case materially detract from the value of the property subject thereto or materially impair the operations of the Company or its Subsidiaries and which have not arisen otherwise than in the ordinary course of business. All of the respective properties and assets of the Company and its Subsidiaries are in adequate operating condition and repair, ordinary wear and tear excepted, and are free and clear of any known defects, except such defects that do not substantially interfere with the continued use thereof in the conduct or normal operations. (s) BROKERS AND FINDERS. Neither the Company nor its Subsidiaries nor any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the Merger or the other transactions contemplated by this Agreement. (t) OWNERSHIP OF PARENT COMMON STOCK. As of the date hereof, neither the Company nor any of its Subsidiaries owns any shares of Parent Common Stock or other securities convertible into shares of Parent Common Stock. (u) DISCLOSURE. Neither this Agreement with the Exhibits and Disclosure 17 Schedules thereto, nor any other agreement, document, certificate or information furnished to Parent or their counsel by or on behalf of the Company in connection with the transactions contemplated hereby, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein not misleading in light of the circumstances under which they were made. 5.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY. Except as set forth in the corresponding sections or subsections (or by appropriate cross-reference) of the disclosure letter delivered to the Company by Parent prior to entering into this Agreement (the "PARENT DISCLOSURE LETTER"), Parent and Merger Subsidiary each hereby represent and warrant to the Company that: (a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and each of its Subsidiaries is a corporation or other entity duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization and Parent and each of its Subsidiaries has all requisite corporate or similar power and authority to own and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its properties or conduct of its business requires such qualification, except where the failure to have such corporate power or authority or to be so qualified or in good standing, when taken together with all other such failures, is not reasonably likely to have a Parent Material Adverse Effect (as defined below). Parent has made available to the Company a complete and correct copy of Parent's and each of its Subsidiaries' certificates of incorporation and by-laws or comparable governing instruments, each as amended to date. Parent's and its Subsidiaries' certificates of incorporation and by-laws or comparable governing instruments so delivered are in full force and effect. As used in this Agreement, the term "PARENT MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial condition, properties, business or results of operations of Parent and its Subsidiaries taken as a whole. (b) PARENT CAPITAL STRUCTURE. As of the date hereof, the authorized capital stock of Parent consists of 50,000,000 shares of Parent Common Stock, of which 44,172,420 shares were outstanding as of the close of business on December 31, 2000, and -0- shares of Preferred Stock, par value $.001 per share (the "PARENT PREFERRED SHARES"), of which none were outstanding as of the close of business on December 31, 2000. All of the outstanding shares of Parent Common Stock have been duly authorized and are validly issued, fully paid and nonassessable. Parent has no Parent Common Stock or Parent Preferred Shares reserved for issuance. Each of the outstanding shares of capital stock or other securities of Parent's Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and owned by a direct or indirect wholly owned Subsidiary of Parent, free and clear of any Liens. Except as set forth above, as of the date hereof there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements or commitments to issue or to sell any shares of capital stock or other securities of Parent or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable 18 for, or giving any Person a right to subscribe for or acquire, any securities of Parent or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. Parent does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of Parent on any matter ("PARENT VOTING DEBT"). (c) CAPITALIZATION OF MERGER SUBSIDIARY. The authorized capital stock of Merger Subsidiary consists of 1,000 shares of Common Stock, par value $0.01 per share, of which 100 are validly issued and outstanding. All of the issued and outstanding capital stock of Merger Subsidiary is, and at the Effective Time will be, owned by Parent, and there are (i) no other shares of capital stock or voting securities of Merger Subsidiary, (ii) no securities of Merger Subsidiary convertible into or exchangeable for shares of capital stock or voting securities of Merger Subsidiary and (iii) no options or other rights to acquire from Merger Subsidiary, and no obligations of Merger Subsidiary to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of Merger Subsidiary. Merger Subsidiary has not conducted any business prior to the date hereof and has no, and prior to the Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and the Merger and the other transactions contemplated by this Agreement. (d) CORPORATE AUTHORITY; APPROVAL. (i) Each of Parent and Merger Subsidiary has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. This Agreement is a valid and binding agreement of Parent and Merger Subsidiary, enforceable against each of Parent and Merger Subsidiary in accordance with its terms, subject to the Bankruptcy and Equity Exception. (ii) The Board of Directors of Parent has unanimously approved this Agreement and the Merger and the other transactions contemplated hereby. Parent has taken all necessary action to permit it to issue the number of shares of Parent Common Stock required to be issued pursuant to Article IV. The Parent Common Stock, when issued, will be validly issued, fully paid and nonassessable, and no shareholder of Parent will have any preemptive right of subscription or purchase in respect thereof. The Parent Common Stock, when issued, will be registered under the Securities Act and Exchange Act and registered or exempt from registration under any applicable state securities or "blue sky" laws. (e) GOVERNMENTAL FILINGS; NO VIOLATIONS. (i) Other than the filings, notices, consents, registrations, approvals, permits and authorizations (A) pursuant to Section 1.3, (B) under the Exchange Act and the Securities Act, or (C) to comply with state securities or "blue-sky" laws, no notices, reports or other filings are required to be made by Parent or Merger Subsidiary with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Parent or Merger Subsidiary from, any Governmental Entity or any other Person, in connection with the execution and delivery of this Agreement by Parent and Merger Subsidiary and the consummation by Parent and Merger Subsidiary of the 19 Merger and the other transactions contemplated hereby, except those the failure to make or obtain are not, individually or in the aggregate, reasonably likely to have a Parent Material Adverse Effect or prevent, materially delay or materially impair the ability of Parent or Merger Subsidiary to consummate the transactions contemplated by this Agreement. (ii) The execution, delivery and performance of this Agreement by Parent and Merger Subsidiary do not, and the consummation by Parent and Merger Subsidiary of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, the articles of incorporation or by-laws of Parent and Merger Subsidiary or the comparable governing instruments of any of its Subsidiaries, (B) a breach or violation of, or a default under, or acceleration of any obligations under, or the termination of, or the loss of a material benefit under, or the creation of a Lien on the assets of Parent or any of its Subsidiaries (with or without notice, lapse of time or both) pursuant to, any Contracts binding upon Parent or any of its Subsidiaries or any of their respective assets, or (assuming, as to consummation, the filings and notices are made, and approvals are obtained, as referred to in Section 5.2(e)(i)) or any applicable Law to which Parent or any of its Subsidiaries or any of their respective assets is subject or (C) any change in the rights or obligations of any party under any of the Contracts, except, in the case of clause (B) or (C) above, for any breach, violation, default, acceleration, termination, creation or change that, individually or in the aggregate, is not reasonably likely to have a Parent Material Adverse Effect or prevent, materially delay or materially impair the ability of Parent or Merger Subsidiary to consummate the transactions contemplated by this Agreement. (f) PARENT REPORTS; FINANCIAL STATEMENTS. Parent has made available to the Company each registration statement, report, proxy statement or information statement prepared by it since April 30, 1999, including (i) Parent's Annual Report on Form 10-K for the years ended April 30, 1999 and April 30, 2000 and (ii) Parent's Quarterly Report on Form 10-Q for the period ended July 31, 2000, each in the form (including exhibits, annexes and any amendments thereto) filed with the SEC (collectively, including any such reports filed subsequent to the date hereof, the "PARENT REPORTS"). As of their respective dates, the Parent Reports did not, and any Parent Reports filed with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. Each of the consolidated balance sheets included in or incorporated by reference into the Parent Reports (including the related notes and schedules) fairly presents in all material respects, or, in the case of Parent Reports filed with the SEC subsequent to the date hereof, will fairly present in all material respects, the consolidated financial position of Parent and its Subsidiaries as of its date and each of the consolidated statements of income and of changes in financial position included in or incorporated by reference into the Parent Reports (including any related notes and schedules) fairly presents in all material respects, or, in the case of Parent Reports filed with the SEC subsequent to the date hereof, will fairly present in all material respects, the results of operations, retained earnings and changes in financial position, as the case may be, of Parent and its Subsidiaries on a consolidated basis for the periods set forth therein (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments that will not be material in amount or effect), in each case in accordance with GAAP consistently applied during the periods involved, except as may be noted therein. 20 (g) ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule 5.2(g) of the Parent Disclosure Schedule, and except as disclosed in the Parent Reports filed prior to the date hereof, since April 30, 2000 Parent and each of its Subsidiaries have conducted their respective businesses only in, and have not engaged in any material transaction other than according to, the ordinary and usual course of such businesses and there has not been (i) any change in the financial condition, properties, business or results of operations of Parent and its Subsidiaries or any development or combination of developments of which the executive officers of Parent have knowledge that, individually or in the aggregate, has had or is reasonably likely to have a Parent Material Adverse Effect; (ii) any material damage, destruction or other casualty loss with respect to any material asset or property owned, leased or otherwise used by Parent or any of its Subsidiaries, whether or not covered by insurance; (iii) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of Parent, except for cash dividends or other distributions on its capital stock publicly announced prior to the date hereof or declared and paid consistent with past practice (including customary increases); (iv) any change by Parent in accounting principles, practices and methods; or (v) any material change in the accounting, actuarial, investment, reserving, underwriting or claims administration or servicing policies, practices, procedures, methods, assumptions or principles of Parent or any of its Subsidiaries. (h) LITIGATION AND LIABILITIES. Except as disclosed in the Parent Reports filed prior to the date hereof, there are no (i) civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of the executive officers of Parent, threatened against, or otherwise adversely affecting Parent or any of its Subsidiaries, (ii) obligations or liabilities of any nature, whether accrued, contingent or otherwise and whether or not required to be disclosed, including those relating to matters involving any Environmental Law, or (iii) facts or circumstances of which the executive officers of Parent have knowledge that could result in any claims against, or obligations or liabilities of, or limitations on the conduct of business by, or otherwise adversely affect, Parent or any of its Subsidiaries, except for any of the foregoing that are not, individually or in the aggregate, reasonably likely to have a Parent Material Adverse Effect or prevent or materially burden or materially impair the ability of Parent or Merger Subsidiary to consummate the transactions contemplated by this Agreement. (i) COMPLIANCE WITH LAWS; PERMITS. Except as set forth in the Parent Reports filed prior to the date hereof, the businesses of each of Parent and its Subsidiaries have been, and are being, conducted in compliance with all Laws, except for any failure to comply that, individually or in the aggregate, would not be reasonably likely to have a Parent Material Adverse Effect or prevent or materially burden or materially impair the ability of Parent to consummate the transactions contemplated by this Agreement, and neither Parent nor any of its Subsidiaries has received any written notice or communication of any material failure to comply with any such Laws that has not been cured (as evidenced by a written notice to such effect, a copy of which has been provided to Company) as of the date hereof. Except as set forth in the Parent Reports filed prior to the date hereof, no investigation, examination, audit or review by any Governmental Entity with respect to Parent or any of its Subsidiaries has occurred, is pending or, to the knowledge of the executive officers of Parent, threatened, except for those the outcome of which are not, individually or in the aggregate, reasonably likely to have a Parent Material Adverse Effect or prevent or materially burden or materially impair the ability of Parent to consummate the transactions contemplated by this Agreement. Parent and each of its 21 Subsidiaries have all permits, licenses, trademarks, patents, trade names, copyrights, service marks, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals necessary to conduct their businesses as presently conducted, except for those the absence of which would not be reasonably likely to result in a Parent Material Adverse Effect. (j) EMPLOYEE BENEFIT PLANS. Parent presently does not maintain or contribute to any "employee benefit plan," as such term is defined in the Employee Retirement Income Security Act of 1974, as amended. (k) LABOR MATTERS. (i) Parent and each of its Subsidiaries is in compliance with all applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practices, except where failure to be in compliance of the engagement in such unfair labor practice could not have a Parent Material Adverse Effect. Except as set forth in the Parent Reports, there are no material pending claims against the Parent or any of its Subsidiaries under any workers compensation plan or policy or for long term disability. Neither Parent nor any of its Subsidiaries has obligations under COBRA with respect to any former employees or qualifying beneficiaries thereunder, except for obligations that could not have a Parent Material Adverse Effect. There are no controversies pending, or to the best knowledge of the executive officers of Parent, threatened, between Parent or any of its Subsidiaries and any of its employees, which controversies have or could reasonably be expected to have a Parent Material Adverse Effect. (ii) Neither Parent nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or written understanding with a labor union or labor organization involving employees of Parent or its Subsidiaries. To the knowledge of the executive officers of Parent, there are no current efforts to organize Parent's workforce or certify a collective bargaining unit at Parent. (l) ENVIRONMENTAL MATTERS. Except as disclosed in the Parent Reports filed prior to the date hereof and except for such matters that, individually or in the aggregate, are not reasonably likely to have a Parent Material Adverse Effect: (i) Parent and its Subsidiaries are and have been in compliance with all applicable Environmental Laws; (ii) neither Parent nor any of its Subsidiaries is subject to any liability under any Environmental Law; (iii) neither Parent nor any of its Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that Parent or any of its Subsidiaries may be in violation of or liable under any Environmental Law; (iv) neither Parent nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances; and (v) there are no circumstances or conditions involving Parent or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use, or transfer of any property of Parent pursuant to any Environmental Law. (m) ACCOUNTING AND TAX MATTERS. As of the date hereof, neither Parent nor any of its affiliates has taken or agreed to take any action, nor do the executive officers of Parent have any knowledge of any fact or circumstance, that would prevent the Merger and the 22 other transactions contemplated by this Agreement from qualifying as a "reorganization" within the meaning of Section 368(a) of the Code. (n) BROKERS AND FINDERS. Neither Parent nor any of its officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the Merger or the other transactions contemplated by this Agreement. (o) OWNERSHIP OF COMPANY COMMON STOCK. Except as set forth on Schedule 5.2(o) of the Parent Disclosure Schedule, as of the date hereof, neither Parent nor any of its Subsidiaries owns any shares of Company Common Stock or other securities convertible into shares of Company Common Stock. (p) DISCLOSURE. Neither this Agreement with the Exhibits and Disclosure Schedules thereto, nor any other agreement, document, certificate or information furnished to the Company or its counsel by or on behalf of Parent in connection with the transactions contemplated hereby, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein not misleading in light of the circumstances under which they were made ARTICLE VI. COVENANTS 6.1. INTERIM OPERATIONS. (a) The Company covenants and agrees as to itself and its Subsidiaries that, after the date hereof and prior to the Effective Time (unless Parent shall otherwise approve in writing, and except as otherwise expressly contemplated by this Agreement): (i) it and its Subsidiaries' businesses shall be conducted in the ordinary and usual course (it being understood and agreed that nothing contained herein shall permit the Company to enter into or engage in (through acquisition, product extension or otherwise) the business of selling any products or services materially different from existing products or services of the Company and its Subsidiaries or entering into or engaging in new lines of business); (ii) it and its Subsidiaries shall use their respective best efforts to preserve their business organizations intact and maintain their existing relations and goodwill with customers, vendors, suppliers, creditors, lessors, regulators, employees and business associates; (iii) it shall not (A) issue, sell, pledge, dispose of or encumber any capital stock owned by it in any of its Subsidiaries; (B) amend its articles of incorporation or by-laws or adopt any rights agreement or similar agreement; (C) split, combine or reclassify its outstanding shares of capital stock; (D) authorize, declare, set aside or pay any dividend or other distribution payable in cash, stock or property in respect of any capital stock other than dividends from its direct or 23 indirect wholly owned Subsidiaries; or (E) repurchase, redeem or otherwise acquire, or permit any of its Subsidiaries to purchase or otherwise acquire, any shares of its stock or any securities convertible into or exchangeable or exercisable for any shares of its stock; (iv) neither it nor any of its Subsidiaries shall (A) issue, sell, pledge, dispose of or encumber any shares of, or securities convertible into or exchangeable or exercisable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock of any class or any other property or assets; (B) other than in the ordinary and usual course of business, transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any other property or assets (including capital stock of any of its Subsidiaries) or incur or modify any material indebtedness or other liability, except for immaterial Liens arising by operation of law; (C) make or authorize or commit to any capital expenditures other than as set forth in Section 6.1(a)(iv)(C) of the Company Disclosure Letter; or (D) make any acquisition of, or investment in, assets or stock of any other Person; (v) neither it nor any of its Subsidiaries shall terminate, establish, adopt, enter into, make any new grants or awards under, amend or otherwise modify, any Compensation and Benefit Plans except as required by Law or increase the salary, wage, bonus or other compensation of any employees except increases for employees who are not executive officers of the Company occurring in the ordinary and usual course of business (which shall include normal periodic performance reviews and related compensation and benefit increases); (vi) neither it nor any of its Subsidiaries shall pay, discharge, settle or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of claims, liabilities or obligations in the ordinary and usual course of business; (vii) neither it nor any of its Subsidiaries shall make or change any material Tax election, settle any audit, file any amended Tax Returns or permit any insurance policy naming it as a beneficiary or loss-payable payee to be canceled or terminated except in the ordinary and usual course of business; (viii) neither it nor any of its Subsidiaries shall enter into any Contract containing any provision or covenant limiting in any respect the ability of the Company or any of its Subsidiaries or any of their "AFFILIATES" (as defined in Rule 12b-2 under the Exchange Act) to (A) sell any products or services of or to any other Person, (B) engage in any line of business (including geographic limitations) or (C) compete with or obtain products or services from any Person, or limiting the ability of any Person to provide products or services to the Company or any of its Subsidiaries or their Affiliates; (ix) neither it nor any of its Subsidiaries will terminate, or amend, or modify in any material respect, any Material Company Contract; (x) neither it nor any of its Subsidiaries shall take any action or omit to take any action that would cause any of its representations and warranties herein to become untrue in any material respect; and (xi) neither it nor any of its Subsidiaries will authorize or enter into an 24 agreement to do any of the foregoing. (b) During the period from the date of this Agreement through the Effective Time, (i) as requested by Parent, the Company shall confer on a regular basis with one or more representatives of Parent with respect to material operational matters, (ii) upon the knowledge of the executive officers of the Company of any event or occurrence that is reasonably likely to result in a Company Material Adverse Effect, any material litigation or material governmental complaints, investigation or hearings (or communications indicating that the same may be contemplated), the breach in any material respect of any representation, warranty or covenant contained herein, or the failure of any condition precedent to the Merger, the Company shall promptly notify Parent thereof and (iii) upon the knowledge of the executive officers of Parent of any event or occurrence that is reasonably likely to result in a Parent Material Adverse Effect or the failure of any condition precedent to the Merger, Parent shall promptly notify the Company thereof. 6.2. ACQUISITION PROPOSALS. The Company agrees that neither it nor any of its Subsidiaries nor any of its or their respective officers and directors shall, and that the Company shall direct and use its best efforts to cause its and its Subsidiaries' employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) (such officers, directors, employees, agents and representatives sometimes collectively referred to herein as "REPRESENTATIVES") not to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer or entering into any agreement with respect to a merger, reorganization, share exchange, consolidation or similar transaction involving, or any purchase of 20% or more of the assets or any equity securities of, the Company or any of its Subsidiaries (any such proposal or offer being hereinafter referred to as an "ACQUISITION PROPOSAL"). The Company further agrees that neither it nor any of its Subsidiaries nor any of their respective officers and directors shall, and that the Company shall direct and cause its and its Subsidiaries' employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) not to, directly or indirectly, engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person relating to, an Acquisition Proposal, whether made before or after the date of this Agreement, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal; PROVIDED, HOWEVER, that nothing contained in this Agreement shall prevent the Company or its Board of Directors from (A) complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal; (B) providing information in response to a request therefor by a Person who has made an unsolicited bona fide written Acquisition Proposal if the Board of Directors receives from the Person so requesting such information an executed confidentiality agreement ("THIRD PARTY CONFIDENTIALITY AGREEMENT") on terms no less favorable to the Company than its agreement with Parent; (C) engaging in any negotiations or discussions with any Person who has made an unsolicited bona fide written Acquisition Proposal; or (D) recommending an unsolicited bona fide written Acquisition Proposal to the stockholders of the Company, if and only to the extent that, prior to taking any such action (i) in each such case referred to in clause (B), (C) or (D) above, the Board of Directors of the Company determines in good faith based on the advice of its outside legal counsel experienced in such matters that such action is necessary in order for its directors to comply with their respective fiduciary duties under applicable Law and (ii) in each case referred to in clause (C) or (D) above, the Board of Directors 25 of the Company determines in good faith that such Acquisition Proposal, if accepted, is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal and the Person making the proposal and would, if consummated, result in a transaction superior to the transaction contemplated by this Agreement, taking into account, among other things, the long-term prospects and interests of the Company and its stockholders (any such superior Acquisition Proposal being referred to in this Agreement as a "SUPERIOR PROPOSAL"). The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. The Company agrees that it will take the necessary steps to promptly inform its Representatives of the obligations undertaken in this Section 6.2. The Company will notify Parent immediately (but, in any event, no less than 24 hours thereafter) if any Acquisition Proposal or inquiry related thereto is received by, any information is requested from, or any discussions or negotiations are sought to be initiated or continued with, the Company or any of its Representatives relating to an Acquisition Proposal, indicating the name of such Person and the material terms and conditions of any Acquisition Proposal. The Company also will promptly request each Person that has heretofore executed a confidentiality agreement in connection with its consideration of an Acquisition Proposal to return all confidential information heretofore furnished to such Person by or on behalf of it or any of its Subsidiaries. 6.3. INFORMATION SUPPLIED. The Company and Parent each agrees, as to itself and its Subsidiaries, that none of the information supplied or to be supplied by it or its Subsidiaries for inclusion or incorporation by reference in (i) the Registration Statement on Form S-4 to be filed with the SEC by Parent in connection with the issuance of shares of Parent Common Stock in the Merger (including the joint proxy statement and prospectus (the "PROSPECTUS/PROXY STATEMENT") constituting a part thereof) (the "S-4 REGISTRATION STATEMENT") will, at the time the S-4 Registration Statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (ii) the Prospectus/Proxy Statement and any amendment or supplement thereto will, at the date of mailing to stockholders and at the times of the meeting of stockholders of the Company to be held in connection with this Agreement, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (iii) any filing with a Governmental Entity in connection with this Agreement under any Health Benefit Law, will be untrue or incorrect in any material respect. 6.4. STOCKHOLDERS MEETING. The Company will take all action necessary to convene a meeting of holders of Shares (the "STOCKHOLDERS MEETING") as promptly as practicable after the S-4 Registration Statement is declared effective (and, in any event, within 45 days thereafter unless otherwise mutually agreed by the Company and Parent) to consider and vote upon the approval of the Merger and this Agreement. Except to the extent the Board of Directors of the Company determines in good faith, based upon advice of its outside legal counsel experienced in such matters, that such action is necessary in order for its directors to comply with their fiduciary duties under applicable Law, the Company's Board of Directors shall recommend such approval, shall not withdraw or modify such recommendation and shall take all lawful action to solicit such approval. 26 6.5. FILINGS; OTHER ACTIONS; NOTIFICATION. (a) Parent and the Company shall promptly prepare and file with the SEC the Prospectus/Proxy Statement, and Parent shall prepare and file with the SEC the S-4 Registration Statement as promptly as practicable. Parent shall use its reasonable best efforts to have the S-4 Registration Statement declared effective under the Securities Act as promptly as practicable after such filing (and the Company shall cooperate with Parent in connection therewith), and promptly thereafter mail the Prospectus/Proxy Statement to the stockholders of the Company. Parent shall also use its reasonable best efforts to obtain prior to the effective date of the S-4 Registration Statement all necessary state securities law or "blue sky" permits and approvals required in connection with the Merger and to consummate the other transactions contemplated by this Agreement and will pay all expenses incident thereto. (b) The Company and Parent each shall cooperate with the other and use (and shall cause their respective Subsidiaries to use) its reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable on its part under this Agreement and applicable Laws to consummate and make effective the Merger and the other transactions contemplated by this Agreement as soon as practicable, including preparing and filing as promptly as practicable all documentation to effect all necessary notices, reports and other filings (including as required by Health Benefit Laws) and to obtain as promptly as practicable all consents, waivers, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any third party and/or any Governmental Entity in order to consummate the Merger or any of the other transactions contemplated by this Agreement; provided, however, that nothing in this Section 6.5 shall require, or be construed to require, Parent, in connection with the receipt of any regulatory approval, to proffer to, or agree to (i) sell or hold separate and agree to sell or to discontinue to or limit, before or after the Effective Time, any assets, businesses, or interest in any assets or businesses of Parent, the Company or any of their respective Affiliates (or to consent to any sale, or agreement to sell, or discontinuance or limitation by the Company of any of its assets or businesses) or (ii) agree to any material conditions relating to, or material changes or restriction in, the operations of any such asset or businesses. Subject to applicable Laws relating to the exchange of information, Parent and the Company shall have the right to review in advance, and to the extent practicable each will consult the other on, all the information relating to Parent or the Company, as the case may be, and any of their respective Subsidiaries, that appear in any filing made with, or written materials submitted to, any third party and/or any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement. In exercising the foregoing right, each of the Company and Parent shall act reasonably and as promptly as practicable. (c) The Company and Parent each shall, upon request by the other, furnish the other with all information concerning itself, its Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Prospectus/Proxy Statement, the S-4 Registration Statement or any other statement, filing, notice or application made by or on behalf of Parent, the Company or any of their respective Subsidiaries to any third party and/or any Governmental Entity in connection with the Merger and the transactions contemplated by this Agreement. (d) The Company and Parent each shall keep the other apprised of the status of 27 matters relating to completion of the transactions contemplated hereby, including promptly furnishing the other with copies of notices or other communications received by Parent or the Company, as the case may be, or any of its Subsidiaries, from any third party and/or any Governmental Entity with respect to the Merger and the other transactions contemplated by this Agreement. The Company and Parent each shall give prompt notice to the other of any change that is reasonably likely to result in a Company Material Adverse Effect or Parent Material Adverse Effect, respectively. 6.6. TAXATION AND ACCOUNTING. (a) Neither Parent nor the Company shall take or cause to be taken, and each of Parent and the Company shall use its reasonable best efforts to prevent any of its affiliates from taking, any action, whether before or after the Effective Time, that would disqualify the Merger as a "reorganization" within the meaning of Section 368(a) of the Code. Each of Parent and the Company agrees to use all reasonable best efforts to cure any impediment to the qualification of the Merger as a "reorganization" within the meaning of Section 368(a) of the Code. (b) On or prior to the date the Prospectus/Proxy Statement is mailed to its stockholders and on or prior to the Closing Date, each of the Company and Parent shall use its reasonable best efforts to cause to be delivered to the other party and its directors a letter of its independent auditors, dated the date of which the S-4 Registration Statement shall become effective and the Closing Date, respectively, in form and substance customary for "comfort" letters delivered by independent public accountants in connection with registration statements similar to the S-4 Registration Statement. 6.7. ACCESS. Upon reasonable notice, and except as may otherwise be required by applicable Law, the Company shall (and shall cause its Subsidiaries to) afford to the Parent's Representatives access, during normal business hours throughout the period prior to the Effective Time, to its properties, books, contracts and records and, during such period, the Company shall (and shall cause its Subsidiaries to) furnish promptly to the Parent all information concerning its business, properties and personnel as may reasonably be requested, PROVIDED that no investigation pursuant to this Section shall affect or be deemed to modify any representation or warranty made by the Company, and PROVIDED, FURTHER, that the foregoing shall not require the Company to permit any inspection, or to disclose any information, that in the reasonable judgment of the Company would result in a violation of applicable Law or would result in the disclosure of any trade secrets of third parties or violate any of the Company's obligations with respect to confidentiality if the Company shall have used all reasonable efforts to obtain the consent of such third party to such inspection or disclosure. All requests for information made pursuant to this Section shall be directed to an executive officer of the Company or such Person as may be designated by the company's officers. 6.8. AFFILIATES; LOCKUP LETTERS. (a) Within 15 days after the date hereof, the Company shall deliver to Parent a list of names and addresses of those Persons who are, in the opinion of the Company, as of the time of the Stockholders Meeting referred to in Section 6.4, "affiliates" of the Company within the meaning of Rule 145 under the Securities Act. The Company shall provide to Parent such 28 information and documents as Parent shall reasonably request for purposes of reviewing such list. There shall be added to such list the names and addresses of any other Person subsequently identified by either Parent (by written notice to the Company) or the Company as a Person who may be deemed to be such an affiliate of the Company; PROVIDED, HOWEVER, that no such Person identified by Parent shall be added to the list of affiliates of the Company if Parent shall receive from the Company, on or before the date of the Stockholders Meeting, an opinion of counsel reasonably satisfactory to Parent to the effect that such Person is not such an affiliate. To the extent not already delivered to Parent, the Company shall exercise its reasonable best efforts to deliver or cause to be delivered to Parent, as promptly as practicable after the date hereof but in no event later than the date of the Closing, from each affiliate of the Company identified in the foregoing list (as the same may be supplemented as aforesaid), a letter substantially in the form to be agreed upon by the parties (the "AFFILIATES LETTER"). Parent shall not be required to maintain the effectiveness of the S-4 Registration Statement or any other registration statement under the Securities Act for the purposes of resale by such affiliates of Parent Common Stock received in the Merger and the certificates representing Parent Common Stock received by such affiliates shall bear a customary legend regarding applicable Securities Act restrictions and the provisions of this Section. (b) Parent agrees that it shall use its best efforts to cause (i) each of the directors and executive officers of the Company to execute and deliver to Parent, on the Closing Date, a lockup letter in the form attached hereto as Exhibit 6.8(b)(i) (a "Director and Officer Lockup Letter") and (ii) each of the shareholders of the Company specified on Schedule 6.8(b) to this Agreement to execute and deliver to Parent, on the Closing Date, a lockup letter in the form attached hereto as Exhibit 6.8(b)(ii) (a "Shareholder Lockup Letter"). 6.9. STOCK EXCHANGE LISTING. Parent shall use its reasonable best efforts to cause the shares of Parent Common Stock to be issued in the Merger to be approved for listing or quotation, as the case may be, on whatever national stock exchange, if any, that the Parent Common Stock shall then be listed, prior to the Closing Date. 6.10. PUBLICITY. The initial press release shall be a joint press release and thereafter the Company and Parent each shall consult with each other and use reasonable best efforts to agree upon the text of any press release, subject to their respective legal obligations (including requirements of stock exchanges and other similar regulatory bodies) with respect to the timing of such public announcements, prior to issuing any such press releases or otherwise making public announcements with respect to the Merger and the other transactions contemplated by this Agreement and prior to making any filings with any third party and/or any Governmental Entity (including any national securities exchange) with respect thereto. 6.11. STOCK OPTIONS. (i) At the Effective Time, each Company Option, whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Company Option, the same number of shares of Parent Common Stock as the holder of such Company Option would have been entitled to receive pursuant to the Merger had such holder exercised such option in full immediately prior to the Effective Time (rounded down to the nearest whole number), at a price per share (rounded up to the nearest whole cent) equal to (y) the aggregate exercise price for the Shares otherwise purchasable pursuant to such Company Option divided by (z) the number of full shares of Parent 29 Common Stock deemed purchasable pursuant to such Company Option in accordance with the foregoing; PROVIDED, HOWEVER, that in the case of any Company Option to which Section 422 of the Code applies, the option price, the number of shares purchasable pursuant to such option and the terms and conditions of exercise of such option shall be determined in accordance with the foregoing, subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code. At or prior to the Effective Time, the Company shall make all necessary arrangements with respect to the Company Stock Plans to permit the assumption of the unexercised Company Options by Parent pursuant to this Section. (ii) Effective at the Effective Time, Parent shall assume each Company Option in accordance with the terms of the Company Stock Plan under which it was issued and the stock option agreement by which it is evidenced. At or prior to the Effective Time, Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of the Company Options assumed by it in accordance with this Section. 6.12. EMPLOYEE BENEFITS. Employees of the Company and its Subsidiaries who are employees on or after the Effective Time, shall be credited to the fullest extent permissible under law for purposes of eligibility and vesting with all service with the Company and its Subsidiaries to the same extent that such service was credited for such purposes by the Company under each employee benefit plan, program, policy or arrangement of the Parent and its Subsidiaries in which the employees are eligible to participate. 6.13. EXPENSES. The Company shall pay all costs and expenses incurred by Parent and Merger Subsidiary in connection with this Agreement and the Merger and the other transactions contemplated by this Agreement (including, without limitation, the reasonable fees, expenses and disbursements of counsel to Parent), whether or not the Merger is consummated, in an amount not to exceed $25,000 (exclusive of the filing fee for the S-4 Registration Statement and expenses incurred in connection with the printing and mailing the Prospectus/Proxy Statement and the S-4 Registration Statement ("Registration Expenses")). After the payment by the Company of $25,000 of such costs and expenses incurred by Parent and Merger Subsidiary, whether or not the Merger is consummated, except as otherwise provided in Section 8.5, all costs and expenses incurred in connection with this Agreement and the Merger and the other transactions contemplated by this Agreement shall be paid by the party incurring such expense, except that Registration Expenses shall be shared equally by Parent and the Company. 6.14. TAKEOVER STATUTE. If any Takeover Statute is or may become applicable to the Merger or the other transactions contemplated by this Agreement, each of Parent and the Company and its Board of Directors shall grant such approvals and take such actions as are necessary so that such transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement or by the Merger and otherwise act to eliminate or minimize the effects of such statute or regulation on such transactions. 30 ARTICLE VII. CONDITIONS 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver at or prior to the Effective Time of each of the following conditions: (a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been duly approved by holders of Shares constituting the Company Requisite Vote in accordance with applicable Law and the Company's articles of incorporation and by-laws. (b) LISTING. The shares of Parent Common Stock issuable to the Company stockholders pursuant to this Agreement shall have been authorized for listing or quotation, as the case may be, on whatever National Stock Exchange, if any, that the Parent Common Stock shall then be listed. (c) REGULATORY CONSENTS. Other than the filing provided for in Section 1.3, all notices, reports and other filings required to be made prior to the Effective Time by the Company or Parent or any of their respective Subsidiaries with, and all consents, registrations, approvals, permits and authorizations required to be obtained prior to the Effective Time (including as required by Health Benefit Laws) by the Company or Parent or any of their respective Subsidiaries from, any Governmental Entity (collectively, "GOVERNMENTAL CONSENTS") in connection with the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated hereby by the Company, Parent and Merger Subsidiary shall have been made or obtained (as the case may be). (d) LITIGATION. No court or Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the Merger (collectively, an "ORDER"), and no Governmental Entity shall have instituted any proceeding seeking any such Order. (e) S-4 REGISTRATION STATEMENT. The S-4 Registration Statement shall have become effective under the Securities Act. No stop order suspending the effectiveness of the S-4 Registration Statement shall have been issued, and no proceedings for that purpose shall have been initiated or be threatened, by the SEC. (f) BLUE SKY APPROVALS. Parent shall have received all state securities and "blue sky" permits and approvals, if any, necessary to consummate the transactions contemplated hereby. 7.2. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY. The obligations of Parent and Merger Subsidiary to effect the Merger are also subject to the satisfaction or waiver by Parent at or prior to the Effective Time of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company set forth in this Agreement shall be true and correct as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of an earlier date); PROVIDED, 31 HOWEVER, that notwithstanding anything herein to the contrary, this Section 7.2(a) shall be deemed to have been satisfied even if such representations or warranties are not so true and correct unless the failure of such representations or warranties to be so true and correct, individually or in the aggregate, has had, or is reasonably likely to have, a Company Material Adverse Effect or is reasonably likely to prevent or to materially burden or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. Parent shall have received a certificate signed on behalf of the Company by an executive officer of the Company to such effect. (b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by an executive officer of the Company to such effect. (c) CONSENTS. The Company shall have obtained the consent or approval of each Person whose consent or approval shall be required under (i) any Material Company Contract and (ii) any Contract to which the Company or any of its Subsidiaries is a party, except in the case of clause (ii), those the failure to obtain, individually or in the aggregate, are not reasonably likely to have a Company Material Adverse Effect; and no such consent or approval, and no Governmental Consent shall impose any condition or conditions relating to, or requiring changes or restrictions in, the operations of any asset or businesses of the Company, Parent or their respective Subsidiaries which could, in the judgment of the Board of Directors of Parent, individually or in the aggregate, materially and adversely impact the economic or business benefits to Parent and its Subsidiaries of the transactions contemplated by this Agreement. (d) AFFILIATES LETTERS. Parent shall have received an Affiliates Letter from each Person identified as an affiliate of the Company pursuant to Section 6.8(a). (e) LOCKUP LETTERS. Parent shall have received (i) a Director and Officer Lockup Letter executed by each director and executive officer of the Company and (ii) a Shareholder Lockup Letter executed by each shareholder of the Company identified on Schedule 6.8(b) hereof as a significant shareholder of the Company. 7.3. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company to effect the Merger is also subject to the satisfaction or waiver by the Company at or prior to the Effective Time of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Parent and Merger Subsidiary set forth in this Agreement shall be true and correct as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of an earlier date); PROVIDED, HOWEVER, that notwithstanding anything herein to the contrary, this Section 7.3(a) shall be deemed to have been satisfied even if such representations or warranties are not so true and correct unless the failure of such representations or warranties to be so true and correct, individually or in the aggregate, has had, or is reasonably likely to have, a Parent Material Adverse Effect or is reasonably likely to prevent or to materially burden or materially impair the ability of the Parent to consummate the transactions contemplated by this Agreement. 32 The Company shall have received a certificate signed on behalf of Parent by an executive officer of Parent and on behalf of Merger Subsidiary by an executive officer of Merger Subsidiary to such effect. (b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY. Each of Parent and Merger Subsidiary shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of Parent and Merger Subsidiary by an executive officer of Parent to such effect. ARTICLE VIII. TERMINATION 8.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the approvals by stockholders of the Company and Parent referred to in Section 7.1(a), by mutual written consent of the Company and Parent by action of their respective Boards of Directors. 8.2. TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Board of Directors of either Parent or the Company if (i) the Merger shall not have been consummated by the Termination Date (as defined below), whether such date is before or after the date of approval by the stockholders of the Company; (ii) the approval of the Company's stockholders required by Section 7.1(a) shall not have been obtained at a meeting duly convened therefor or at any adjournment or postponement thereof; PROVIDED, HOWEVER, that if an Acquisition Proposal has been made by any Person prior to the time of such vote, the Company may not terminate this Agreement pursuant to this clause (ii) until a date that is not less than 90 days after the date of such vote, or (iii) any Order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger shall become final and non-appealable (whether before or after the approval by the stockholders of the Company or Parent); PROVIDED, that the right to terminate this Agreement pursuant to clause (i) above shall not be available to any party that has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the occurrence of the failure of the Merger to be consummated. For purposes hereof, the "TERMINATION DATE" shall be July 24, 2001; provided, however, that if the Merger shall have not been consummated by July 24, 2001 solely by reason of the S-4 Registration Statement not having been declared effective under the Securities Act, the Termination Date shall be September 24, 2001; provided further, however, that in the event that the S-4 Registration Statement is permitted to be declared effective under the Securities Act without prior SEC review, the Termination Date shall be April 24, 2001. 8.3. TERMINATION BY THE COMPANY. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the approval by stockholders of the Company referred to in Section 7.1(a), by action of the Board of 33 Directors of the Company: (a) if (i) the Company is not in material breach of any of the terms of this Agreement, (ii) the Board of Directors of the Company authorizes the Company, subject to complying with the terms of this Agreement, to enter into a binding written agreement concerning a transaction that constitutes a Superior Proposal and the Company notifies Parent in writing that it intends to enter into such an agreement, attaching the most current version of such agreement to such notice, (iii) Parent does not make, within five business days of receipt of the Company's written notification of its intention to enter into a binding agreement for a Superior Proposal, an offer that the Board of Directors of the Company determines, in good faith, is at least as favorable, taking into account, among other things, the long-term prospects and interests of the Company and its stockholders, as the Superior Proposal and (iv) the Company prior to such termination pays to Parent in immediately available funds the fees required to be paid pursuant to Section 8.5. The Company agrees (x) that it will not enter into a binding agreement referred to in clause (ii) above until at least the sixth business day after it has provided the notice to Parent required thereby and (y) to notify Parent promptly if its intention to enter into a written agreement referred to in its notification shall change at any time after giving such notification. (b) if there has been a material breach by Parent or Merger Subsidiary of any representation, warranty, covenant or agreement contained in this Agreement that is not curable or, if curable, is not cured within 30 days after written notice of such breach is given by the Company to the party committing such breach. (c) if there has occurred a Parent Material Adverse Effect. 8.4. TERMINATION BY PARENT. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Board of Directors of Parent if (a) the Company enters into a binding agreement for a Superior Proposal or the Board of Directors of the Company recommends a Superior Proposal or shall have withdrawn or adversely modified its approval or recommendation of this Agreement or failed to reconfirm its recommendation of this Agreement within five business days after a written request by Parent to do so, (b) there has been a material breach by the Company of any representation, warranty, covenant or agreement contained in this Agreement that is not curable or, if curable, is not cured within 30 days after written notice of such breach is given by Parent to the Company, (c) the Company, any of its Subsidiaries or any of their Representatives shall take any actions pursuant to clause (B), (C) or (D) of the proviso set forth in Section 6.2, or (d) there has occurred a Company Material Adverse Effect. 8.5. EFFECT OF TERMINATION AND ABANDONMENT. (a) In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article VIII, this Agreement (other than as set forth in Section 9.1) shall become void and of no effect with no liability on the part of any party hereto (or of any of its directors, officers, employees, agents, legal and financial advisors or other representatives); PROVIDED, HOWEVER, except as otherwise provided herein, no such termination shall relieve any party hereto of any liability or damages resulting from any breach of this Agreement. (b) In the event that (i) an Acquisition Proposal shall have been made to the Company 34 or any of its Subsidiaries or any of its stockholders or any Person shall have publicly announced an intention (whether or not conditional) to make any Acquisition Proposal with respect to the Company or any of its Subsidiaries and thereafter this Agreement is terminated by the Company pursuant to Section 8.2(i) or by either Parent or the Company pursuant to Section 8.2(ii) or (ii) this Agreement is terminated (A) by the Company pursuant to Section 8.3(a) or (B) by Parent pursuant to Section 8.4(a), then the Company shall promptly, but in no event later than two days after the date of such termination or such earlier time as required by this Agreement, pay to Parent a termination fee of $250,000 (the "TERMINATION FEE") and shall promptly, but in no event later than two days after being notified of such by Parent, pay to Parent an amount equal to all of the reasonable out-of-pocket charges and expenses incurred by Parent or Merger Subsidiary in connection with this Agreement and the transactions contemplated by this Agreement and substantiated to the Company in writing, in each case payable by wire transfer of same day funds ("EXPENSES"). (c) In the event this Agreement is terminated (A) by the Company pursuant to Section 8.2(i) or Section 8.2(ii) or (B) by Parent pursuant to Section 8.2(ii) or Section 8.4(c) and no fee is otherwise payable to Parent pursuant to paragraph (b) above, the Company shall promptly, but in no event later than two days after the date of such termination or such earlier time as required by this Agreement, pay to Parent the Expenses, payable by wire transfer of same day funds. If, within one year of such termination, the Company enters into an agreement concerning a transaction that constitutes an Acquisition Proposal, the Company at the time of entering into such Agreement shall pay to Parent the Termination Fee, payable by wire transfer of same day funds. (d) The Company acknowledges that the agreements contained in Sections 8.5(b) and (c) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Parent and Merger Subsidiary would not enter into this Agreement; accordingly, if the Company fails to promptly pay the amount due pursuant to either Section 8.5(b) or (c), and, in order to obtain such payment, Parent or Merger Subsidiary commences a suit which results in a judgment against the Company for the fee set forth therein the Company shall pay to Parent or Merger Subsidiary its costs and expenses (including reasonable attorneys' fees) in connection with such suit, together with interest from the date such amounts became due on the amounts owed at the prime rate (as determined by BankAmerica) in effect from time to time during such period. ARTICLE IX. MISCELLANEOUS AND GENERAL 9.1. SURVIVAL. This Article IX and the agreements of the Company, Parent and Merger Subsidiary contained in Section 6.6 (Taxation and Accounting) shall survive the consummation of the Merger. This Article IX and the agreements of the Company, Parent and Merger Subsidiary contained in Section 6.13 (Expenses) and Section 8.5 (Effect of Termination and Abandonment) shall survive the termination of this Agreement. All other representations, warranties, covenants and agreements in this Agreement shall not survive the consummation of the Merger or the termination of this Agreement. 35 9.2. MODIFICATION OR AMENDMENT. Subject to the provisions of the applicable Law, at any time prior to the Effective Time, the parties hereto may modify or amend this Agreement, by written agreement executed and delivered by duly authorized officers of the respective parties. 9.3. WAIVER OF CONDITIONS. The conditions to each of the parties' obligations to consummate the Merger are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable Law. 9.4. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. 9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States of America located in the Southern District of the State of New York solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby and thereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a New York State or Federal court. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 9.6 or in such other manner as may be permitted by law shall be valid and sufficient service thereof. (b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED 36 THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5. 9.6. NOTICES. All notices or other communications under this Agreement shall be in writing and shall be deemed duly given, effective (i) three business days later, if sent by registered or certified mail, return receipt requested, postage prepaid, (ii) when sent, if sent by telecopier or fax, provided that the telecopy or fax is promptly confirmed by telephone confirmation thereof, (iii) when served, if delivered personally to the intended recipient, and (iv) one business day later, if sent by overnight delivery via a national courier service, and in each case, addressed to the intended recipient at the address set forth in the preamble hereof. Any party may change the address to which notices or other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth: IF TO PARENT OR MERGER SUBSIDIARY Emergent Group Inc. 375 Park Avenue, 36th Floor New York, New York 10152 Attn: Mark Waldron Fax: (212) 202-4169 WITH A COPY TO Sonnenschein Nath & Rosenthal 1221 Avenue of the Americas New York, New York 10020 Attn: Ira I. Roxland, Esq. Fax: (212) 768-6800 IF TO COMPANY Medical Resources Management, Inc. 932 Grand Central Avenue Glendale, California 91201 Attn: Al Guadagno Fax: (818) 246-6943 WITH A COPY TO Sidley & Austin 555 West Fifth Street, Suite 4000 Los Angeles, California 90013 Attn: Robert W. Kadlec, Esq. Fax: (213) 896-6600 or to such other persons or addresses as may be designated in writing by the party to receive such 37 notice as provided above. 9.7. ENTIRE AGREEMENT; NO OTHER REPRESENTATIONS. This Agreement (including any exhibits hereto), the Company Disclosure Letter and the Parent Disclosure Letter constitute the entire agreement, and supersede all other prior agreements, understandings, representations and warranties both written and oral, among the parties, with respect to the subject matter hereof. 9.8. NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder, except as provided in Section 6.12.. 9.9. OBLIGATIONS OF PARENT AND OF THE COMPANY. Whenever this Agreement requires a Subsidiary of Parent to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause such Subsidiary to take such action. Whenever this Agreement requires a Subsidiary of the Company to take any action, such requirement shall be deemed to include an undertaking on the part of the Company to cause such Subsidiary to take such action and, after the Effective Time, on the part of the Surviving Corporation to cause such Subsidiary to take such action. 9.10. SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability or the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision so long as the economics or legal substance of the transactions contemplated hereby are not affected in any manner adverse in any material respect to any party, and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. 9.11. INTERPRETATION. The table of contents and headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to a Section or Exhibit, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." 9.12. ASSIGNMENT. This Agreement shall not be assignable by either party without the written consent of the other; PROVIDED, HOWEVER, that Parent may designate, by written notice to the Company, another wholly owned direct or indirect Subsidiary to be a Constituent Corporation in lieu of Merger Subsidiary, in which event all references herein to Merger Subsidiary shall be deemed references to such other Subsidiary, except that all representations and warranties made herein with respect to Merger Subsidiary as of the date hereof shall be deemed representations and warranties made with respect to such other Subsidiary as of the date of such designation. 38 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first written above. MEDICAL RESOURCES MANAGEMENT, INC. By: /s/Al Guadagno ------------------------------------ Name: Al Guadagno Title: Senior Vice President & CFO EMERGENT GROUP INC. By: /s/Mark W. Waldron ------------------------------------ Name: Mark W. Waldron Title: President & CEO MRM ACQUISITION INC. By: /s/Mark W. Waldron ------------------------------------ Name: Mark W. Waldron Title: President 39