ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (this "Agreement") is executed as of the
7th day of October, 1998, to be effective as of the 30th day of September,
1998, by and among DIVERSIFIED CORPORATE RESOURCES, INC., a Texas corporation
("DCRI"), DCRI ACQUISITION CORPORATION, a Texas corporation ("Buyer"), TEXCEL,
INC., a Pennsylvania corporation ("Texcel" or "Seller"), TEXCEL TECHNICAL
SERVICES, INC., a Pennsylvania corporation ("Texcel Technical" or "Seller")
(Texcel and Texcel Technical collectively referred to herein as the "Sellers"),
XXXXXX X. XXXXXXX, an individual ("Xxxxxxx"), and XXXX X. XXXX, an individual
("Xxxx"), XXXX X. XXXXXXX, an individual ("Xxxxxxx") and XXXXXXX X.
XXXXXXXXXXXX, an individual ("Janfrancisco") (Rinaldi, Kane, Xxxxxxx and
Xxxxxxxxxxxx are collectively referred to as the "Shareholders").
WHEREAS, Sellers are engaged in the business of providing staffing
services (the "Business");
WHEREAS, DCRI is engaged in the business of providing staffing services
and has formed Buyer as a wholly-owned subsidiary to acquire the Business;
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers, on the terms and conditions hereinafter set forth, the Business as
a going concern and certain of the properties and assets owned by Sellers (the
"Transaction");
WHEREAS, DCRI has agreed to assume certain obligations of Sellers and
to guarantee all obligations of Buyer hereunder; and
WHEREAS, the Shareholders, jointly and severally, have agreed to join
in the representations and warranties made by Sellers in this Agreement, to
indemnify DCRI and Buyer against certain Losses (as hereinafter defined), and to
execute certain related agreements in connection herewith;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, DCRI, Buyer, Sellers and the Shareholders hereby agree as
follows:
ARTICLE 1
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PURCHASE AND SALE OF ASSETS
1.1 Agreement to Purchase and Sell. On the terms and subject to the
conditions of this Agreement, each Seller agrees to sell, convey, transfer,
assign and deliver to Buyer, free and clear of all liens, claims and
encumbrances, and DCRI and Buyer agree to purchase and assume from each Seller,
(a) each Seller's respective assets and properties described in Section 1.2 (all
such assets and properties being herein collectively referred to as the "Assets"
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and individually referred to as an "Asset") and (b) the Assumed Liabilities (as
defined in Section 2.1). The Assets shall not include the Excluded Assets (as
defined in Section 1.3). 1.1
1.2 Assets to Be Conveyed. Subject to Section 1.3, the Assets shall consist
of all assets owned by each Seller or both Sellers as of the Closing (as defined
below) and used in connection with the Business and that are described in the
following clauses (a) through (o):
(a) Real Property Leases. The real estate leasehold interests of each
Seller (collectively, the "Leased Properties"), copies of which leases are
attached hereto as Schedule 1.2(a) (the "Real Property Leases").
(b) Equipment. All of each Seller's furniture, fixtures, equipment,
machinery, apparatus, appliances, vehicles, implements and all other tangible
personal property of every kind and description (the "Equipment"), including
without limitation, the assets listed in Schedule 1.2(b).
(c) Assumed Contracts. All right, title and interest of each Seller
in, to and under the contracts and agreements described on Schedule 1.2(c)
attached hereto (the "Assumed Contracts") and all of each Seller's rights
(including rights of refund and offset), privileges, claims, causes of action
and options relating or pertaining to the Assumed Contracts or any thereof.
(d) Permits. To the extent transferable, all right, title and interest
of each Seller in, to and under all permits and licenses relating to the
Business or all or any of the Assets.
(e) Books and Records. All of each Seller's books, records, papers and
instruments of whatever nature and wherever located, whether stored in or
readable or accessible by computer or otherwise, relating to the Business and
the Assets, including, without limitation, accounting and financial records,
sales records, customer data, supplier data, sales literature and other sales
aids, salary records, contract forms, technical data, graphic materials, pricing
and information manuals and customer files.
(f) Prepaid Expenses. All right, title and interest of each Seller in
and to all prepaid rentals and other prepaid expenses, bonds, deposits and
financial assurance requirements relating to any of the Assets or the Business.
(g) Insurance Proceeds. All insurance proceeds and insurance claims of
each Seller relating to all or any part of the Assets or the Business.
(h) Warranty Rights. The benefit of and the right to enforce the
covenants and warranties, if any, that a Seller is entitled to enforce with
respect to the Assets.
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(i) Computer Programs. All of each Seller's rights, if any, in
computer programs and computer software, along with license rights pertaining
thereto, to the extent relating or pertaining to the Business and or the Assets.
(j) Name. All of each Seller's right, title and interest in and to its
respective corporate name "Texcel, Inc." and "Texcel Technical Services, Inc.,"
all names derived from or bearing a resemblance thereto; and all related logos
and trade names including, without limitation, all of each Seller's corporate,
copyright, trademark and service xxxx rights and interests in such names, logos
and trade names, and goodwill associated therewith.
(k) Intangible Assets. All customer lists, patents, trademarks, trade
names, service marks, copyrights, processes, formulas, trade secrets,
proprietary and technical information, know-how, other trade rights and other
intangible assets, together with all rights to, and applications, licenses and
franchises for, any of the foregoing, relating to the Business, including, but
not limited to, those listed in Schedule 1.2(k).
(l) Other Intangibles. All right, title and interest of each Seller
in, to and under all rights, privileges, claims, causes of action and options
relating or pertaining to the Business and the Assets.
(m) Accounts Receivable. All of each Seller's accounts receivable from
customers and others and in and to any income and payment due to such Seller
arising out of the Business, all as more particularly described in Schedule
1.2(m); provided, that from the date of Schedule 1.2(m) through the Closing such
accounts receivable may be reasonably increased or decreased in the ordinary
course of business.
(n) Cash. All of each Seller's cash on hand and in its bank accounts,
marketable securities, cash equivalents and short-term investments.
(o) Miscellaneous. All other assets owned by each Seller or both
Sellers and used in connection with the Business other than Excluded Assets.
1.3 Assets Not to Be Conveyed. Notwithstanding anything to the contrary
contained herein, the Assets shall not include: (a) the corporate minute books
of each Seller; (b) all claims of a Seller for refunds of any income taxes
(whether federal, state, local, foreign or other) applicable to periods prior to
the Effective Date (as hereinafter defined); and (c) any rights accruing as a
result of, or any proceeds paid or payable in accordance with, this Agreement
(collectively, the "Excluded Assets").
1.4 Non-Assignable Contracts. In the case of any contract or agreement to
which a Seller is a party and that by its terms or by virtue of its subject
matter is not assignable without the consent of a third party (collectively, the
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"Non-Assignable Contracts"), such Seller will use its reasonable best efforts to
obtain, prior to the Closing, any written consents necessary to convey to Buyer
the benefit thereof. Notwithstanding any other provisions of this Agreement, in
the event that any third party to a Non-Assignable Contract has not consented to
an assignment thereof to Buyer for any reason, then Buyer shall have absolutely
no liability or obligation to Sellers, such third party or any other party with
respect to such Non-Assignable Contract and such Non-Assignable Contract shall
be deemed not to be an Asset or an Assigned Contract pursuant to the terms of
this Agreement; and, if any Non-Assignable Contract is not assigned by Buyer for
any reason, and Buyer considers in its sole judgment that such Non-Assignable
Contract is material to the business to be conducted by Buyer after the Closing
Date (as defined in Section 3.1) then, at Buyer's option, Buyer shall have no
obligation to consummate its purchase hereunder. In the event that Buyer
consummates its purchase hereunder and any Non-Assignable Contract has not been
assigned to Buyer for any reason then either (a) Buyer and Sellers shall
negotiate in good faith to adjust the Purchase Price based on such event and/or
(b) Buyer and Sellers shall cooperate in good faith with the other party in any
reasonable arrangement necessary or desirable to provide Buyer the benefits of
such Non-Assignable Contract.
ARTICLE 2
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PURCHASE PRICE
2.1 Purchase Price.
(a) The total purchase price for the Assets (the "Purchase Price")
shall be the sum of the following: (i) cash payment by a certified check at
Closing in the amount of $1.8 million; (ii) three (3) cash installment payments
(the "Installment Payments") in the amount of $800,000 on each of the three (3)
anniversaries following the Closing, subject to adjustment as provided in
Sections 2.1(b) and 2.1(c) hereof; (iii) issuance by DCRI to Sellers at Closing
of an aggregate of 100,000 shares of common stock, par value $.10 per share (the
"DCRI Common Stock"), of DCRI, plus (iv) the payment or assumption by Buyer of
those liabilities and obligations of a Seller or both Sellers listed on
Schedules 1.2(c) and 2.1 (the liabilities and obligations listed on Schedules
1.2(c) and 2.1 being referenced to as the "Assumed Liabilities").
(b) Subject to the provisions of Section 13.1(e) hereof, the
Installment Payments shall be adjusted upward in the event that the DCRI Share
Value (as hereinafter defined) is below $10.20 per share by the amount equal to
the product of 100,000 and the difference between $10.20 and the DCRI Share
Value. Such adjustment shall be equally divided among the three (3) Installment
Payments.
(c) An Installment Payment for an Installment Period shall be reduced
if Buyer's EBITDA (the "Applicable EBITDA") during any year of the three year
period (the "Installment Period"), from October 1, 1998, to September 30, 2001
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(each year for purposes of this Section 2.1 (c) shall begin on October 1 and end
on September 30), is not equal to at least $1,025,000, as below provided.
Recognizing that determination of Applicable EBITDA will extend beyond the dates
each Installment Payment is due and payable, DCRI shall make a reasonable
estimate of Buyer's Applicable EBITDA and make an Installment Payment based upon
such estimate; once the actual amount of the Applicable EBITDA of Buyer is
determined, DCRI shall (a) make an additional payment to Sellers if the
Installment Payment made was less than what should have been paid, or (b) reduce
the next Installment Payment to be made if any Installment Payment made exceeds
what should have been paid based upon the actual amount of the Buyer's
Applicable EBITDA. The reductions in the Installment Payments shall be
determined as follows:
1. If Buyer's Applicable EBITDA during any Installment Period is
less than $1,025,000, the Installment Payment for such Installment Period shall
be reduced by $120,000.
2. If Buyer's Applicable EBITDA during any Installment Period is
less than $865,000, the Installment Payment for such Installment Period shall be
reduced by a further $80,000 in addition to the $120,000 reduction pursuant to
Section 2.1 (c)(1) of this Agreement.
(d) For purposes of Section 2.1(c), EBITDA shall mean earnings before
interest, taxes, depreciation and amortization as determined by DCRI in
accordance with generally accepted accounting principles as consistently
applied. For purposes of calculating Buyer's EBITDA, such calculation shall
exclude (i) the revenues and profits from any business operations other than
those of the Acquired companies unless and to the extent that DCRI and Sellers
mutually agree that the revenues and profits from any other business operations
are to be included in determining EBITDA, and (ii) any corporate overhead
allocation from DCRI unless (but only to the extent that) DCRI eliminates
corporate overhead previously incurred by Sellers such that the calculation of
EBITDA with respect to corporate overhead after the Closing shall be determined
on a basis consistent with the past practices of the Sellers.
(e) The parties agree that (i) DCRI shall not be deemed to be in
default under the terms of this Agreement if (A) the estimate of Applicable
EBITDA of Buyer is not unreasonable, and (B) if the actual amount of Applicable
EBITDA of Buyer is determined within forty-five (45) days from the date an
Installment Payment is initially due and payable, (ii) DCRI shall thereafter
have the right to make adjustments with respect to the Applicable EBITDA of
Buyer if such adjustments are determined to be appropriate by DCRI in connection
with its annual audit by a firm of independent public accountants, (iii) DCRI is
obligated to provide to Sellers a detailed schedule of information and
extraordinary adjustments, if any, each time DCRI makes an Installment Payment
to Sellers, makes a final determination of actual Applicable EBITDA of Buyer, or
makes any adjustments to Applicable EBITDA of Buyer, (iv) Sellers and its
designated representatives shall have the right to review and audit each
determination of actual Applicable EBITDA of Buyer and any subsequent
adjustments to actual Applicable EBITDA of Buyer, provided however, that such
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review and or audit must be initiated within sixty (60) days from the date of
DCRI providing to Sellers a determination of Applicable EBITDA of Buyer, and
must be completed within a reasonable period of time thereafter, (v) DCRI and
Buyer shall cooperate with Sellers and its designated representatives in the
connection with the process of Sellers reviewing or auditing a determination by
DCRI related to applicable EBITDA of Buyer, and (vi) if DCRI and Sellers are
unable to resolve within thirty (30) days any disputes as to actual Applicable
EBITDA of Buyer or adjustments thereto, such disputes shall be resolved by
arbitration pursuant to the arbitration provisions of this Agreement.
(f) In the event that any Installment Payment made to the Sellers
exceeds the amount that should have been paid to Sellers, the amount of
overpayment shall be a liability payable by the Sellers and the Shareholders and
may, at the option of Buyer, be deducted from any amounts thereafter payable by
Buyer to Sellers or the Shareholders. In the event that any Installment Payment
made to Sellers is less than the amount that should have been paid to Sellers,
the amount of underpayment shall be promptly paid by Buyer to Sellers following
the determination of the actual amount payable to Sellers.
(g) For purposes hereof, DCRI Share Value shall mean the higher of (i)
the average per share closing price of DCRI Common Stock on the American Stock
Exchange (the "AMEX") for the five (5) consecutive trading days ending two (2)
business days prior to the Closing Date, or (ii) $7.80 per share.
2.2 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Sellers and the Assets in the manner set forth in Schedule 2.2;
provided that part of the Purchase Price shall be allocated in the manner set
forth in Schedule 2.2 to the owners of the capital stock of Sellers as
compensation paid to such individuals in consideration of their respective
covenants regarding noncompetition. The parties agree (a) to comply with all
filing, notice and reporting requirements described in Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code") and (b) that, without the
consent of all parties, no party will make any representation to any other party
as to such allocation that is at variance with the allocation set forth on such
schedule or take any position on their income tax returns or any other document
that is inconsistent with such allocation.
2.3 Prorations. The following matters and items pertaining to the each of
the Assets shall be apportioned (based upon a 365-day year) between Sellers and
Buyer, or where applicable, credited in total to Sellers or Buyer, as the case
may be, as of the Effective Date. Unless otherwise indicated below, Buyer shall
receive a credit for any of the items in this Section 2.3 to the extent the same
are accrued but unpaid as of the Effective Date (whether or not due, owing or
delinquent as of the Effective Date), and Sellers shall receive a credit to the
extent any of the items in this Section 2.3 shall have been paid prior to the
Effective Date to the extent the payment thereof relates to any period of time
after the Effective Date. Net credits in favor of Buyer shall be deducted from
the Purchase Price, and net credits in favor of Seller shall be added to the
Purchase Price. The provisions of this Section 2.3 shall survive the Closing.
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2.1
(a) Taxes. All taxes (other than federal, state, local and
foreign income, capital stock, windfall profits and franchise taxes) shall be
prorated as of the Effective Date between Buyer and Sellers. If the amount of
any such taxes is not ascertainable on the Effective Date, the proration
therefor shall be based on the most recent available xxxx and adjusted as
necessary on a post-closing basis.
(b) Leases. Any amounts prepaid, accrued or due and payable
under the Real Property Leases with respect to common areas shall be prorated as
of the Effective Date between Buyer and Seller.
ARTICLE 3
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CLOSING
3.1 Time and Place of Closing. The sale and purchase of the Assets pursuant
to this Agreement (the "Closing") shall take place at the principal offices of
Xxxxxxx, Xxxxxx & Xxxx, P.C., counsel for Seller, located at 0000 Xxxxxx Xxxxxxx
West, Suite 320, Blue Xxxx, Pennsylvania, or at such other time and place as the
parties may agree; but in no event later than October 15, 1998. The date of
Closing is referred to in this Agreement as the "Closing Date." The parties
agree that time is of the essence with respect to the foregoing and all other
time periods set forth herein.
3.2 Actions to be Taken at Closing by Seller. At the Closing and subject to
the terms and conditions hereof, Sellers, jointly and severally, agree to take
the following actions, all of which shall constitute conditions precedent to
DCRI's and Buyer's obligations to close hereunder:
(a) execute and deliver to Buyer the following:
1. a lease assignment and assumption (each a "Lease Assignment"
and collectively the "Lease Assignments") in form and substance acceptable to
Buyer that transfers, assigns and conveys to Buyer all of each Seller's estates,
rights, titles and interests in, to and under each of the Real Property Leases;
2. bills of sale executed by each Seller conveying to Buyer all
of the personal property included in the Assets in the form of Schedule
3.2(a)(2) attached hereto (the "Bills of Sale");
3. an assignment and assumption agreement respecting all of the
Assets and Assumed Liabilities in the form of Schedule 3.2(a)(3) hereto (the
"Assumption Agreement");
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4. such other agreements, documents and/or instruments, including
such specific assignments, bills of sale and other instruments of conveyance and
transfer, in form and substance acceptable to Buyer and to vest in Buyer title
thereto free and clear of all liens, claims and encumbrances;
(b) deliver to Buyer the following:
1. certificates of the Secretary of the Commonwealth of
Pennsylvania dated as of a recent date, duly certifying as to the existence and
good standing of each Seller as a corporation under the laws of the State of
Pennsylvania;
2. written instruments evidencing all consents necessary to
consummate the transaction contemplated hereby, including, without limitation,
consents necessary to transfer the Assumed Contracts;
3. written consents to assignments, estoppel certificates and
subordination, nondisturbance and attornment agreements from the lessor with
respect to each Leasehold Interest being assigned to Buyer by a Seller hereunder
and each mortgagee that possesses a mortgage on the real estate, or any part
thereof, that is subject to such Leasehold Interest;
4. all documentation reasonably required by Buyer to effect the
change by each Seller of its corporate name to a new name bearing no resemblance
to its present corporate name;
5. certificates duly executed by the Secretary or Assistant
Secretary of each Seller pursuant to which such officer shall certify (A) the
due adoption by the Board of Directors and by the shareholders of such Seller of
corporate resolutions attached to such certificate authorizing the transaction
and the execution and delivery of this Agreement and the other agreements and
documents contemplated hereby and the taking of all actions contemplated hereby
and thereby; (B) the incumbency and true signatures of those officers of such
Seller duly authorized to act on its behalf in connection with the Transaction
and this Agreement and to execute and deliver this Agreement and the other
agreements and documents contemplated hereby on behalf of such Seller; and (C)
that the copy of the Articles of Incorporation and Bylaws of such Seller
attached to such certificate are true and correct and such Articles of
Incorporation and Bylaws have not been amended except as reflected in such copy;
6. original copies of all Assumed Contracts and all amendments,
supplements or modifications thereto, together with a written assignment thereof
to Buyer;
7. all of each Seller's books and records constituting a part of
the Assets;
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8. the certificate of each Seller referred to in Section 9.1 and
Section 9.2;
9. possession or constructive possession of the Assets and access
to and keys for any properties related to the Business;
10. such documents necessary to release the Assets from all
liens, claims and encumbrances, which documents shall be in form and substance
satisfactory to Buyer and to Buyer's counsel;
11. UCC-3 Termination Statements with respect to all recorded
UCC-1 Financing Statements affecting the Assets;
12. the legal opinion referred to in Section 9.5;
13. cause each of the Shareholders to enter into a Lock-Up
Agreement with DCRI (the "Lock-Up Letter Agreement") with respect to the shares
of DCRI Common Stock received by Sellers pursuant to Section 2.1(a)(iii) and
distributed to the Shareholders, substantially in the form of Schedule
3.2(a)(13);
14. cause Xxxxxxx to enter into an employment agreement with
Buyer (the "Xxxxxxx Employment Agreement"), effective as of October 1, 1998,
substantially in the form of Schedule 3.2(a)(14) hereto;
15. cause Janfrancisco to enter into an employment agreement with
Buyer (the "Janfrancisco Employment Agreement"), effective as of October 1,
1998, substantially in the form of Schedule 3.2(a)(15) hereto;
16. cause Xxxx to enter into an employment agreement with Buyer
(the "Xxxx Employment Agreement") effective as of October 1, 1998, substantially
in the form of Schedule 3.2(a)(16) hereto;
17. cause Xxxxxxx to enter into an employment agreement with
Buyer (the "Xxxxxxx Employment Agreement") effective as of October 1, 1998,
substantially in the form of Schedule 3.2(a)(17) hereto;
18. cause each of the persons listed in Schedule 3.2(a)(18)
hereto to enter into an Agreement with Buyer (the "Non-Shareholder Agreement")
with respect to both shares of DCRI Common Stock to be issued after closing to
those persons (pursuant to which such persons will be entitled to stock bonus
awards in the amount of $50,000, in the aggregate, during each of the three (3)
years following the Closing Date), and options to purchase shares of DCRI Common
Stock to be granted to such persons (pursuant to which such persons will be
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awarded options to purchase, in the aggregate, 20,000 shares of DCRI Common
Stock), substantially in the form of Schedule 3.2(a)(18) hereto;
19. cause Sellers to execute and deliver to DCRI an investment
letter (the "Investment Letter") substantially in the form of Schedule
3.2(a)(19) hereto; and
20. all other documents required to be executed and delivered by
a Seller or Sellers pursuant to this Agreement.
(c) perform all other obligations required to be performed at Closing
by Sellers pursuant to this Agreement.
3.3 Actions to be Taken at Closing by Shareholders. At the Closing, subject
to the terms and conditions hereof, each Shareholder shall take the following
actions, all of which shall constitute conditions precedent to DCRI's and
Buyer's obligations to close hereunder:
(a) execute and deliver to DCRI the Lock-Up Letter Agreement;
(b) in the case of Xxxxxxx only, execute and deliver to Buyer the
Xxxxxxx Employment Agreement;
(c) in the case of Xxxx only, execute and deliver to Buyer the Xxxx
Employment Agreement;
(d) in case of Xxxxxxx only, execute and deliver to Buyer the Xxxxxxx
Employment Agreement;
(e) in case of Janfrancisco only, execute and deliver to Buyer the
Janfrancisco Employment Agreement; and
(f) to the extent shares of DCRI Common Stock are to be issued to the
Shareholder, each of the Shareholders shall execute and deliver to DCRI an
investment letter substantially in the form of Schedule 3.29a)(19).
3.4 Actions to be Taken at Closing by Buyer. At the Closing, subject to the
terms and conditions hereof, DCRI or Buyer shall take the following actions, all
of which shall constitute conditions precedent to the obligations of each Seller
and each Shareholder to close hereunder:
(a) execute and deliver to Sellers the following:
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1. the Lease Assignments; and
2. the Assumption Agreement.
(b) deliver to Sellers the following:
1. a certificate duly executed by the Secretary or Assistant
Secretary of each of DCRI and Buyer pursuant to which such officer shall certify
(i) the due adoption by the Board of Directors of DCRI and Buyer of corporate
resolutions attached to such certificate authorizing the execution and delivery
of this Agreement and the other agreements and documents contemplated hereby and
the taking of all actions contemplated hereby and thereby, and (ii) the
incumbency and true signatures of those officers of DCRI and Buyer duly
authorized to act on their respective behalf, in connection with the Transaction
and this Agreement and to execute and deliver this Agreement and the other
agreements and documents contemplated hereby on behalf of DCRI and Buyer;
2. the certificate of Buyer referred to in Section 10.1 and
10.1 and Section 10.2;
3. stock certificates evidencing the shares of DCRI Common Stock
to be issued pursuant to Section 2.1(a)(iii) registered in the names and
denominations requested by Sellers at least two (2) business days prior to the
Closing Date;
4. evidence of the listing on AMEX of the shares (the "DCRI
Shares") to be issued at Closing pursuant to Section 2.1(a)(iii), on exercise of
the stock options evidenced by the Non-Shareholder Agreements as provided in
Section 10.4;
5. the legal opinion referred to in Section 10.5;
6. to enter into the Lock-Up Letter Agreements, the Xxxxxxx
Employment Agreement, the Xxxx Employment Agreement, the Xxxxxxx Employment
Agreement, the Janfrancisco Employment Agreement, and the Non-Shareholder
Agreements; and
7. all other documents required to be executed and delivered by
DCRI or Buyer pursuant to this Agreement.
(c) execute and deliver to each of the persons listed on Schedule
3.2(17) the NonShareholder Agreement; and
(d) perform all other obligations required to be performed at Closing
by DCRI or Buyer pursuant to this Agreement.
3.5 Effective Date. Upon the Closing of the transactions contemplated
herein, the exchange and transfer of the Assets and the assumption of the
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Assumed Liabilities shall be deemed to have occurred and shall be effective for
accounting and tax purposes as of 12:01 a.m. on October 1, 1998 (the "Effective
Date"); provided that this provision is not intended to modify any of the
representations, warranties, covenants or undertakings given by any party hereto
which relate to the Closing Date.
3.6 Schedules. Each of the parties hereto acknowledge that (a) one or more
of the schedules to be attached to this Agreement (collectively referred to as
the "Schedules") have not been completed at the time of execution of this
Agreement, (b) if Sellers and Buyer are unable to mutually agree upon and/or
accept, as the case may be, any of the Schedules prior to October 15, 1998, and
closing hereunder has not occurred, both Sellers and Buyer have the right to
terminate this Agreement by promptly giving written notice thereof to the other,
and (c) if either party elect to terminate this Agreement, pursuant to this
Section 3.6, none of the parties hereto shall have any liabilities or
responsibilities to the other parties. Each of the parties shall use their best
efforts to complete all of the Schedules and to satisfy any of the objections
thereto of any party to this Agreement.
ARTICLE 4
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PERSONNEL AND EMPLOYEE BENEFITS
4.1 Personnel. Buyer shall, after the Closing, offer employment on a
temporary or permanent basis to the employees of each Seller (collectively, the
"Employees"). Each Seller shall encourage its Employees offered employment by
Buyer to accept employment with Buyer, and Sellers shall not, directly or
indirectly, solicit the employment of, or seek to retain the services of, any
such Employees without the prior written consent of Buyer.
4.2 Employee Benefits. Buyer expressly is not required to assume, adopt or
accept any other employee benefit plan, contract, practice, program, policy or
arrangement of any kind of either Seller, including, without limitation, any
stock option, bonus, compensation, retirement, profit sharing, vacation,
medical, disability benefit, life insurance or severance pay plan, contract,
practice, program, policy or arrangement and shall have no liability whatsoever
under any such employee benefit plan, contract, practice, program, policy or
arrangement.
Notwithstanding the foregoing, Buyer agrees to (a) make no changes in
the compensation of any employees of Sellers, other than Xxxxxxx who shall be
compensated in the manner set forth in the Xxxxxxx Employment Agreement during
the ninety (90) day period of time subsequent to the Closing Date, (b) maintain,
during the years 1999, 2000 and 2001, a cash bonus plan for the employees of the
Sellers which is comparable to the bonus plan of the Sellers which is described
in Schedule 4.2(b) to this Agreement, (c) assume responsibility for the accrued
vacation time of all employees of Sellers, other than the Shareholders, which is
set forth in Schedule 4.2(c) to this Agreement, and (d) continue in place, until
at least December 31, 1998, the group health plan of Sellers which is described
in Schedule 4.2(d) to this Agreement. Unless Buyer and Xxxxxxx hereafter agree
to the contrary in writing, all bonus compensation payable by Buyer to Xxxxxxx
is as set forth in the Xxxxxxx Employment Agreement.
ARTICLE 5
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SELLERS' AND SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES
Each Seller and each Shareholder, jointly and severally, represent and
warrant to DCRI and Buyer as follows:
5.1 Organization and Standing. Each Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Pennsylvania, such being the only jurisdiction where Seller conducts business or
owns property.
5.2 Authority. Each Seller has full power and authority to own and lease
its Assets and to conduct the Business as it is now being conducted by each
Seller, and to execute and deliver this Agreement and the other agreements and
documents contemplated hereby and to carry out the terms and obligations hereof
and thereof. Each Seller has taken all corporate action necessary to authorize
the execution, delivery and performance of this Agreement and the other
agreements and documents contemplated hereby. Each Shareholder has the authority
to execute this Agreement and the other agreements and documents contemplated
hereby to be executed by a Shareholder (collectively, the "Shareholder
Agreements").
5.3 Execution and Delivery. This Agreement has been, and the other agree-
ments and documents contemplated hereby to be executed by a Seller have been, or
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at Closing will be, duly executed by the applicable Seller, and each constitutes
the valid and binding obligation of such Seller, enforceable in accordance with
their respective terms and conditions. This Agreement has been, and the
Shareholders Agreements at Closing will be, duly executed by the applicable
Shareholder, and each constitutes the valid and binding obligation of such
Shareholder, enforceable in accordance with their respective terms and
conditions.
5.4 Capitalization. The Shareholders, together with the persons listed on
Schedule 5.4 (which schedule sets forth the percentage interest held by such
shareholders of each Seller), owns all of the issued and outstanding capital
stock of Sellers, free and clear of all liens, claims, encumbrances, equities
and proxies, except as listed on Schedule 5.4. Each outstanding share of capital
stock of each Seller has been legally and validly issued and is fully paid and
nonassessable. Except as listed on Schedule 5.4, there exist no options,
warrants, subscriptions or other rights to purchase, or securities convertible
into or exchangeable for, any of the authorized or outstanding securities of
either of Texcel or Texcel Technical. Except as set forth in Schedule 5.4, no
shares of capital stock of either Texcel or Texcel Technical are owned by either
of Texcel or Texcel Technical in treasury or otherwise have been issued or
disposed of in violation of the preemptive rights of any of the shareholders of
either Texcel or Texcel Technical.
5.5 Corporate Records. The copies of the Articles of Incorporation and all
amendments thereto and the Bylaws of each of Texcel and Texcel Technical that
have been delivered to DCRI are true, correct and complete copies thereof. The
minute books of Texcel and Texcel Technical, copies of which have been delivered
to DCRI, contain accurate minutes of all meetings of, and accurate consents to
all actions taken without a meeting by, the Boards of Directors (and any
committees thereof) and the stockholders of Texcel and Texcel Technical since
the incorporation of Texcel and Texcel Technical.
5.6 Compliance with Laws, Permits and Instruments. Neither Seller is in
violation of or default under, and the execution and delivery of this Agreement
and the other agreements and documents contemplated hereby by each Seller will
not violate or be in conflict with or result in the creation or imposition of
any lien, charge or encumbrance under (a) any material provision of any Assumed
Contract or any other contract or agreement to which either Seller is a party or
by which any of the Assets are bound, (b) any provision of the charter or Bylaws
of either Seller, (c) any federal, state or local law, statute, regulation or
ordinance applicable to the Business or any of the Assets, or (d) any provision
of either Seller's permits or licenses affecting or relating to the Assets or
the Business. To the knowledge of Sellers and the Shareholders, each Seller is
in compliance in all material respects with all federal, state or local laws,
statutes, regulations or ordinances governing or applicable to the Business or
the Assets.
5.7 Consents. Except for the consents specified in Schedule 5.7 hereto (all
of which have been obtained or will have been obtained prior to Closing), no
approval, consent, authorization or action of or filing with any governmental
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body or other third party is required on the part of either Seller in connection
with (a) the execution, delivery or performance by either Seller of this
Agreement or the other agreements and documents contemplated hereby or (b) the
consummation by either Seller of the Transaction, including, without limitation,
the assumption by Buyer of the Assumed Contracts.
5.8 Assets; Title to Assets; Liens. Except for the Excluded Assets
described in Section 1.3, the Assets described in clauses (a) through (o) of
Section 1.2 hereof are the only assets, properties, rights and interests used by
the Sellers in connection with the Business. The Assets to be conveyed to Buyer
under this Agreement constitute all of the assets, properties, rights and
interests necessary to conduct the Business in substantially the same manner as
conducted by Sellers prior to the Closing Date. Except with respect to the
Excluded Assets described in Section 1.3, no officer, director, shareholder or
employee of either Seller has retained any material interest in any property,
real or personal, tangible or intangible, used or pertaining to Business of
either Seller. Sellers have good and marketable title to all of the Assets, free
and clear of any mortgages, liens, security interests, pledges, claims and other
encumbrances of any kind or nature whatsoever (collectively, the "Liens"),
except for those permitted encumbrances described on Schedule 5.8 hereto. Except
as described in Schedule 5.8 hereto, no mortgage, financing statement or similar
document that names either Seller as debtor and that covers any of the Assets is
on file in any jurisdiction and neither Seller has signed any presently
effective security agreement authorizing any secured party thereunder to file
any such financing statement. The execution, delivery and performance of this
Agreement by Sellers will not result in the creation or imposition of any Lien
on any of the Assets.
5.9 Condition of Assets. The Equipment (other than obsolete equipment that
is neither being used in the Business nor necessary for the conduct of the
Business consistent with past practices): (a) has been properly maintained and
is in good operating condition (except for ordinary wear and tear, which in the
aggregate will not have a material adverse effect on the Business), (b) is
capable of being used in the Business as presently being conducted without
present need for repair or replacement except in the ordinary course of the
Business, and (c) conforms in all material respects with all applicable legal
requirements.
5.10 Permits. To the knowledge of Sellers and the Shareholders, Sellers
possess all the permits and licenses necessary to own, operate, use and maintain
the Assets in the manner in which they are now being maintained and operated and
to conduct the Business as now being conducted. Such permits and licenses are
either (a) assignable to DCRI or Buyer without the consent or approval of any
governmental body or third party or (b) of such a ministerial nature that
suitable replacements will be readily obtainable by Buyer in due course upon
proper application therefor without Buyer incurring any material cost or
expense. Seller is in compliance in all material respects with the terms of such
permits and licenses.
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5.11 Changes. Except as described in Schedule 5.11 hereto, since June 30,
1998, (a) there has been no material adverse change nor any event or condition
that has had, or has a reasonable possibility of having in the future, a
material adverse change with respect to the financial condition, assets,
liabilities, business or prospects of a Seller; (b) the Business has been
conducted only in the ordinary course and, except as previously disclosed to
Buyer in writing, in substantially the same manner in which it had been
previously conducted; (c) neither Seller has entered into any transactions
whatsoever (except this Agreement) with respect to the Assets or the conduct of
the Business other than in the ordinary course of the Business; (d) neither
Seller has sold, leased, mortgaged, pledged or subjected to any lien, security
interest or other charge or otherwise encumbered or disposed of any of the
Assets other than in the ordinary course of the Business; (e) the Assets have
been maintained and repaired in the usual and ordinary course and operated in a
good and workmanlike and prudent manner consistent with past practices; (f)
neither Seller has waived any material rights or forgiven any material claims
constituting or which would constitute an Asset; (g) neither Seller has lost or
terminated employees, customers or suppliers that could or does materially and
adversely affect its business or assets; and (h) neither Seller has entered into
any commitment or transaction or experienced any other event that is material to
the Assets, the Business or this Agreement or to any of the other agreements and
documents executed or to be executed pursuant to this Agreement or to the
transaction contemplated hereby or thereby.
5.12 Assumed Contracts. Sellers have previously delivered or made available
to Buyer true, correct and complete copies of all of the Assumed Contracts
described in Schedule 1.2(c). Schedule 1.2(c) contains a complete and accurate
list of all contracts to which either Seller is a party and that in any way
relate to the operations or properties of the Business or that are or will be
binding upon the Business or the Assets. All of the Assumed Contracts are valid
and in full force and effect and neither Seller nor, to the best of each
Seller's and each Shareholder's knowledge, any other party to the Assumed
Contracts has breached any material provision of, is in violation or in default
in any material respect under the terms of, and no event has occurred that, with
the lapse of time or action by a third party or both, would result in a
violation or a default in any material respect under the terms of, or in
acceleration of any payments due under, any Assumed Contract.
5.13 Real Property Leases. Each Seller has heretofore delivered to Buyer
correct and complete copies of the Real Property Leases and all amendments
thereto; a copy of such Real Property Leases and all amendments are attached
hereto as Schedule 1.2(a). Neither Seller nor, to each Seller's and each
Shareholder's knowledge, the landlord under any such lease has breached any
material provision of or is in violation or in default in any material respect
under the terms of such lease. Sellers enjoy peaceful and undisturbed possession
under each of the Real Property Leases, and each such lease is valid and
subsisting and in full force and effect. Neither Seller has received any written
notice from the landlord under any of the Real Property Leases that there exists
an event or condition that has not since been cured or waived and that, with or
without the passage of time or the giving of notice or both, would constitute
after the date hereof a default under such lease.
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5.14 Taxes.
(a) Each Seller has filed all federal, state and other tax reports or
returns required by applicable legal requirements to be filed by it in
connection with the Assets or the Business and has either discharged or caused
to be discharged, as the same have become due, all taxes attributable or
relating to the Assets or the Business for any period or periods ending on or
before the Closing Date.
(b) All such tax reports or returns fairly reflect the taxes of each
Seller for the periods covered thereby. Neither Seller is delinquent in the
payment of any tax, assessment or governmental charge, there is no tax
deficiency or delinquency asserted against either Seller, and there is no unpaid
assessment, proposal for additional taxes, deficiency or delinquency in the
payment of any of the taxes of either Seller that could be asserted by any
taxing authority. No Internal Revenue Service audit of either Seller is pending
or, to Sellers' and the Shareholders' knowledge, threatened, and the results of
any completed audits are properly reflected in the Financial Statements (as
defined in Section 5.18). Neither Seller has not granted any extension to any
taxing authority of the limitation period during which any tax liability may be
asserted. Neither Seller has committed any violation of any federal, state,
local or foreign tax laws. All monies required to be withheld by either Seller
from Employees or collected from customers for income taxes, social security and
unemployment insurance taxes and sales, excise and use taxes, and the portion of
any such taxes to be paid by Sellers to governmental agencies or set aside in
accounts for such purpose have been so paid or set aside, or such monies have
been approved, reserved against and entered upon the books of Sellers.
(c) Each Seller is and has been an "S Corporation," as that term is
defined in Code ss.1361, from the dates of its incorporation through and
including the taxable year ending on the date immediately prior to the Closing.
Shareholders have always treated the Sellers as S corporations for federal
income tax purposes.
5.15 Litigation. Except as disclosed on Schedule 5.15 hereto, no legal
action, suit or proceeding, judicial or administrative, or governmental
investigation is pending, or to each Seller's and each Shareholder's knowledge,
threatened against either Seller or any of the Assets that (a) if adversely
determined, has a reasonable possibility of causing in the future a material
adverse effect on the Business or the Assets or (b) questions or might question
the validity of this Agreement or any actions taken or to be taken by either
Seller pursuant hereto or seeks to enjoin or otherwise restrain the Transaction.
Neither Seller knows of any basis for any such action, suit, proceeding or
investigation. Except as disclosed on Schedule 5.15 hereto, there are no orders,
decrees or judgments of any court or governmental body against either Seller (i)
that remain undischarged or otherwise are in effect and that interfere in any
respect with, or impose a burden on, the Business or the operation or use of the
Assets in the ordinary conduct of the Business or (ii) with respect to which
either Seller is in default..
5.16 Employee Benefit Plans and ERISA. Except as listed on Schedule 5.16
hereto, none of the Sellers maintain or sponsor or make or is required to make
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contributions to any pension, profit-sharing, stock bonus, stock option, thrift
or other retirement plan, medical, hospitalization, vision, dental, life,
disability, vacation or other insurance or benefit plan, employee stock
ownership plan, deferred compensation, stock ownership, stock purchase,
performance share, bonus, benefit or other incentive plan, severance plan or
other similar plan, agreement, arrangement or understanding relating to any of
the Sellers or their respective employees (the "Employee Benefit Plans"),
whether or not such plan is or is intended to be qualified under Section 401(a),
404A or any other section of the Code, including without limitation, all
employee benefit plans (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), whether or not
subject to the provisions of ERISA. Except as set forth in Schedule 5.16, each
Employee Benefit Plan maintained or sponsored by either of the Sellers or to
which either of the Sellers makes or is required to make employer contributions
(collectively, the "Plans") is in full force and effect in accordance with its
terms and is, and each plan administrator and fiduciary of each Plan is, in
compliance with all applicable requirements of ERISA and other applicable laws,
regulations and rulings. The only Plans that are "pension benefit plans" (within
the meaning of Section 3(2) of ERISA), other than any such plans that are
described in Section 401(a)(1) of ERISA, maintained or sponsored by either of
the Sellers or to which either of the Sellers makes or is required to make
employer contributions, are identified on Schedule 5.16 as such (the "Pension
Benefit Plans"). No Pension Benefit Plan or any trust created under one of the
Pension Benefit Plans or any trustee, administrator or sponsor thereof, has
engaged in a "prohibited transaction" as that term is defined in Section
4975(c)(1) of the Code, that could subject the Pension Benefit Plan, trust,
trustee, administrator or sponsor thereof, or any party dealing with the Pension
Benefit Plan or any such trust to the tax or penalty on prohibited transactions
imposed by said Section 4975, nor is the fiduciary (as defined in Section 3 of
ERISA) of the Pension Benefit Plan or any employee benefit plan (as defined in
Section 3 of ERISA) maintained by either of the Sellers acting in a manner that
constitutes a breach of its fiduciary duty, as set forth in ERISA. Except as set
forth in Schedule 5.16, the Pension Benefit Plans have not been terminated, nor
have contributions thereto been discontinued, nor have there been any
"reportable events," as that term is defined in Section 4043 of ERISA, since the
effective date of Section 4043 of ERISA. The Pension Benefit Plans have not
incurred any "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA (whether or not waived), since the effective date of
Section 302 of ERISA, or prior thereto, and all contributions required to be
made have been made. Prior to the Closing Date, all Plans will either be
terminated or the participation of employees of Sellers therein will cease.
Neither of the Sellers has an existing defined benefit pension plan covering its
employees. None of the Pension Benefit Plans identified on Schedule 5.16 are
multiemployer plans as defined in Section 3(37) of ERISA. All appropriate
administrative actions and required compliance with appropriate administrative
actions and required compliance with appropriate Internal Revenue Service and
Department of Labor rules and regulations have been taken or are in process in a
timely manner. No contributions pursuant to the Pension Benefit Plans have been
made in such amounts as would violate Section 404 of the Code so as to
disqualify the accompanying trust. Each of the Sellers has in force sufficient
bonding for every fiduciary who is required to be bonded with respect to the
Pension Benefit Plans pursuant to Section 412 of ERISA. There does not exist
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any pending or, to the best of the knowledge of Sellers and Shareholders,
threatened litigation against any fiduciary of any Pension Benefit Plan, nor has
any bonding company been called on to defend any such fiduciary. A true and
complete copy of each existing Plan has been furnished to DCRI along with the
most recent favorable determination letter issued by the Internal Revenue
Service with respect thereto and the two most recent annual reports (on form 550
series) required to be filed with respect thereto.
5.17 Group Health Plans. With respect to either Seller's "group health
plan(s)" (as defined in Section 4980B(g)(2) of the Code, if any, except as set
forth in Schedule 5.17:
(a) Each Seller has complied in all material respects with the
continuation health care coverage requirements of Section 4980B of the Code, as
such requirements apply with respect to any Employee (or prior employee of
either Seller) or any "qualified beneficiary" of such employee (as defined in
Section 4980B(g)(1) of the Code) on or prior to (i) the Closing Date.
(b) Except as has been previously disclosed to Buyer, neither Seller
has any present intention of terminating any group health plan(s) that Seller
currently maintains.
(c) Each Seller is solely responsible for complying with the
requirements of Section 4980B of the Code with respect to each Employee (and any
qualified beneficiary of such Employee), who does not become an employee of the
Buyer effective immediately after the Closing Date, it being the intention of
the parties that any group health plan(s) maintained by Buyer shall not
constitute a successor plan(s) to the Seller's group health plan(s), and that
Buyer is not a successor employer with respect to Seller's group health plan(s),
nor is Seller a predecessor employer with respect to Buyer's group health
plan(s).
5.18 Financial Information. The unaudited financial statements of each
Seller set forth in Schedule 5.18 hereto (the "Financial Statements") were
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP") and are true, correct and complete, and present
fairly the financial position of each Seller as of the dates indicated and the
results of its operations for the periods specified. The Financial Statements
consist of (a) the unaudited balance sheet of each Seller as of June 30, 1998,
and (b) the unaudited income statement of each Seller for the twelve (12) month
period ended on that date. The unaudited balance sheets contained in the
Financial Statements are sometimes referred to herein as the "Balance Sheets."
Except as otherwise disclosed in this Agreement or Schedule 5.18 hereto, the
Financial Statements reflect all liabilities of each Seller, accrued,
contingent, or otherwise (known or unknown, asserted or unasserted), arising out
of transactions effected or events occurring on or prior to the Closing. Except
as set forth in the Financial Statements or as otherwise disclosed in this
Agreement or Schedule 5.18 hereto, neither Seller is liable upon or with respect
to, or obligated in any other way to provide funds in respect of or to guarantee
or assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity, and
Seller knows of no basis for the assertion of any other claims or liabilities of
any nature or in any amount.
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5.19 Accounts Payable. Attached hereto as Schedule 5.19(a) is a complete
and accurate list of all accounts and notes payable of the Sellers as of
September 30, 1998, showing the name of each creditor and the amount due to each
by invoice number and date. To the knowledge of Sellers Schedule 5.19(a)
reflects the accounts payable of Sellers except those incurred in the ordinary
course of business prior to October 1, 1998, and (b) the accounts payable and
other obligations were incurred by Sellers in the ordinary course of business
prior to October 1, 1998 and are not unreasonable in amount or extraordinary in
nature (both in relationship to Sellers normal business practices).
5.20 Books of Account. The books of account of each Seller have been kept
accurately in the ordinary course of the Business, the transactions entered
therein represent bona fide transactions and the revenues, expenses, assets and
liabilities of each Seller have been properly recorded in such books.
5.21 Environmental Matters; OSHA Compliance.
(a) Except as described on Schedule 5.21 attached hereto and except
where all of the matters referred to in any of the clauses (i) through (iv)
below in the aggregate could not reasonably be expected to have a material
adverse effect on either Seller or the Business or the Assets:
1. Each Seller and all of its properties, assets and operations
are in full compliance with all federal, state and local laws, regulations and
requirements pertaining to health, safety or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Resource Conservation and Recovery Act of 1976, the
Occupational Safety and Health Act, the Clean Air Act, the Clean Water Act, the
Toxic Substances Control Act, and all amendments thereto, and all similar laws,
regulations and requirements of any governmental authority or agency having
jurisdiction over a Seller or any of its properties or assets (collectively,
"Environmental Laws"). Neither a Seller nor a Shareholder is aware of and has
not received any notice of any past, present or future conditions, events,
activities, practices or incidents that may interfere with or prevent the
compliance or continued compliance of Sellers with any or all Environmental
Laws.
2. Each Seller has obtained all permits, licenses and
authorizations that are required under Environmental Laws.
3. No Hazardous Substances (as defined below) exist on, about or
within, or have been used, generated, stored or disposed of on, or released from
any of the properties or assets of either Seller other than in compliance with
Environmental Laws, or transported from any of such properties or assets unless
by a duly authorized or licensed disposal firm, and each Seller has retained all
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documentation required by Environmental Laws relating to such disposal. For the
purposes of this Agreement, the term "Hazardous Substances" shall include any
substance, product, waste, pollutant, material, chemical, contaminant,
constituent or other material that is listed, regulated or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum and
polychlorinated biphenyls. The use that either Seller makes of its properties
and assets will not result in the use, generation, storage, transportation,
accumulation, disposal or release of any Hazardous Substance on, in or from any
such properties or assets other than in compliance with Environmental Laws.
4. There is no action, suit, proceeding, investigation or inquiry
before any court, administrative agency or other governmental authority pending
or, to the knowledge of either Seller or either Shareholder, threatened, against
either Seller relating in any way to any Environmental Law. Neither Seller (A)
has any liability for remedial action under any Environmental Law, (B) has
received any request for information by any governmental or regulatory authority
with respect to the condition, use or operation of any of its properties or
assets and (C) has received any notice from any governmental or regulatory
authority or other person or entity with respect to any violation of or
liability under any Environmental Law.
(b) No lien or encumbrance arising under any Environmental Law has
attached to any of the properties or assets of either Seller.
5.22 Patents, Trademarks and Copyrights.
(a) Each Seller owns all patents, trademarks, service marks and
copyrights, if any, necessary to conduct its business, or possesses adequate
licenses or other rights, if any, therefor, without conflict with the rights of
others. Subsequent to Closing, Seller will execute such documentation as Buyer
shall reasonable request to effectuate the assignment and conveyance of Seller's
Proprietary Rights (as herein defined) to Buyer. Set forth on Schedule 5.22
hereto is a true and correct description of the following ("Proprietary
Rights"):
1. All trademarks, trade names, service marks and other trade
designations, including common-law rights, registrations and applications
therefor, and all patents, copyrights and applications currently owned, in whole
or in part, by either Seller, and all licenses, royalties, assignments and other
similar agreements relating to the foregoing to which either Seller is a party
(including expiration dates if applicable); and
2. All agreements relating to technology, know-how or processes
that either Seller is licensed or authorized to use by others, or which it
licenses or authorizes others to use.
(b) Each Seller has the sole and exclusive right to use the
Proprietary Rights identified in Schedule 5.22 without infringing or violating
the rights of any third parties. No consent of third parties will be required
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for the use thereof by Buyer upon consummation of the transactions contemplated
by this Agreement. No claim has been asserted by any person to the ownership of
or right to use any Proprietary Right or challenging or questioning the validity
or effectiveness of any such license or agreement, and neither the Sellers nor
the Shareholders know of any valid basis for any such claim. Each of the
Proprietary Rights is valid and subsisting, has not been canceled, abandoned or
otherwise terminated and, if applicable, has been duly issued or filed.
(c) Neither the Sellers nor the Shareholders have any knowledge of any
claim that, or inquiry as to whether, any product, activity or operation of
either Seller infringes upon or involves, or has resulted in the infringement
of, any Proprietary Right of any other person, corporation or other entity; and
no proceedings have been instituted, are pending or, to the best of the
knowledge of either Seller or either Shareholder, are threatened that challenge
the rights of either Seller with respect thereto. Neither Seller has given nor
is either Seller bound by any agreement of indemnification for any Proprietary
Right as to any property manufactured, used or sold by either Seller.
5.23 Investments Representations. Sellers and the Shareholders are
acquiring the shares of DCRI Stock to be issued pursuant to Section 2.1(a)(iii)
of the Agreement for investment and not with a view to or resale in connection
with any distribution or public offering thereof, within the meaning of any
applicable securities laws and regulations. Sellers and Shareholders acknowledge
that such shares are "restricted securities" as that term is defined in Rule 144
promulgated by the SEC and, therefore, the resale of and shares is restricted by
federal and state securities laws and the certificates evidencing such shares
shall bear a legend reflecting these securities law restrictions.
5.24 Disclosure. No representation or warranty by a Seller or a Shareholder
in this Agreement, and no statement respecting either Seller or either
Shareholder contained in any other agreement or document contemplated hereby,
contains or will contain any untrue statement of material fact or omits or will
omit to state any material fact necessary to make the statements herein or
therein, in light of the circumstances under which it was or will be made, not
misleading. Except as disclosed herein, there is no matter that materially
adversely affects or will in the future materially adversely affect the Business
or the Assets other than general economic conditions.
ARTICLE 6
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DCRI AND BUYER'S REPRESENTATIONS AND WARRANTIES
DCRI and Buyer, jointly and severally, represent and warrant to the
Sellers and the Shareholders as follows:
6.1 Organization and Standing. Each of DCRI and Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas.
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6.2 Authority. Each of DCRI and Buyer has full power and authority
(corporate and otherwise) to conduct its business as now being conducted and to
execute and deliver this Agreement and all of the other agreements and documents
contemplated hereby and to carry out the terms and obligations hereof and
thereof. Each of DCRI and Buyer has taken all corporate action necessary to
authorize the execution, delivery and performance of this Agreement and all of
the other agreements and documents contemplated hereby.
6.3 Execution and Delivery. This Agreement has been, and the other
agreements and documents contemplated hereby at Closing will be, duly executed
by DCRI and Buyer and each constitutes the valid and binding obligation of DCRI
and Buyer, enforceable in accordance with their respective terms and
conditions..
6.4 SEC Reports and Financial Statements. DCRI has filed with the SEC and
has made available to each Seller and the shareholders of each Seller true and
complete copies of all forms, reports, schedules, statements, and other
documents, including all exhibits thereto, required to be filed by it since
January 1, 1998, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Securities Act of 1933, as amended (the "Securities
Act") (as such documents have been amended since the time of their filing,
collectively, the "SEC Documents").
6.5 Compliance with Laws, Permits and Instruments. The execution, delivery
and performance of this Agreement by DCRI or Buyer will not violate or be in
conflict with (a) any material provision of any contract or other agreement to
which DCRI or Buyer is a party or by which any of their respective assets are
bound that is material to DCRI and its subsidiaries taken as a whole; (b) any
provision of the Articles of Incorporation or Bylaws of Buyer; (c) any federal,
state or local law, statute, regulation or ordinance applicable to the business
or any of the assets of DCRI or Buyer; or (d) any of DCRI's or Buyer's permits
or licenses affecting or relating to its assets or business.
6.6 Consents. Except as set forth on Schedule 6.6, no approval, consent,
authorization or action of or filing with, any governmental body or other third
party is required on the part of Buyer in connection with (a) the execution,
delivery or performance by DCRI or Buyer of this Agreement and the other
agreements and documents contemplated hereby or (b) the consummation by DCRI or
Buyer of the Transaction, including, without limitation, the assumption by Buyer
of the Assumed Contracts.
6.7 Litigation. There is no claim, action, suit, proceeding, investigation
or inquiry pending before any federal, state or other court or governmental or
administrative agency, or to Buyer's knowledge threatened against Buyer or
Buyer's assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby or have a reasonable
22
possibility of causing in the future a material adverse effect on the business
or assets of Buyer except as disclosed on Schedule 6.7.
ARTICLE 7
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DCRI'S AND BUYER'S COVENANTS
DCRI and Buyer, jointly and severally, agree that, subsequent to the
execution of this Agreement, on or prior to the Closing:
7.1 Consummation of Transaction. DCRI and Buyer agree to use all reasonable
efforts to cause the consummation of the Transaction in accordance with the
terms and conditions of this Agreement.
7.2 Stock Exchange Listing. DCRI shall use its reasonable efforts to cause
the DCRI Shares to be approved for listing on the AMEX, subject to official
notice of issuance, prior to the Closing Date.
ARTICLE 8
---------
SELLER'S COVENANTS
Sellers and the Shareholders, jointly and severally, agree that,
subsequent to the execution of this Agreement, on or prior to the Closing:
8.1 Consummation of Transaction. Sellers and Shareholders agree to use all
reasonable efforts to cause the consummation of the Transaction in accordance
with the terms and conditions of this Agreement.
8.2 Business Operations. Sellers shall operate the Business only in the
ordinary course and will not, without the prior written consent of DCRI,
introduce any new method of management of operation and Sellers shall use all
reasonable efforts to preserve the Business intact and to retain their
respective present customers and suppliers. Neither Seller shall take any action
that might reasonably be expected to have a material adverse effect on the
Business or the Assets without the prior written consent of DCRI or take or fail
to take any action that would cause or permit the representations made in
Article 5 hereof to be inaccurate at the time of Closing or preclude a Seller
from making such representations and warranties at the Closing. Notwithstanding
the foregoing, it is agreed and understood by the parties hereto that,
subsequent to June 30, 1998 and prior to the closing Sellers shall (a)
distribute $100,000 to one or more of the Shareholders in the form of a
distribution to Shareholders or as bonus compensation, and (b) distribute
$30,000 in lieu of the discretionary profit sharing participation by those
employees of the Sellers listed on Schedule 8.2 hereto.
23
8.3 Access. Upon reasonable prior notice, Sellers shall permit DCRI and its
authorized representatives reasonable access during normal business hours to,
and make available for inspection, all of the Assets and Business of Sellers,
and furnish Buyer all documents, records and information, including, but not
limited to, financial statements, projections and customer lists, solely with
respect to the Business and Assets as DCRI and its representatives may
reasonably request, all for the sole purpose of permitting DCRI to become
familiar with the Business and Assets of Sellers.
8.4 Material Change. Prior to the Closing, each Seller shall promptly
inform DCRI in writing of any material adverse change to the Business or the
Assets, including, without limitation, the updating of any schedules hereto.
Notwithstanding the disclosure to DCRI of any such material adverse change,
Sellers and Shareholders shall not be relieved of any liability to DCRI pursuant
to this Agreement for, nor shall the providing of such information by a Seller
to DCRI be deemed a waiver by DCRI or Buyer of, the breach of any representation
or warranty of Sellers and the Shareholders contained in this Agreement.
8.5 Approvals of Third Parties. As soon as practicable after the execution
of this Agreement, Sellers will use their reasonable good faith efforts to
secure all necessary approvals and consents of third parties, including, but not
limited to, consents to the Lease Assignments necessary for the consummation of
the Transaction.
8.6 Contracts. Except with DCRI's prior written consent, neither Seller
shall waive any material right or cancel any material contract, debt or claim
that constitutes an Asset or that would constitute an Asset.
8.7 Liens. Except with DCRI's prior written consent, neither Seller shall
permit any new Lien to attach to any of the Assets, whether now owned or
hereafter acquired.
8.8 Material Contracts. Neither Seller shall, without the consent of DCRI,
incur any obligation outside of the ordinary course of business; make any
purchases outside of the ordinary course of business in the aggregate; increase
the compensation paid or payable to any officer, director, employee or agent of
either Seller; or otherwise take any action outside the ordinary course of
business.
8.9 No Disclosure or Negotiation with Others.
(a) Sellers shall not disclose to the public or any third party (other
than Sellers' advisors) any of the terms or conditions hereof without the prior
written consent of DCRI (except as otherwise required by applicable law).
24
(b) Sellers will not, and will use its best efforts to cause its
officers, directors, employees, agents and shareholders not to, solicit or
encourage, directly or indirectly, in any manner, any discussions with, or
furnish or cause to be furnished any information to, any third party in
connection with, or negotiate for or otherwise pursue, the sale of the common
stock of Sellers, all or substantially all of the assets of the Sellers or any
portion or all of its Business, or any business, or any business combination or
merger of the Sellers with any other third party. The Sellers will promptly
inform DCRI of any inquiries or proposals with respect to any of the matters set
forth in this Section 8.9.
ARTICLE 9
---------
DCRI AND BUYER'S CONDITIONS PRECEDENT
Except as may be waived in writing by DCRI and Buyer, the obligations
of DCRI and Buyer hereunder are subject to the fulfillment at or prior to the
Closing of each of the following conditions:
9.1 Representations and Warranties. The representations and warranties of
each Seller contained herein shall be true and correct as of the Closing Date
with the same force and effect as if such representations and warranties had
made on and as of the Closing Date, and at Closing, each Seller shall certify to
that effect.
9.2 Covenants. Each Seller shall have performed and complied in all
material respects with all covenants or conditions required by this Agreement to
be performed and complied with by it prior to the Closing, and at Closing, each
Seller shall certify to that effect.
9.3 Actions at Closing. Sellers and Shareholders shall have taken all
actions required of it pursuant to Sections 3.2 and 3.3 of this Agreement.
9.4 AMEX Listing. The DCRI Shares shall have been authorized for listing on
AMEX upon official notice of issuance.
9.5 Legal Opinion. DCRI and Buyer shall have received the opinion of
Xxxxxxx, Xxxxxx & Xxxx, P.C., counsel to the Sellers and Shareholders,
substantially in the form of Schedule 9.5.
9.6 Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing or otherwise,
asserted, instituted or entered to restrain or prohibit the carrying out of the
Transaction.
9.7 No Material Adverse Change. No material adverse changes to the Business
or the Assets shall have occurred, or an event which with the passage of time
might result in such material adverse change, after the date hereof and prior to
the Closing.
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ARTICLE 10
----------
SELLERS' AND SHAREHOLDERS' CONDITIONS PRECEDENT
Except as may be waived in writing by Sellers and the Shareholders, the
obligations of Sellers and the Shareholders hereunder are subject to fulfillment
at or prior to the Closing of each of the following conditions:
10.1 Representations and Warranties. The representations and warranties of
DCRI and Buyer contained herein shall be true and correct as of the Closing Date
with the same force and effect as if such representations and warranties had
been made on and as of the Closing Date, except (a) with respect to those
representations and warranties specifically made as of an earlier date (in which
case such representations and warranties shall be true as of such earlier date)
and (b) for changes that occur after the date hereof that are expressly
permitted by the terms of this Agreement or by Seller, and at Closing, DCRI and
Buyer will certify to that effect.
10.2 Covenants. DCRI and Buyer shall have performed and complied in all
material respects with all covenants or conditions required by this Agreement to
be performed and complied with by it prior to the Closing, and at Closing, Buyer
shall certify to that effect.
10.3 Actions at Closing. Buyer shall have taken all actions required of it
pursuant to Section 3.3 of this Agreement.
10.4 AMEX Listing. The DCRI Shares shall have been authorized for listing
on AMEX upon official notice of issuance.
10.5 Legal Opinion. Sellers and Shareholders shall have received the
opinion of Jenkens & Xxxxxxxxx, P.C., counsel to DCRI and Buyer, substantially
in the form of Schedule 10.5.
10.6 Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
Transactions.
26
ARTICLE 11
----------
ASSUMED OBLIGATIONS AND DCRI
GUARANTY OF BUYER'S OBLIGATIONS
11.1 Assumed Obligations. At Closing, DCRI and Buyer agree to assume each
Seller's obligations (a) under the Assumed Contracts listed on Schedule 1.2(c),
(b) under the Real Property Leases, as provided in the Lease Assignments, (c)
under the Assumed Liabilities listed on Schedule 2.1, (d) the accounts payable
of Sellers which are not unreasonable in amount or as to purpose, and which have
been incurred by Sellers in the ordinary cause of business and which are
consistent with past practices and policies of Sellers, and (e) all other
unsecured obligations of Sellers which arise in the ordinary course of business
(none of which will be unreasonable in amount or as to purpose) and which if
paid would be consistent with the past practices and policies of Sellers (an
example would be refund of a placement fee because a candidate terminates during
the time period in which the Sellers are obligated to refund such placement
fee). The parties acknowledge that neither Buyer nor DCRI are assuming any
obligations of Sellers except those hereinbefore set forth, and that the
obligations of Sellers not be assumed include (i) a disputed unemployment
insurance matter in New Jersey (all claims for refunds and all payments
attributable to this matter remain the property of Sellers), (ii) a disputed
workers compensation insurance invoice, and (iii) those obligations which are
not described in the preceding sentence and which should have been disclosed to
Buyer pursuant to the terms of this Agreement. Anything in this Agreement or
elsewhere to the contrary notwithstanding, in no event shall DCRI and Buyer be
required to assume or in any way become responsible or liable for, or be deemed
to have assumed or become liable or responsible for, any duty, obligation, debt
or liability of a Seller, whether or not related to the Business or the Assets,
except as specifically provided herein and in the Lease Assignments, or
otherwise expressly assumed in writing by DCRI and Buyer; it being expressly
acknowledged that it is the intention of the parties hereto that all duties,
obligations, debts and liabilities of a Seller or both Sellers (other than
obligations expressly assumed by DCRI or Buyer herein, in the Assumption, or in
the Lease Assignments) shall be and remain solely the duties, obligations, debts
and liabilities f each Seller or both Sellers. Specifically, and without implied
limitation of the foregoing, DCRI or Buyer shall not assume or agree to pay,
perform or discharge any liabilities or obligations of Seller, whether accrued,
absolute, contingent or otherwise, based on or arising out of or in connection
with (i) any defects in products sold, rented or distributed by a Seller prior
to the Closing, (ii) any implied or express warranties relating to such
products, or (iii) any bulk sales or bulk transfer laws (it being the intent of
the parties that Sellers shall be liable for all such liabilities and
obligations regardless of whether such liabilities and obligations are initially
the liabilities and obligations of Seller or Buyer).
11.2 DCRI Guaranty. DCRI hereby guarantees to Sellers and the Shareholders
all obligations of Buyer pursuant to this Agreement and other agreements and
documents contemplated hereby.
27
ARTICLE 12
----------
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
AGREEMENTS AND OBLIGATIONS; INDEMNIFICATION
12.1 Survival. Except for the covenants contained in Article 11 of this
Agreement and the payments required to be made to Sellers pursuant to the terms
of this Agreement, which covenants and obligations shall survive until
satisfied, the representations, warranties, obligations, covenants, indemnities
and agreements of Sellers, Shareholders, DCRI and Buyer contained in this
Agreement shall survive the Closing Date for a period of two (2) years. Said
representations, warranties, obligations, covenants, indemnities and agreements
shall not be affected by, and shall remain in full force and effect
notwithstanding, any investigation during such two-year period made by or on
behalf of any party hereto or any information any party may have with respect
thereto. If written notice of a claim has been given in good faith prior to the
expiration of the applicable representations and warranties by a party in whose
favor such representations and warranties have been made to the party that made
such representations and warranties, the relevant representations and warranties
shall survive as to such claim until the claim has been finally resolved.
12.2 Indemnification by Sellers and Shareholders. Sellers and Shareholders,
jointly and severally, hereby agree, effective as of the Closing, to pay, and to
indemnify, save and hold harmless DCRI and Buyer, their affiliates, and their
respective officers, directors, stockholders and employees from and against, any
and all damages, liabilities, losses, claims, deficiencies, penalties, interest,
expenses, clean-up costs, fines, assessments, charges and costs (including,
without limitation, reasonable attorneys' fees, costs of investigation and court
costs) (collectively, "Losses") imposed on, incurred by or asserted against such
person or entity (or any of them) in any way relating to or arising from or out
of (a) any liability, obligation, contract, debt, lien, litigation, dispute or
commitment of a Seller or both Sellers, including, without limitation, any
product liability or breach of warranty claims relating to services or products
provided by Sellers or either Seller or any liability arising from any bulk sale
or bulk transfer law, other than obligations expressly assumed by DCRI or Buyer
herein or in the Lease Assignments, the Assumed Liabilities or the Assumed
Contracts; (b) any act or omission of a Seller prior to or at the Closing; (c)
the use, ownership or operation of the Assets or the conduct of the Business
prior to or at the Closing; (d) the breach of any covenant of a Seller or the
failure of a Seller to perform any obligation of such Seller contained in this
Agreement or in the other agreements and documents contemplated hereby; (e) any
inaccuracy in or breach of any representation or warranty of a Seller or a
Shareholder contained in this Agreement or any other agreement or document
contemplated hereby; (f) all tax liabilities of Sellers or Shareholders, other
than (i) all real property taxes for the Leased Properties that are attributable
to periods subsequent to the Closing and for which the tenant is responsible
under the Real Property Leases, and (ii) all personal property taxes of Sellers
that are attributable to periods subsequent to the Closing; (g) any failure to
comply with applicable bulk sales laws in connection with the Transaction and
(h) any liability to Employees or former employees of a Seller or their
beneficiaries arising prior to or at the Closing Date from the employment or
28
severance of such Employees or former employees by Seller or their rights to
benefits under the Seller's group health or other employee benefit plans.
12.3 Indemnification by Buyer. DCRI and Buyer, jointly and severally,
hereby agree, effective as of the Closing, to pay, and to indemnify, save and
hold harmless Sellers and their respective officers, directors, shareholders and
Employees from and against, any Losses imposed, incurred by or asserted against
such person or entity (or any of them) in any way relating to or arising from or
out of (a) the obligations expressly assumed by DCRI or Buyer hereunder or under
the Assumed Contracts, the Assumed Liabilities or under the Lease Assignments;
(b) the breach of any covenant of DCRI or Buyer or the failure of DCRI or Buyer
to perform any of their obligations contained herein or in any other agreement
or document contemplated hereby; and (c) any inaccuracy in or breach of any
representation or warranty of DCRI or Buyer under this Agreement or any other
agreement or document contemplated hereby.
12.4 Notice; Defense of Claims. Promptly after receipt by an indemnified
party of notice of any claim, liability or expense to which the indemnification
obligations in this Agreement would apply, the indemnified party shall give
notice thereof in writing to the indemnifying party, but the omission to so
notify the indemnifying party promptly will not relieve the indemnifying party
from any liability except to the extent that the indemnifying party shall have
been prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted. If within twenty (20) days after receiving such notice the
indemnifying party gives written notice to the indemnified party stating that:
(a) it would be liable under the provisions hereof for indemnity in the amount
of such claim if such claim were successful; and (b) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense, then counsel for the defense shall be selected by the indemnifying
party (subject to the consent of the indemnified party which consent shall not
be unreasonably withheld) and the indemnifying party shall assume the defense
with respect to such claim, liability or expense at the indemnifying party's
expense as long as the indemnifying party is conducting a good faith and
diligent defense at its own expense; provided, however, that the assumption of
defense of any such matters by the indemnifying party shall relate solely to the
claim, liability or expense that is subject or potentially subject to
indemnification. The indemnifying party shall have the right, with the consent
of the indemnified party, which consent shall not be unreasonably withheld, to
settle all indemnifiable matters related to the claims by third parties that are
susceptible to being settled provided its obligation to indemnify the
indemnifying party therefor will be fully satisfied. As reasonably requested by
the indemnified party, the indemnifying party shall keep the indemnified party
apprised of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish the indemnified party with
all documents and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to acting on major
29
matters, including settlement discussions. Notwithstanding anything herein
stated to the contrary, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party, provided, however,
that the separate counsel selected by the indemnified party shall be approved by
the indemnifying party, which approval shall not be unreasonably withheld. If no
such notice of intent to dispute and defend is given by the indemnifying party,
or if such diligent good faith defense is not being or ceases to be conducted,
the indemnified party shall, at the expense of the indemnifying party, undertake
the defense of (with counsel selected by the indemnified party), and shall have
the right to compromise or settle (exercising reasonable business judgment),
such claim, liability or expense. Provided however, before settling the
indemnified party shall first use reasonable efforts to obtain the consent to
that settlement from the indemnifying party, which consent shall not be
unreasonably withheld. After using reasonable efforts without success the
indemnified party may settle without the consent of the indemnifying party
without any prejudice to its claim for indemnity. If such claim, liability or
expense is one that by its nature cannot be defended solely by the indemnifying
party, then the indemnified party shall make available all information and
assistance that the indemnifying party may reasonably request and shall
cooperate with the indemnifying party in such defense.
12.5 Set-off. DCRI and Buyer shall have the right to set-off, upon written
notice to Sellers and the Shareholders, any undisputed amounts payable by
Sellers or the Shareholders to DCRI or Buyer pursuant to claims for
indemnification hereunder against any amount at any time payable by DCRI or
Buyer or any assignee to any Seller or any Shareholder under or pursuant to this
Agreement and/or any other agreements now or hereafter entered into between a
Seller or a Shareholder and DCRI or Buyer or any assignee of DCRI or Buyer.
Notwithstanding anything herein to the contrary, the parties
acknowledge and agree that none of the Purchase Price payable to Sellers
pursuant to Section 2.1(b) is required by this Agreement to be used by Sellers
to satisfy any of the indemnification obligations of Sellers and Shareholders as
herein set forth, and that none of the amount payable by Buyer to Sellers
pursuant to Section 2.1(b) shall be subject to set-off by Buyer if and to the
extent that Buyer has a claim for indemnification against Sellers under the
terms of this Agreement.
ARTICLE 13
----------
TERMINATION
13.1 Termination. This Agreement may be terminated prior to the
consummation of the Transaction:
30
(a) by written consent duly authorized by the Boards of Directors of
each of DCRI and the Sellers,
(b) by DCRI or the Sellers if either (i) the Closing shall not have
occurred on or before October 15, 1998; however, the right to terminate this
Agreement under this Section 13.1(b)(i) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing to occur on or before such date;
or (ii) there shall be any statute, law, ordinance, rule, or regulation that
makes consummation of the Transaction illegal or otherwise prohibited or if any
court of competent jurisdiction or governmental entity shall have issued an
order, decree, or ruling or taken any other action restraining, enjoining, or
otherwise prohibiting the Transaction and such order, decree, ruling, or other
action shall have become final and nonappealable;
(c) by DCRI, upon a material breach of any representation, warranty,
or agreement set forth in this Agreement by any of the Sellers or Shareholders,
such that the condition set forth in Section 9.1 or 9.2 would not be satisfied;
(d) by the Sellers, upon a material breach of any representation,
warranty, or agreement set forth in this Agreement by DCRI or Buyer such that
the condition set forth in Section 10.1 or 10.2 would be not satisfied; or
(e) by DCRI if there has been a materially adverse change in the
business, assets, condition, financial or otherwise, or prospect of the Sellers;
or
(f) by Sellers or Buyer pursuant to Section 3.6 of this Agreement.
13.2 Notice and Effects of Termination. In the event there is a basis for
termination of this Agreement by either DCRI or the Sellers as provided in
Section 13.1, and such party desires to terminate this Agreement, it may do so
by giving written notice to the other party pursuant to Section 14.1, whereupon
this Agreement shall forthwith terminate, and there shall be no liability or
obligation on the party of any part hereto except (i) with respect to Sections
8.9, 11.2, 14.9, 14.10 and 14.13-14.17, and (ii) to the extent that such
termination results from the breach by a party hereto of any of its
representations, warranties, covenants, or agreements set forth in this
Agreement.
ARTICLE 14
----------
31
MISCELLANEOUS
14.1 Notices. Any and all notices, requests, instructions and other
communications required or permitted to be given under this Agreement after the
date hereof by any party hereto to any other party may be delivered personally
or by nationally recognized overnight courier service or sent by mail or
facsimile transmission, at the respective addresses or transmission numbers set
forth below and shall be effective (a) in the use of personal delivery or
facsimile transmission, when received; (b) in the case of mail, upon the earlier
of actual receipt or three (3) business days after deposit in the United States
Postal Service, first class certified or registered mail, postage prepaid,
return receipt requested; and (c) in the case of nationally recognized overnight
courier service, one (1) business day after delivery to such courier service
together with all appropriate fees or charges for such delivery. The parties may
change their respective addresses and transmission numbers by written notice to
all other parties, sent as provided in this Section 14.1. All communications
must be in writing and addressed as follows:
SELLER: Texcel, Inc.
Texcel Technical Services, Inc.
0000 Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, President
with a copy to: Xxxxxxx, Xxxxxx & Xxxx, P.C.
0000 Xxxxxx Xxxxxxx Xxxx
Xxxxx 000
Blue Xxxx, Pennsylvania 19422-2245
Attention: Xxxxx X. Xxxxxxx
DCRI: Diversified Corporate Resources, Inc.
00000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Mr. M. Xxx Xxxxxxx, President
BUYER: DCRI Acquisition Corporation
00000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Mr. M. Xxx Xxxxxxx, President
32
with a copy to: Jenkens & Xxxxxxxxx,
a Professional Corporation
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
14.2 Further Cooperation. The parties agree that they will, at any time and
from time to time after the Closing, upon request by the other and without
further consideration, do, perform, execute, acknowledge and deliver all such
further acts, deeds, assignments, assumptions, transfers, conveyances, powers of
attorney, certificates and assurances as may be reasonably required in order to
fully consummate the Transaction in accordance with this Agreement or to carry
out and perform any undertaking made by the parties hereunder.
14.3 Amendment. This Agreement may be amended, modified or supplemented
only by an instrument in writing executed by the party against which enforcement
of the amendment, modification or supplement is sought.
14.4 Assignability; Binding Effect. Neither party shall assign this
Agreement, by operation of law or otherwise, in whole or in part, without the
prior written consent of the other party; provided, however, (a) Sellers shall
have the right to assign, without the prior written consent of Buyer, to
Shareholders, or any of them, (i) the right to receive all or any portion of the
Purchase Price payable to Sellers, and (ii) all or any part of the 100,000
shares of DCRI Common Stock to be issued to Sellers under the terms of this
Agreement, and (b) DCRI shall have the right to assign this Agreement to any
subsidiary of DCRI, without the prior written consent of Seller; provided,
however, notwithstanding any such assignment DCRI shall remain liable with
respect to its obligations hereunder. Any assignment made or attempted in
violation of this Section 14.4 shall be void and of no effect. This Agreement
shall be binding upon, and shall inure to the benefit of Sellers, DCRI and Buyer
and their respective successors and permitted assigns. Except as expressly
provided herein, this Agreement shall not be deemed to create or confer any
rights, benefits or interests in any other persons, except through the parties
hereto, nor shall anything in this Agreement act to relieve or discharge the
obligation or liability of any third party to any party to this Agreement, nor
shall any provision give any third party any right of subrogation or action over
or against any party to this Agreement.
14.5 Exhibits and Schedules. The exhibits and schedules to this Agreement
(and any appendices thereto) referred to in this Agreement and attached hereto
are and shall be incorporated herein and made a part hereof for all purposes as
though set forth herein verbatim.
14.6 Sections and Articles. All sections and articles referred to herein
are sections and articles of this Agreement. Descriptive headings as to the
contents of particular articles and sections are for convenience only and shall
not control or affect the meaning or construction of any provision of this
Agreement.
33
14.7 Entire Agreement. Except as otherwise expressly provided in Section
14.17(c) hereof, this Agreement and the other agreements, documents and
instruments executed and delivered by the parties to each other at the Closing
constitute the full understanding of the parties, a complete allocation of risks
between them and a complete and exclusive statement of the terms and conditions
of their agreement relating to the subject matter hereof and supersedes any and
all prior agreements, whether written or oral, that may exist between the
parties with respect thereto. Except as otherwise specifically provided in this
Agreement, no conditions, usage of trade, course of dealing or performance,
understanding or agreement purporting to modify, vary, explain or supplement the
terms or conditions of this Agreement shall be binding unless hereafter or
contemporaneously herewith made in writing and signed by the party to be bound,
and no modification shall be effected by the acknowledgment or acceptance of
documents containing terms or conditions at variance with or in addition to
those set forth in this Agreement.
14.8 Gender; Plurals. Each use herein of the masculine, neuter or feminine
gender shall be deemed to include the other genders and each use herein of the
plural shall include the singular and vice versa, in each case as the context
requires or as it is otherwise appropriate.
14.9 Expenses. Except as otherwise provided in Section 8.9 and this Section
14.9, Sellers shall pay all of their expenses and costs (including, without
limitation, all counsel fees and expenses), and DCRI and Buyer shall pay all of
their expenses and costs (including, without limitation, all counsel fees and
expenses), in connection with this Agreement and the consummation of the
Transaction.
14.10 Brokerage Fees and Commissions. Neither Sellers, on one hand, nor
DCRI or Buyer, on the other, shall have any responsibility or liability for any
fees, expenses or commissions payable to any agent, representative or broker of
the other.
14.11 Waiver. Any of the terms or conditions of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof. Such
action shall be evidenced by a signed written notice given in the manner
provided in Section 14.1 hereof. No party to this Agreement shall by any act
(except by a written instrument given pursuant to Section 14.1 hereof) be deemed
to have waived any right or remedy hereunder or to have acquiesced in any breach
of any of the terms and conditions hereof. No failure to exercise, nor any delay
in exercising any right, power or privilege hereunder by any party hereto shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by any party of
any right or remedy on any one occasion shall not be construed as a bar to any
right or remedy that such party would otherwise have on any future occasion or
to any right or remedy that any other party may have hereunder.
34
14.12 Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all counterparts
hereof so executed by the parties hereto, whether or not such counterpart shall
bear the execution of each of the parties hereto, shall be deemed to be, and
shall be construed as, one and the same Agreement. A telecopy or facsimile
transmission of a signed counterpart of this Agreement shall be sufficient to
bind the party or parties whose signature(s) appear thereon.
14.13 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS,
WITHOUT REGARD FOR THE PROVISIONS THEREOF REGARDING CHOICE OF
LAW.
14.14 Specific Performance. Each of the parties hereto acknowledges that
the other party would be irreparably damaged and would not have an adequate
remedy at law for money damages in the event that any of the covenants contained
in this Agreement were not performed in accordance with its terms or otherwise
were materially breached. Each of the parties hereto therefore agrees that,
without the necessity of proving actual damages or posting bond or other
security, the other party shall be entitled to temporary and/or permanent
injunction or injunctions to prevent breaches of such performance and to
specific enforcement of such covenants in addition to any other remedy to which
it may be entitled, at law or in equity.
14.15 Attorneys' Fees and Costs. In the event attorneys' fees or other
costs are incurred to enforce, through legal action, any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred therein.
14.16 Severability. In the event that any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws, then
(a) such provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
were not a part hereof; (b) the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by such illegal,
invalid or unenforceable provision or by its severance from this Agreement; and
(c) there shall be added automatically as a part of this Agreement a provision
as similar in terms to such illegal, invalid or unenforceable provision as may
be possible and still be legal, valid and enforceable.
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14.17 Confidentiality.
(a) Except as may be required by law or court order, each Seller
hereby agrees, and shall use its best efforts to cause its officers, directors,
employees, agents and shareholders, not to disclose or divulge any DCRI
Confidential Information (as defined below), or any part thereof, to any third
party, and not to use the DCRI Confidential Information, or any part thereof, in
any manner or for any purpose.
(b) As used in this Agreement, "DCRI Confidential Information" means
any and all information and compilations of data (in any form whatsoever,
tangible or intangible) relating in any way to DCRI (including its subsidiaries)
and its business, assets and customers, including, without limitation, all
accounting, financial and business information, employment and personnel
information, contracts, marketing plans, price lists and information, customer
lists and information, and all other data and records that are or may be used by
or useful to DCRI; provided, however, that DCRI Confidential Information does
not include information that (i) is or becomes generally available to the public
other than by the Sellers; (ii) is lawfully obtained by the Sellers from a third
party; provided that the third party is not, to the Sellers' knowledge, bound by
a nondisclosure agreement with respect to the information; or (iii) is
subsequently developed by the Sellers from independent sources.
(c) Notwithstanding anything contained herein to the contrary, that
certain Confidentiality Agreement executed by the parties as of May 29, 1998,
shall survive the execution of this Agreement.
14.18 Advice of Counsel. Each of the undersigned has read this Agreement,
has had the opportunity to consult with legal counsel concerning the matters
contained herein, and has either obtained legal counsel with respect to such
matters and the execution of this Agreement, or has voluntarily waived such
right.
14.19 Event of Default.
(a) In the event that Buyer shall fail to make any payment to Sellers
within fifteen (15) days from the date due pursuant to the provisions of this
Agreement, and such failure to pay shall remain unremedied for a period of
thirty (30) days after receipt of written notice thereof by Buyer (an "Event of
Default"), then upon any such event of default, the balance of the amounts
payable under this Agreement, including the maximum amount payable under Section
2.1(a)(i) of this Agreement shall be accelerated and forthwith due and payable.
The parties hereto acknowledge and agree that Buyer shall not be in default of
its obligation hereunder, if, pursuant to the terms of this Agreement, Buyer
does not pay part of an Installment Payment based upon a reasonable adjustment
with respect to EBITDA, or if Buyer applies as a set-off a reasonable amount
related to a claim for indemnification under the terms of this Agreement.
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(b) In the event that Buyer shall fail to make any payment to Seller
within fifteen (15) days from the date due pursuant to the terms of this
Agreement, inclusive of any amounts accelerated pursuant to Section 14.19(a),
Buyer shall be obligated to pay interest on the amount in default, until paid in
full, at the rate of ten percent (10%) per annum.
(c) No extension of time for payment granted by Seller of all or any
part of the amount owing herein at any time shall effect the liability of the
parties, including any surety, accommodation party or guarantor. Acceptance by
Seller of any installment after any default shall not operate to extend the time
for payment of any amount then remaining unpaid or constitute a waiver of any of
the other rights of Seller herein. No delay by Seller in exercising any power or
right shall operate as a waiver of any power or right. The waiver of any default
by Seller shall not operate as a waiver of any subsequent default or any power
or right that Seller may have under the terms of this Agreement.
14.20 Further Assurances of Buyer.
(a) From and after the closing date, Buyer shall afford to Sellers and
their attorneys, accountants and other representatives, reasonable access,
during normal business hours, to such books and records possessed by Buyer
relating to Sellers or Sellers' business as may reasonably be required in
connection with the preparation of financial information for period including on
or prior to the Closing Date. Buyer shall cooperate in all reasonable respects
with Sellers with respect to its former interest in the business and in
connection with financial account closing and reporting all claims in litigation
asserted by or against third parties, including, but not limited to, making
employees of Buyer reasonably available to assist with, or provide information
in connection with financial account closing and reporting and claims in
litigation, provided, that Sellers reimburse Buyer for its reasonable
out-of-pocket expenses (including costs of employees so assisting) in connection
therewith.
(b) For a period of not less than seven (7) years after the Closing
Date, Buyer shall preserve and retain the Buyer's corporate accounting, legal,
auditing and other books and records of the business acquired from Sellers
(including, but not limited to any governmental or non-governmental actions,
suits, proceedings or investigations arising out of the conduct of the business
and operations of the business acquired from Sellers prior to the Closing Date);
provided, however, that such seven (7) year period shall be extended in the
event that any action, suit, proceeding, or investigation has been commenced or
is pending or threatened at the termination of such seven (7) year period and
such extension shall continue until any such action, suit proceeding, or
investigation has been settled through judgment or otherwise or is no longer
pending or threatened. Notwithstanding the foregoing, Buyer may discard or
destroy any of such books and records prior to the end of such seven (7) year
period or period of extension, if applicable, if it gives Sellers at least sixty
(60) days prior written notice of its intent to do so and Sellers have not taken
possession of such books and records, at its expense, within such sixty (60) day
period.
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(c) Nothing in Section 14.20 shall relieve Sellers and Shareholders of
the obligations to indemnify Buyer and DCRI pursuant to Article 12 of this
Agreement.
14.21 Further Assurances of Sellers.
(a) From and after the Closing Date, Sellers shall afford to Buyer and
their attorneys, accountants and other representatives, reasonable access,
during normal business hours, to such books and records possessed by Sellers
relating to Sellers' business as may reasonably be required in connection with
the preparation of financial information for period including on or prior to the
Closing Date.
(b) For a period, of not less than seven (7) years after the Closing
Date, Sellers shall preserve and retain the Seller's corporate accounting,
legal, auditing and other books and records of the business acquired from
Sellers (including, but not limited to any governmental or non-governmental
actions, suits, proceedings or investigations arising out of the conduct of the
business and operations of the business acquired from Sellers prior to the
Closing Date); provided, however, that such seven (7) year period shall be
extended in the event that any action, suit, proceeding, or investigation has
been commenced or is pending or threatened at the termination of such seven (7)
year period and such extension shall continue until any such action, suit
proceeding, or investigation has been settled through judgment or otherwise or
is no longer pending or threatened. Notwithstanding the foregoing, Sellers may
discard or destroy any of such books and records prior to the end of such seven
(7) year period or period of extension, if applicable, if it gives Buyer and
DCRI at least sixty (60) days prior written notice of its intent to do so and
Buyer has not taken possession of such books and records, at its expense, within
such sixty (60) day period.
(c) Nothing in Section 14.21 shall relieve Buyer and DCRI of the
obligations to indemnify Seller's pursuant to Article 12 of this Agreement.
14.22 Liquidated Damages. Notwithstanding anything in this Agreement
to the contrary, the parties hereto acknowledge and agree as follows:
(a) Sellers and Xxxx shall forfeit the right to receive Xxxx'x portion
of the Installment Payments (as herein deferred) if Xxxx hereafter violates the
nonsolicitation or noncompetition provisions of the Xxxx Employment Agreement.
For purposes hereof, Xxxx'x portion of the Installment Payments is an amount
equal to twenty-nine and one quarter percent (29.25%) of the Installment
Payments involved.
(b) Sellers and Xxxxxxx shall forfeit the right to receive Xxxxxxx'x
portion of the Installment Payments (as herein deferred) if Xxxxxxx hereafter
violates the nonsolicitation or noncompetition provisions of the Xxxxxxx
38
Employment Agreement. For purposes hereof, Xxxxxxx'x portion of the Installment
Payments is an amount equal to fourteen and 85/00 percent (14.85%) of the
Installment Payments involved.
(c) Sellers and Janfrancisco shall forfeit the right to receive
Janfrancisco's portion of the Installment Payments (as herein deferred) if
Janfrancisco hereafter violates the nonsolicitation or noncompetition provisions
of the Janfrancisco Employment Agreement. For purposes hereof, Janfrancisco's
portion of the Installment Payments is an amount equal to one and one-half
percent (1.5%) of the Installment Payments involved.
14.23 Arbitration. If Sellers dispute the amount of any Installment Payment
to be made to Sellers by Buyer, or any adjustments thereto based upon Applicable
EBITDA, Sellers must give Buyer and DCRI written notice thereof, within the time
period specified in Section 2.1(e) specifying the reasons for the dispute and
verifying the dollar amount involved with respect to each dispute and the amount
of the Installment Payment which Sellers deem to be payable. If such dispute is
not resolved by negotiation within thirty (30) days from the date of receipt of
such notice by Buyer and DCRI, the dispute shall be referred to a firm of
independent certified public accountants jointly selected by the Sellers and
DCRI and whose decision shall be rendered promptly and shall be binding on all
parties. The costs of the jointly selected independent accounting firm shall be
borne equally by the Sellers and the Buyer. In the event that Sellers and Buyer
are unable to agree upon an independent firm of accountants, the parties agree
to use an accounting firm selected by the outside accounting firm of both
Sellers and Buyer as the accounting firm to resolve the dispute(s) involved.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto effective as of the date
first hereinabove written.
SELLERS: BUYER:
Texcel, Inc. DIVERSIFIED CORPORATE
RESOURCES, INC.
By: Xxxxxx X. Xxxxxxx By: M. Xxx Xxxxxxx
--------------------------- --------------------
Name: Xxxxxx X. Xxxxxxx Name: M. Xxx Xxxxxxx
--------------------------- --------------------
Title: President Title: President
--------------------------- --------------------
Texcel Technical Services, Inc. DCRI ACQUISITION CORPORATION
By: Xxxxxx X. Xxxxxxx By: M. Xxx Xxxxxxx
---------------------------- --------------------
Name: Xxxxxx X. Xxxxxxx Name: M. Xxx Xxxxxxx
---------------------------- --------------------
Title: President Title: President
---------------------------- --------------------
SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxx
-----------------------------------
Xxxx X. Xxxx
/s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
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