EXHIBIT 99.3
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of the 1st day of
January, 2002, among ATC STAFFING SERVICES, INC., a New York corporation (the
"Buyer"), DSS STAFFING CORP., a New York corporation ("DSS"), the SHAREHOLDERS
OF DSS listed on the signature page of this Agreement (the "DSS Shareholders"),
DIRECT STAFFING, Inc., a New York corporation ("DSI"), and the SHAREHOLDERS OF
DSI listed on the signature page of this Agreement (the "DSI Shareholders"). All
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in Exhibit A hereto.
RECITALS
WHEREAS, each of DSS and DSI (each individually, a "Seller" and
collectively, the "Sellers") is engaged in the business of providing
supplemental staffing, outsourcing and human resources to the healthcare
industry, as a franchisee of the Buyer (collectively, the "Business"); and
WHEREAS, each of the Sellers desires to sell to Buyer, and Buyer
desires to purchase from the Sellers, the Business and the Acquired Assets on
the terms provided herein; and
WHEREAS, Buyer desires to employ two of the Shareholders of Seller,
Xxxxxxxx XxXxxxxx ("XxXxxxxx") and Xxxxxx Xxxxxx ("Xxxxxx"), to manage the
Business for a term of up to eight (8) years commencing on the date of Closing.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements contained herein, the parties agree as
follows.
ARTICLE I
ITEM PURCHASE AND SALE OF ACQUIRED ASSETS
1.1 Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement and in reliance upon the representations, warranties, covenants
and agreements set forth herein, Buyer agrees to purchase from the Sellers, and
the Sellers agree to sell to Buyer, at the Closing, free and clear of all Liens,
all of the assets, properties, rights, interests, licenses, permits, contracts,
causes of action, claims and operations of the Sellers of every kind and
description as the same shall exist on the Closing Date (other than the Excluded
Assets), wherever located, whether tangible or intangible, real, personal or
mixed which relate to the ownership and/or conduct of the Business (the
collective assets, properties, rights, interests, licenses, permits, contracts,
causes of action, claims and operations of the Business to be transferred to
Buyer by each of the Sellers pursuant hereto are referred to collectively herein
as the "Acquired Assets") and include, without limitation, the following in
respect of each Seller:
(a) all books and records of the Business, including, without
limitation, all customer lists, customer files, employee files and
information, databases regarding customers and employees and all
manuals, advertising materials, promotional material and brochures
regarding the services provided by the Business or otherwise used in
the Business, and the telephone and fax numbers and domain names of the
Business;
(b) all contracts, leases or other agreements whether written
or oral relating to the Business to which the Seller is a party and
which are identified on Exhibit B hereto ("Assumed Agreements");
(c) all trademarks, trade names, brand names, service marks,
copyrights, proprietary data, trade secrets and all other intellectual
property and intellectual property rights utilized in connection with
the Business or otherwise relating to the Business in each case as
conducted by the Seller, including those set forth on Exhibit B hereto,
together with the goodwill of the Business associated therewith (the
"IP Rights");
(d) all rights in and to software used in the operation of the
Business, together with all manuals and other related technical
information;
(e) furniture, office equipment, owned computer equipment
(including all hardware and software), if any, communications
equipment, and other tangible property (and interests in any of the
foregoing), including any of the foregoing that are subject to capital
leases;
(f) all rights, claims, credits, causes of action or rights of
set-off against third parties, whether liquidated or unliquidated,
fixed or contingent;
(g) all transferable franchises, licenses, permits or other
authorizations issued or granted by any governmental authority that are
owned by, granted to or held or used by either Seller;
(h) all work in progress; and
(i) all goodwill associated with the Business or the Acquired
Assets.
Without limitation of the foregoing, Exhibit B hereto contains a true and
complete list of all of the Acquired Assets.
1.2 Excluded Assets. The assets and properties set forth on Exhibit C
(the "Excluded Assets") shall be excluded from the Acquired Assets.
1.3 Transition. Buyer and Sellers will reasonably cooperate in order to
ensure an orderly transition of the Business to Buyer. Such cooperation will
include without limitation arrangements to ensure that telephone calls, e-mail,
mail, faxes and orders and inquiries are promptly forwarded to Buyer. Buyer and
the Sellers will also cooperate in transferring employees of either Seller who t
Buyer selects (if any) to Buyer. Each Seller shall be responsible for
terminating, and shall have the exclusive right to terminate, any of its
employees who Buyer does not so select.
1.4 Closure of Business. Immediately upon the Closing, except as
otherwise required hereunder or requested by Buyer, each Seller shall cease
operation of the Business and transfer operation of the Business to Buyer.
1.5 Retained Liabilities. Except as provided in Section 1.6, the
parties agree that Buyer is not assuming (and Buyer and its Affiliates shall not
be responsible for) any liabilities or obligations of the Business as operated
prior to the Closing or of either Seller and its Affiliates however arising (the
"Retained Liabilities"). Without limitation of the foregoing, each Seller shall
retain, and Retained Liabilities shall include, all liabilities and obligations
(x) to employees of the Business (including severance and other obligations),
whether or not Buyer hires such employees, arising prior to the Closing (other
than obligations to employees which constitute Assumed Liabilities in accordance
with Section 1.6 below), (y) arising from or in respect of the services provided
by the Business prior to Closing and (z) arising as a result of the violation by
a Seller or the Business of Legal Requirements regarding the collection and
payment over to governmental authorities of sales, use, excise and similar
taxes, payroll and similar taxes and the withholding of taxes for all periods
prior to Closing. Without limitation of the provisions of this Section 1.5, a
list of Retained Liabilities is set forth in Exhibit D hereto.
1.6 Assumed Liabilities. Buyer hereby agrees to assume as of the
Closing and thereafter to perform and discharge when due obligations of the
Sellers (x) to the employees of the Business to be expressly agreed upon with
Buyer prior to Closing for accrued vacation, severance, and other
payroll-related obligations arising prior to the Closing, solely to the extent
agreed upon with Buyer, and (y) under the Assumed Agreements set forth in
Exhibit E hereto with respect to periods after the Closing (other than any
obligations arising from the breach of such Assumed Agreements occurring at or
prior to Closing, which obligations shall constitute Retained Liabilities).
Obligations to be assumed by Buyer pursuant to this Section 1.6 are referred to
herein as "Assumed Liabilities". Assumed Liabilities pursuant to clause (x)
above shall be deemed to be Operating Expenses (as defined in Section 1.7(c))
for purposes of calculating the Annual Net Income pursuant to Section 1.7 below.
1.7 Purchase Price.
(a) In consideration for the Acquired Assets, Buyer shall pay
to Sellers, in accordance with the terms of payment set forth in
Section 1.8, an amount (the "Purchase Price") equal to the sum of:
(i) Twelve Million Nine Hundred Seventy-Five Thousand
Dollars ($12,975,000); and
(ii) An amount equal to the greater of:
(1) the product of (x) the average Annual
Net Income from the continued operation of
the Acquired Assets (to be calculated in the
manner set forth in Section 1.7(c)) during
the three consecutive twelve-month periods
commencing on the Closing Date (each such
twelve-month period, a "Measurement Year")
and (y) 5.25, provided that the product of
such calculation exceeds $20,000,000; or
(2) Seventeen Million Two Hundred Twenty
Thousand Dollars ($17,220,000).
(b) Intentionally deleted.
(c) Annual Net Income for each Measurement Year shall equal
the sum of the Monthly Net Income for all of the months within a
Measurement Year. The Monthly Net Income for each month within the
Measurement Year shall be calculated as follows:
(i) Calculate the total amount of all sales
in such month generated by the continued
operation of the Acquired Assets for the
provision of personnel services, and
services and products related to personnel
services, whether received in cash, in
services, in kind or on credit (and if on
credit, whether or not payment is received
therefor), including fees received for the
permanent hiring of temporary personnel or
liquidated damages (collectively "Gross
Sales").
(ii) Deduct from Gross Sales (1) any amounts
paid to temporary employees or otherwise by
Buyer which Buyer shall subsequently
determine to have been paid based upon
forged or erroneous time sheets, fraudulent,
erroneous or improper authorizations, for
standby time (amounts paid to temporary
employees for time not worked for a client),
or for any reason not billable to a client,
or for unconfirmed overtime paid to
temporary employees, (2) any amounts
refunded to a client through the exercise of
any guarantee, or for any other reason, (3)
all sales taxes or similar taxes, which by
law, are chargeable to clients (but only to
the extent they have
been included), if such taxes are separately
stated when the client is charged and paid
to the appropriate taxing authority, and (4)
the amount of any authorized and documented
credits, sales allowances, discounts, and/or
rebates given to clients in good faith and
in accordance with Buyer's Policies and
Procedures (amounts included in items (1) -
(4) collectively, the "Sales Adjustment
Amount"). Gross Sales less the Sales
Adjustment Amount shall equal "Adjusted
Gross Sales".
(iii) Deduct from Adjusted Gross Sales an
amount equal to the wages and all bonuses
(including sign-on bonuses) actually paid to
temporary employees, plus any
employment-related or wage-related taxes,
insurance and fringe benefits (including,
without limitation, FICA, Workers'
Compensation, health and hospitalization
insurance; fidelity bonding, liability
insurance, unemployment insurance and, if
required, disability insurance, vacation
programs and, if applicable, sick pay
programs) applicable to temporary employees
(collectively, "Direct Costs"). Direct Costs
include fees to Independent Contractors
(i.e. a Person that performs work
assignments as a self-employed, independent
business Person or "free-lancer" and has
entered into an Independent Contractor
Agreement with Buyer). Adjusted Gross Sales
less Direct Costs shall equal "Gross
Margin".
(iv) Multiply the Gross Margin by 60%
(hereafter, the "Allowable Gross Margin").
(v) Deduct from the Allowable Gross Margin
all operating expenses which Buyer is
obligated to pay and are attributable to
continued operation of the Business
(provided such expenses are not already
included in Direct Costs), including but not
limited to administrative payroll costs
(e.g., salaries, overtime, all bonuses
(including sign-on bonuses) paid to
administrative employees), FICA/Medicare,
office rent, utilities, telephone, equipment
or auto leases, depreciation, taxes and
licensing, Delinquent Accounts (as
calculated and defined below), advertising
and promotions, employee benefits,
insurance, supplies, legal and other outside
services, printing, postage, dues and
publications, travel, taxes and licenses,
employee training and development, office
security (collectively, "Operating
Expenses").
(vi) Sales amounts attributable to
Delinquent Accounts shall be included in
Operating Expenses and deducted from
Allowable Gross Margin, in accordance with
the following provisions:
(1) The collection of Delinquent Accounts
shall be in accordance with Buyer's credit
approval policies and procedures, which will
initially be the policies and procedures
that were established for Delinquent
Accounts prior to the Closing. Thereafter,
Buyer may from time to time determine that
circumstances warrant a modification to the
credit policies and procedures, either
generally or with respect to specific
accounts. In such case, Buyer shall consult
with DiCorcia prior to implementing any such
modification and the parties shall use their
good faith efforts to agree on the nature
and scope of such modifications. Buyer's
credit approval policies and procedures, as
same may be modified from time to time in
accordance with this provision, shall
hereafter be referred to as the "Policies
and Procedures".
(2) An annual aggregate allowance in the
amount of $333,333 (the "Delinquency
Allowance") shall be available in each
Measurement Year for Delinquent Accounts for
which the Policies and Procedures were
adhered to ("Conforming Delinquent
Accounts"). Fifty percent (50%) of the
amount of any Delinquent Account where the
Policies and Procedures were adhered to
shall be applied first to the Delinquency
Allowance and thereafter charged to
Operating Expenses for the relevant
Measurement Year.
(3) One hundred percent (100%) of the amount
of any Delinquent Account where the Policies
and Procedures were not adhered to
("Non-conforming Delinquent Accounts") shall
be charged to Operating Expenses for the
relevant Measurement Year.
(4) The unused portion (if any) of the
Delinquency Allowance for any Measurement
Year shall not be carried forward or
retroactively applied to Delinquent Accounts
occurring during any other Measurement Year.
(5) In calculating the Purchase Price, the
Parties assumed that Delinquent Accounts as
of December 31, 2001 would be in the
aggregate amount of $178,006. In the event
that the actual amount of Delinquent
Accounts at such time exceeds $178,006 such
excess amount will be deducted from
Operating Expenses for the first Measurement
Year and will not be offset by any available
Delinquency Allowance for such Measurement
Year.
(6) As used herein, "Delinquent Account(s)"
means those accounts that remain unpaid in
whole or in part for 150 days after its date
(in respect of invoices for temporary
personnel services), (or) remains unpaid in
whole or in part for 60 days beyond the
payment date agreed to by the client. For
purposes of calculating Delinquent Accounts,
Buyer acknowledges that DiCorcia shall be
responsible for collections and that Buyer
shall be entitled to monitor such
collections. If Buyer believes that
circumstances dictate a change in the way a
particular account is being handled, Buyer
and DiCorcia shall discuss collection
activities and credit limits established for
particular customers. In such event,
DiCorcia and the Chief Financial Officer
("CFO") of Buyer will use their good faith
efforts to mutually agree on how to handle
the particular account.
(vii) Deduct interest (the "Reserve Interest
Requirement") at a rate of 10% per annum on the
amount of [the total accounts receivable that are
over 150 days old minus 5% of the total accounts
receivable]. Allowable Gross Margin less Operating
Expenses and less Reserve Interest Requirement shall
equal "Monthly Net Income".
Exhibit F hereto illustrates the calculation of the Annual Net
Income.
During the four year period after the Closing, Buyer shall provide each
Shareholder with monthly reports regarding receivables, open credit and other
financial results of the operation of the Business containing at least the same
types of information as contained in the reports that were provided to the
Sellers prior to the Closing. The Shareholders shall have the right to inspect
Buyer's books and records exclusively relating to the Business (i.e., expressly
excluding any records that may be commingled with records relating to any other
operations of Buyer other than the Business), at reasonable times and upon
reasonable notice for the purpose of confirming Buyer's calculation of Annual
Net Income, subject to the provisions of Section 5.16(d).
1.8 Terms of Payment.
(a) The Purchase Price shall be payable as follows:
(i) $12,975,000 (i.e., the amount set forth in
Section 1.7(a)(i)) by delivery at the Closing of one
or more duly executed promissory notes of Buyer in
the form of Exhibit G-1 hereto, in said aggregate
principal amount. Said promissory notes shall bear
interest at the rate of 5% per annum and will be
payable over a period of three years in thirty-six
(36) equal consecutive monthly payments of principal,
together with interest thereon.
(ii) $17,220,000, by delivery at the Closing of one
or more duly executed promissory notes of Buyer in
the form of Exhibit G-2 hereto, in said aggregate
principal amount (subject to adjustment in accordance
with the provisions of Section 1.8(b)). Said
promissory notes shall bear interest at the rate of
5% per annum and will be payable as follows:
(1) $11,000,000 shall be payable in full,
with interest thereon, on the date which is
thirty-six (36) months after the Closing;
provided, however, that if Buyer's parent
company, ATC Healthcare, Inc., consummates a
secondary public offering of its equity
securities prior to payment in full of the
amount due pursuant to this subclause (1),
payment of an amount equal to the lesser of
(i) the unpaid portion of this payment; (ii)
the net proceeds received by Buyer from such
public offering and (iii) $5,500,000, shall
be accelerated to the date which is 30 days
after the consummation of such public
offering;
and provided further, that if prior to
payment in full of the amount due pursuant
to this subclause (1), a transaction is
consummated for the sale or other
disposition to a third party of more than
50% of the outstanding voting capital stock
of Buyer's parent company, ATC Healthcare,
Inc. (a "Company Sale Transaction"), the
unpaid portion of the payment described in
this subclause (1) shall be accelerated and
paid at the closing of the Company Sale
Transaction, in the same form as the
consideration for the Company Sale
Transaction. Accordingly, if the
consideration in the Company Sale
Transaction consists of assets other than
cash, the unpaid portion of this payment
under the Promissory Note shall be payable
in cash and/or non-cash assets of the same
type received in the Company Sale
Transaction.
(2) The remaining balance will be payable
over a period of five years beginning on the
date which is thirty-nine (39) months after
the Closing Date in sixty (60) equal
consecutive monthly payments of principal,
together with interest thereon.
(b) (i) On the date that is thirty-nine (39) months after the
Closing Date, Buyer shall calculate the Average Annual Net Income for
the three Measurement Years following the Closing. If (1) the product
of the average Annual Net Income for the three Measurement Years (as
calculated on such date) and 5.25 exceeds $20,000,000 or (2) any of the
circumstances described in
Section 1.7(b)(i)-(ii) above occurs, the remaining aggregate unpaid
principal payable under the promissory notes shall be adjusted to
reflect the product of (x) the Average Annual Net Income for the three
Measurement Years and (y) 5.25, less any payments of principal
previously made pursuant to the promissory notes issued pursuant to
Section 1.8(a)(ii)). In such case, the holders of such promissory notes
shall return the promissory notes to Buyer in exchange for new
promissory notes having the identical terms as the original promissory
notes, except that the remaining principal amount and the subsequent
monthly payments thereunder shall be appropriately adjusted.
(ii) The aggregate principal amount of the promissory notes
to be delivered pursuant to clause (b)(i) above shall be based on
Buyer's and Seller's mutually agreed upon estimate, as of the date
which is 39 months after the Closing, of Delinquent Accounts for the
third Measurement Year. On or before the date which is 51 months after
the Closing, the actual average Annual Net Income for the three years
following the Closing shall be calculated based on actual Delinquent
Accounts for the third Measurement Year. The remaining aggregate unpaid
principal payable under the promissory notes shall then be adjusted to
reflect the product of (x) the actual average Annual Net Income and (y)
5.25, less any payments of principal previously made pursuant to the
promissory notes issued under Section 1.8(a)(ii) and/or 1.8(b)(i). In
such case, the holders of such promissory notes shall return the
promissory notes to Buyer in exchange for new promissory notes having
the identical terms as the original promissory notes, except that the
principal amounts and the subsequent monthly payments thereunder shall
be appropriately adjusted.
(c) The promissory notes to be delivered by Buyer pursuant to
the provisions of this Section 1.8 shall hereafter be referred to
individually as a "Promissory Note" and collectively as the "Promissory
Notes".
(d) The Promissory Notes shall be issued to each DSS
Shareholder and DSI Shareholder, and payments shall be wire transferred
to the designated accounts of the DSS Shareholders and the DSI
Shareholders in the percentage amounts set forth in Schedule 1.8
hereto. The Shareholders shall provide Buyer with wire instructions.
(e) Payment of the Promissory Notes shall be secured by a lien
on and security interest in (i) the equity interest represented by the
capital account in ATC Funding, LLC attributable to the equity
contributions of ATC Staffing in ATC Funding, LLC, but not to exceed
the fair market value of the accounts receivable actually contributed
by ATC Staffing minus the attributable amount of any loan advances then
outstanding with respect thereto (the "ATC Funding Equity"), (ii) the
capital stock of ATC Staffing (the "ATC Staffing Equity"), (iii) the
assets of ATC Staffing (the "ATC Staffing Assets"), and (iv) all
proceeds of the foregoing (the "Collateral"); provided, however, that
the lien and security interest in the Collateral to be granted in
clauses (ii), (iii) and (iv) above with
respect to the ATC Staffing Equity and the ATC Staffing Assets, and the
proceeds thereof, shall be an expressly subordinate, second priority
and junior security interest subject to the prior security interest in
such Collateral of HFG Healthco-4 LLC (together with its successors and
assigns, the "Senior Creditor"). Notwithstanding the foregoing, the
security interest in the Collateral shall apply only to those assets of
ATC Staffing which are directly attributable to the All Care business,
and shall not apply to any other asset of ATC Staffing, including but
not limited to funds designated for payroll of ATC Healthcare. Buyer
shall remove from ATC Staffing as expeditiously as is practicable any
assets which are not directly attributable to the All Care business.
Upon payment in full of (1) the entire amount due under the Promissory
Notes described in Section 1.8(a)(i) and (2) the initial payment due
under the Promissory Notes described in Section 1.8(a)(ii), the
security interest in the ATC Funding Equity and the ATC Staffing
Equity, and the proceeds thereof, shall be released and the DSS
Shareholders and DSI Shareholders shall take such actions as are
necessary to effect such release, including the filing of UCC
termination statements.
The rights of the Shareholders under the Promissory Notes and the
Sellers' security interest are intended to be subordinate to the rights
of HFG (as provided in the Subordination Agreement) and/or any other
lender providing financing to Buyer, provided that the terms of
subordination required by such lender are not more onerous to the
Sellers and the Shareholders than the terms contained in the
Subordination Agreement. Accordingly, the Sellers and the Shareholders
agree to sign any documentation reasonably requested by HFG and/or such
other lender to evidence such subordination to the rights of the
lender, provided, that the terms of subordination are not more onerous
to the Sellers and the Shareholders than the terms contained in the
Subordination Agreement.
(f) Defaults under the Promissory Notes shall include a default in
payment and Buyer's failure to fund field or administrative payroll and
certain essential general and administrative costs of the All Care
Subsidiary, subject to the notice and cure periods and other applicable
provisions to be set out in the Promissory Notes.
1.9 Allocation of Purchase Price. On or prior to the Closing Date, the
parties shall mutually agree on allocation of the Purchase Price in accordance
with Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"),
such allocation to be inserted in Exhibit H and signed by the parties. All such
mutually agreed to allocations shall be used by each party and the respective
Shareholders of each of the Sellers in preparing any filing required pursuant to
Section 1060 of the Code or any similar provisions of state or local law and all
relevant income and franchise tax returns.
1.10 Termination of Franchise Agreements. The DSS Franchise Agreement
and the DSI Franchise Agreement are hereby terminated and of no further force or
effect, effective as of the date of this Agreement.
ARTICLE II
CLOSING
Closing. The purchase and sale of the Acquired Assets and assumption of
the Assumed Liabilities pursuant to this Agreement (the "Closing") will take
place on January 30, 2002 or such other date as the parties may mutually agree
upon, at the offices of Buyer, 0000 Xxxxxx Xxxxxx, Xxxx Xxxxxxx, XX 00000, at
11:00 a.m. EST. The date on which the Closing is to occur is herein referred
to as the "CLOSING DATE".
Deliveries at the Closing. At the Closing:
The following deliveries will be made by each of the Sellers
to Buyer:
such appropriately executed bills of sale,
assignments and other instruments of transfer
providing for the sale, assignment, transfer,
conveyance and delivery (including, to the extent
applicable, of record) of the Acquired Assets to
Buyer in forms acceptable to the Buyer and its
counsel;
copies of resolutions adopted by the board of
directors of such Seller approving the execution and
delivery of this Agreement and the performance by
such Seller of its obligations hereunder, all of the
foregoing certified as of the Closing Date by such
Seller's Secretary or Assistant Secretary;
such appropriately executed certificates, instruments
and documents referred to in Section 6.1 below;
possession of the Acquired Assets, in such manner as
may reasonably be specified by Buyer;
a legal opinion of counsel to such Seller, in the
form set forth in Exhibit I;
such other documents as Buyer may reasonably request
in order to effectuate the transactions contemplated
by this Agreement to be consummated at the Closing.
The following deliveries will be made by Buyer to the Sellers:
the Promissory Notes described in Sections 1.7(b)(i)
and (ii), duly executed by Buyer;
copies of resolutions adopted by the board of
directors of Buyer approving the execution and
delivery by Buyer of this Agreement and the
performance by the Buyer of its obligations
hereunder, all of the foregoing certified as of the
Closing Date by the Buyer's Secretary or Assistant
Secretary; and
such appropriately executed certificates, instruments
and documents referred to in Section 6.2 below.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers represents and warrants to the Buyer, severally and
not jointly, that the statements contained in this Section 3 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article III).
3.1 Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
3.2 Authorization of Transaction. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of the Seller and the
Shareholders of the Seller have duly authorized the execution, delivery, and
performance of this Agreement by the Seller. This Agreement constitutes the
valid and legally binding obligation of the Seller, enforceable in accordance
with its terms and conditions.
3.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject or any provision of
the charter or bylaws of the Seller or conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which the Seller is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Lien upon any of its
assets). The Seller is not required to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the parties to consummate the transactions
contemplated by this Agreement.
3.4 Brokers' Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.5 Title to Assets. The Seller has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it or located on
its premises, free and clear of all Liens. Without limiting the generality of
the foregoing, the Seller has good and marketable title to all of the Acquired
Assets, free and clear of any Liens or
restriction on transfer. Exhibit B is a correct and complete list of all of the
Acquired Assets.
3.6 No Subsidiaries. The Seller does not (a) own of record or
beneficially, directly or indirectly, (i) any shares of capital stock or
securities convertible into capital stock of any other corporation or (ii) any
interest in any partnership, joint venture or other non-corporate business
enterprise or (b) control, directly or indirectly, any other entity.
3.7 Events Subsequent to October 31, 2001. Since October 31, 2001,
there has not been any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of the Seller.
Without limiting the generality of the foregoing, since that date:
(a) the Seller has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(b) the Seller has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than $10,000 or
outside the Ordinary Course of Business;
(c) no party (including the Seller) has accelerated,
terminated, modified, or cancelled any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) involving more than $10,000 to which the
Seller is a party or by which it is bound;
(d) the Seller has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(e) the Seller has not made any capital expenditure (or series
of related capital expenditures) either involving more than
$10,000 or outside the Ordinary Course of Business;
(f) the Seller has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments,
loans, and acquisitions) either involving more than $10,000 or
outside the Ordinary Course of Business;
(g) the Seller has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease
obligation involving more than $10,000 in the aggregate;
(h) the Seller has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary
Course of Business;
(i) the Seller has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and
claims) either involving more than $10,000 or outside the
Ordinary Course of Business;
(j) the Seller has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(k) the Seller has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(l) the Seller has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(m) the Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(n) the Seller has not made any loan to, or entered into any
other transaction with, any of its directors, officers or
employees outside the Ordinary Course of Business;
(o) the Seller has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified
the terms of any existing such contract or agreement;
(p) the Seller has not granted any increase in the base
compensation of any of its directors, officers or employees
outside the Ordinary Course of Business;
(q) the Seller has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of
its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(r) the Seller has not made any other change in employment
terms for any of its directors, officers or employees outside
the Ordinary Course of Business;
(s) the Seller has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of
Business;
(t) Except as listed on Schedule 3.7, the Seller has not paid
any amount to any third party with respect to any Liability or
obligation which would not constitute an Assumed Liability if
in existence as of the Closing;
(u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Seller; and
(v) the Seller has not committed to any of the foregoing.
3.8 Undisclosed Liabilities. The Seller does not have any Liability
(and to the Seller's knowledge there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability), except for Liabilities
set forth in Schedule 3.8 hereto (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement, or violation of law).
3.9 Legal Compliance. The Seller and its respective predecessors and
Affiliates has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
3.10 Tax Matters.
(a) The Seller has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Seller (whether or not shown on any Tax
Return) have been paid. The Seller is not currently the beneficiary of
any extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where Seller does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Liens on any of the assets of the Seller
that arose in connection with any failure (or alleged failure) to pay
any Tax.
(b) The Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other
third party.
(c) No Shareholder, director or officer of the Seller expects
any authority to assess any additional Taxes for any period for which
Tax Returns
have been filed. There is no dispute or claim concerning any Tax
Liability of the Seller either (i) claimed or raised by any authority
in writing or (ii) as to which any of the Shareholders, directors or
officers of the Seller has Knowledge based upon personal contact with
any agent of such authority. The Seller has delivered to the Buyer
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by the Seller since December 1998.
(d) The Seller has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(e) None of the Assumed Liabilities is an obligation to make a
payment that will not be deductible under Code Section 280G. The Seller
is not a party to any Tax allocation or sharing agreement. The Seller
(A) has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return and (B) has no Liability for the Taxes of any
Person under Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
3.11 Real Property.
(a) The Seller does not own any real property.
(b) Schedule 3.11(b) lists and describes briefly all real
property leased or subleased to the Seller. The Seller has delivered to
the Buyer correct and complete copies of the leases and subleases
listed in Schedule 3.11(b). With respect to each lease and sublease in
Schedule 3.11(b):
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and
effect on identical terms following the consummation
of the transactions contemplated hereby;
(iii) no party to the lease or sublease is in breach
or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or
default or permit termination, modification, or
acceleration thereunder; and
(iv) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or
sublease.
3.12 Intellectual Property.
(a) The Seller owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the Seller as
presently conducted. Each item of Intellectual Property owned or used
by the Seller immediately prior to the Closing hereunder will be owned
or available for use by the Buyer on identical terms and conditions
immediately subsequent to the Closing hereunder. The Seller has taken
all necessary action to maintain and protect each item of Intellectual
Property that it owns or uses.
(b) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Shareholders, the
directors or officers of the Seller has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that
the Seller must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of the Shareholders, the
directors or officers of the Seller, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of the Seller.
(c) Schedule 3.12(c) identifies each trade name or trademark
used by the Seller in connection with the Business. The Seller
possesses all right, title, and interest in and to each such trade name
or trademark, free and clear of Lien, license, or other restriction;
and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, enforceability, use, or ownership
thereof.
(d) With respect to each item of Intellectual Property that
any third party owns and that the Seller uses pursuant to license,
sublicense, agreement, or permission:
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby; and
(iii) no party to the license, sublicense, agreement,
or permission is in breach or default, and no event
has occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder.
3.13 Tangible Assets. The Seller owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of the
Business as presently conducted. Each such tangible asset is free from defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
3.14 Contracts. Schedule 3.14 lists and identifies the following
contracts and other agreements to which the Seller is a party:
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $1,000 per annum;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a loss to the Seller, or involve consideration in
excess of $1,000;
(c) any agreement (or group of related agreements) under which
the Seller has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation,
in excess of $1,000 or under which it has imposed a Lien on any of its
assets, tangible or intangible;
(d) any agreement concerning confidentiality or
noncompetition;
(e) any agreement with or involving any current or former
Affiliate, Shareholder, officer, director, employee or consultant and
their respective Affiliates;
(f) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(g) any collective bargaining agreement;
(h) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation or severance benefits;
(i) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(j) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Seller; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $1,000.
The Seller has delivered to the Buyer a correct and complete copy of
each written agreement listed in Schedule 3.14 and a written summary setting
forth the terms and conditions of each oral agreement referred to in Schedule
3.14. With respect to each such agreement: (i) except for applicable bankruptcy,
insolvency, reorganization, moratoria, fraudulent conveyance and other similar
laws or equitable principle affecting enforcement of creditors' rights or
remedies generally, public policy principles, and general principles of equity
including without limitation principles regarding the availability or
unavailability of equitable remedies, including but not limited to specific
performance and injunctive relief, the agreement is legal, valid, binding,
enforceable, and in full force and effect; (ii) subject to the exceptions
provided in (i) above, the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (iii) no party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (iv) no party has repudiated any
provision of the agreement. Buyer acknowledges that such agreements may require
the other party's consent to assignment and nothing stated herein shall be
deemed to imply otherwise.
3.15 Notes and Accounts Receivable. All notes and accounts receivable
of the Seller are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and to Seller's knowledge, will be collected in accordance with their terms at
their recorded amounts, subject to applicable bankruptcy, insolvency,
reorganization, moratoria, fraudulent conveyance and other similar laws or
equitable principles affecting enforcement of creditors' rights or remedies
generally.
3.16 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Seller.
3.17 Insurance. Schedule 3.17 sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) under which the Seller is currently a named insured, or otherwise
the beneficiary of coverage:
(a) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(b) the policy number and the period of coverage; and
(c) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and
operate) of coverage.
With respect to each such insurance policy: (i) the policy is legal,
valid, binding, enforceable, and in full force and effect; (ii) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (iii) the Seller is not in breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has occurred
which, with notice or the lapse of time, would constitute such a breach or
default, or permit termination, modification, or acceleration, under the policy;
and (iv) no party to the policy has repudiated any provision thereof. The Seller
has been covered during the past three (3) years by insurance in scope and
amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period.
3.18 Litigation. Schedule 3.18 sets forth each instance in which the
Seller (i) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party or, to the Knowledge of the Shareholders,
directors or officers of the Seller is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the actions, suits,
proceedings, hearings, and investigations set forth in Schedule 3.18 could
result in any adverse change in the business, financial condition, operations,
results of operations, or future prospects of the Seller. None of the
Shareholders, directors or officers of the Seller has any reason to believe that
any such action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Seller.
3.19 Liability. The Seller has no Liability (and there is no Basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
arising out of any injury to individuals or property as a result of any services
provided by the Seller.
3.20 Employees. To the Knowledge of any of the Shareholders, directors
or officers of the Seller, no executive, key employee, or group of employees has
any plans to terminate employment with the Seller. The Seller is not a party to
or bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Seller has not committed any unfair labor practice.
None of the Seller's Shareholders or the directors and officers of the Seller
has any Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Seller. Schedule 3.20 sets forth a list of all of the employees of Seller
as of the date of this Agreement, and their respective position, start date, and
salary together with the amount of any bonuses or other compensation of any
nature to be paid to any such persons pursuant to agreement, custom or present
understanding. Each Seller
has delivered to Buyer true and correct copies of all written agreements between
the Seller and its respective employees.
3.21 Employee and Related Matters; ERISA.
(a) Schedule 3.21 sets forth each employee stock option,
incentive, hospitalization, medical, dental, vision, life insurance,
accidental death and dismemberment insurance, business travel
insurance, cafeteria and flexible spending, sick pay, disability,
severance, 401(k), golden parachute or other plan, fund, program,
policy, contract or arrangement providing employee benefits that is
maintained or contributed to by Seller in which any employees have
participated or under which any employees have accrued and remain
entitled to any benefits (the "Plans"). No employee of Seller is
entitled to any benefit under any Plan by reason of the transactions
contemplated hereby.
(b) None of Seller or any of the Plans or any trust created
thereunder, or any trustee or administrator thereof, has engaged in a
transaction in connection with which Seller would be subject to either
a material liability or civil penalty assessed pursuant to Sections
409, 502(i) or 502(1) of ERISA or a material tax imposed pursuant to
Section 4971, 4972, 4974, 4975, 4976 or 4980B of the Code. Each of the
Plans has been operated and administered in all material respects in
accordance with applicable laws, including the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the Code. There
are no pending or, to the Knowledge of Seller, threatened claims by or
on behalf of any of the Plans, by any employee or beneficiary covered
under any such Plan, or otherwise involving any such Plan (other than
ordinary course claims for benefits).
(c) Seller is not, and has not been within the last six years,
obligated to contribute, on behalf of any current or former employee of
Seller, to a multiemployer plan (as defined in Section 3(37) of ERISA).
(d) None of the Plans or any trust established thereunder has
incurred any accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, as of the
last day of the most recent fiscal year of each of the Plans. No
contribution failure has occurred with respect to any Plan sufficient
to give rise to a lien under Section 302(f) of ERISA.
(e) With respect to any Plan that is an employee welfare
benefit plan (i) no such Plan is unfunded or funded through a welfare
benefits fund, as such term is defined in Section 419(e) of the Code
and (ii) to the Knowledge of any of the Shareholders, officers or
directors of Seller, each such Plan that is a group
health plan, as such term is defined in Section 5000(b)(1) of the Code,
complies with the applicable requirements of Section 4980B(f) of the
Code.
3.22 Guaranties. The Seller is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
3.23 Environmental, Health, and Safety Matters. The Seller has complied
and is in compliance with all Environmental, Health, and Safety Requirements.
The Seller has not received any written or oral notice, report or other
information regarding any actual or alleged violation of Environmental, Health,
and Safety Requirements, or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to any of them or
its facilities arising under Environmental, Health, and Safety Requirements.
3.24 Certain Business Relationships With the Seller. None of the
Seller's Shareholders, officers or directors or their respective Affiliates has
been involved in any business arrangement or relationship with Seller within the
past 12 months, other than as a shareholder, officer, director or employee of
Seller, and none of the Seller's Shareholders, officers or directors or their
respective Affiliates owns any asset, tangible or intangible, which is used in
the business of Seller.
3.25 Disclosure. The representations and warranties contained in this
Article III do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article III not misleading.
3.26 Investment. Seller (i) understands that the Promissory Notes have
not been, and will not be, registered under the Securities Act, or under any
state securities laws, and are being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (ii) is
acquiring the Promissory Notes solely for its own account for investment
purposes, and not with a view to the distribution thereof (except to the
Shareholders), (iii) is a sophisticated investor with knowledge and experience
in business and financial matters, (iv) has received certain information
concerning the Buyer and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent in
holding the Promissory Notes, (v) is able to bear the economic risk and lack of
liquidity inherent in holding the Promissory Notes, and (vi) is an Accredited
Investor.
ARTICLE IIIA
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
3A.1 Representations of All Shareholders. Each of the Shareholders
represents and warrants to the Buyer, severally and not jointly, that the
following provisions of this Section 3A.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 3A.1).
(a) This Agreement constitutes the valid and legally binding
obligation of the Shareholder, enforceable in accordance with its terms
and conditions, subject to applicable bankruptcy, insolvency,
reorganization, moratoria, fraudulent conveyance and other similar laws
or equitable principle affecting enforcement of creditors' rights or
remedies generally, public policy principles, and general principles of
equity including without limitation principles regarding the
availability or unavailability of equitable remedies, including but not
limited to specific performance and injunctive relief. Neither the
execution and the delivery of this Agreement, nor the consummation of
the transactions contemplated hereby will conflict with, result in a
breach of, constitute a default under, any agreement, contract, lease,
license, instrument, or other arrangement to which the Shareholder is a
party or by which it is bound.
(b) The Shareholder has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
(c) The Shareholder (i) understands that the Promissory Notes
have not been, and will not be, registered under the Securities Act, or
under any state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions not
involving any public offering, (ii) is acquiring the Promissory Notes
solely for its own account for investment purposes, and not with a view
to the distribution thereof, (iii) is a sophisticated investor with
knowledge and experience in business and financial matters, (iv) has
received certain information concerning the Buyer and has had the
opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding the Promissory
Notes, (v) is able to bear the economic risk and lack of liquidity
inherent in holding the Promissory Notes, and (vi) is an Accredited
Investor.
.2.1. ARTICLE IV
(a) REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Article IV).
4.1 Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject.
4.4 Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
4.5 Consents. Except as set forth in Schedule 4.5, no consent,
approval, exemption or authorization is required to be obtained from, no notice
is required to be given to and no filing is required to be made with any third
party (including, without limitation, any governmental authority) by Buyer in
order to authorize or permit the consummation by Buyer of the transactions
contemplated by this Agreement.
ARTICLE V
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 Announcements. Neither the Sellers nor any of the Shareholders
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior written
approval of Buyer.
5.2 Further Assurances. Each party shall execute and deliver such
instruments and take such other actions prior to or after the Closing as any
other party may reasonably request in order to carry out the intent of this
Agreement, including, without limitation, obtaining any required consents or
approvals from governmental entities or other third parties, and each party
hereby agrees to use its respective reasonable best efforts to consummate the
transactions contemplated hereby as soon as is practicable. From time to
time after the Closing, Buyer, the Sellers and the Shareholders shall for no
additional consideration execute and deliver or cause to be executed and
delivered such further documents, certificates and instruments of conveyance,
assignment and transfer, and take such further action, as Buyer or Seller may
reasonably request in order to more effectively to sell, assign, convey,
transfer, reduce to possession and record title to any of the Acquired Assets to
Buyer. Each party shall cooperate and deliver such instruments and take such
action as may be reasonably requested by the other party hereto in order to
carry out the provisions and purposes of this Agreement and the transactions
contemplated hereby. Each Seller hereby irrevocably appoints Buyer as its
attorney-in-fact to execute documents, certificates and instruments in Seller's
name in order to more effectively assign, convey, transfer, reduce to possession
and record title to any of the Acquired Assets to Buyer. Such power of attorney
is coupled with an interest and irrevocable.
5.3 Consents and Approvals. Between the date hereof and the Closing
Date, the parties hereto shall cooperate with each other and use their best
efforts to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all consents, approvals and authorizations of all third parties
which are necessary or advisable to consummate the transactions contemplated by
this Agreement. The parties hereto agree that they will consult with each other
with respect to the obtaining of all consents, approvals and authorizations of
all third parties necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of matters relating to completion of the transactions contemplated
hereby.
5.4 Taxes, Tax Reporting and Cooperation on Tax Matters. The
Shareholders shall cause the Sellers to file all tax returns that the Sellers
are required to file and to pay all taxes required to be paid by the Sellers at
all times after the Closing Date. The Sellers and the Shareholders shall comply
with all tax reporting obligations in connection with the Acquired Assets and
the Assumed Liabilities on or before the Closing Date, and Buyer shall comply
with all tax reporting obligations with respect to the same after the Closing
Date. The parties shall provide each other with such assistance as may
reasonably be requested by any of them in connection with the preparation of any
tax return that may be required to be filed by it, any audit or other
explanation by any taxing authority, or any judicial or administrative
proceedings relating to liability for taxes. The party requesting assistance
hereunder shall reimburse the other for reasonable out-of-pocket expenses
incurred in providing such assistance.
5.5 Operation of Business Pre-Closing. From the date hereof until the
Closing Date, none of the Sellers will engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, neither Seller will (a) declare, set
aside, or pay any dividend or make any distribution with respect to its capital
stock or redeem, purchase, or otherwise acquire any of its capital stock, (b)
pay any amount to any third party with respect to any Liability or obligation
(including any costs and expenses the Seller has
incurred or may incur in connection with this Agreement and the transactions
contemplated hereby) which would not constitute an Assumed Liability if in
existence as of the Closing, (c) cause any of the representations or warranties
contained in Article III not to be true and correct at the Closing Date; (d)
adversely affect the ability of Buyer to consummate the transactions
contemplated hereby; or (e) otherwise engage in any practice, take any action,
or enter into any transaction of the sort described in Section 3.7 above. The
Sellers will keep their respective businesses and properties substantially
intact, including their present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers and
employees.
5.6 Operation of Business Post-Closing.
(a) For a period of fifty-one (51) months beginning on the
Closing Date, Buyer agrees to use the name "All Care Nursing Service"
exclusively in connection with the Business.
(b) For a period of three (3) years beginning on the Closing
Date, Buyer agrees: (a) to consult and coordinate with DiCorcia prior to
modifying the credit limits and payment terms that were in effect prior to the
Closing for existing accounts of the Business at the time of the Closing; and
(b) All Care Nursing Service ("ACNS") shall enter new account information into
Staff-Trak and forward all pertinent client information to Buyer's designee, and
the following shall apply: (i) Each prospective new customer shall be required
to complete and submit a new client information form to the Credit Manager of
Buyer. This form will contain all necessary information to determine the
creditworthiness of such new customer. If the Credit Manager believes that a new
customer raises issues of creditworthiness (e.g., which may require either
limiting the amount of sales Buyer will give credit on and/or restricting sales
to the customer whatsoever), Credit Manager will contact DiCorcia or a
representative designated by DiCorcia. The Credit Manager and DiCorcia or his
representative will use their best efforts to mutually agree on the appropriate
course of action in respect of the particular customer. If they fail to reach
agreement, DiCorcia and the designee of Buyer will discuss the matter and use
their best efforts to mutually agree on the appropriate course of action in
respect of the particular situation. If DiCorcia decides to accept a customer
against the recommendation of Buyer, 100% of any Delinquent Accounts that arise
from such customers will be allocated to Operating Expenses for purposes of
determining Annual Net Income.
(c) Buyer acknowledges and agrees that payments to the Sellers
under the Promissory Notes and payments to fund the All Care Subsidiary and its
operations will be a high priority for Buyer.
(d) Buyer agrees that until the Promissory Notes are paid in
full, the All Care business will remain in and be operated out of the All Care
Subsidiary.
(e) Buyer agrees that prior to the payment of $11,000,000 in
the aggregate on account of the Purchase Price, Buyer will not sell to a third
party the All
Care business or the All Care Subsidiary. The foregoing provision is not
intended to restrict a Company Sale Transaction (as defined in Section
1.8(a)(ii)(1)).
5.7 Until the earlier to occur of: (i) the termination of DiCorcia's
Employment Agreement or (ii) the expiration of forty-eight months from the date
of Closing, Buyer shall perform the operations of payroll and billing at 000
Xxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx. If six (6) months after the Closing Date the
DSO (i.e, days sales outstanding) for the All Care Subsidiary is five (5) days
or more higher than the DSO for the All Care business as of December 31, 2001,
Buyer may at any time thereafter relocate the collections operations of the All
Care Subsidiary to another location.
5.8 Full Access. Each Seller will permit representatives of the Buyer
to have full access at all reasonable times, upon reasonable notice, and in a
manner so as not to interfere with the normal business operations of the Seller,
to all premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to the Seller.
5.9 Exclusivity. Neither the Sellers nor the Shareholders will (a)
solicit, initiate, or encourage the submission of any proposal or offer from any
Person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets, of any of the Sellers
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Sellers will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
5.10 Use of Name. Subsequent to the Closing Date, Buyer shall have sole
right and title in the name "AllCare" and all variations thereof, and neither of
the Sellers, nor the Seller's Shareholders nor any Affiliate thereof shall use
such names or any variation thereof subsequent to the Closing Date.
5.11 Disclosure Supplements. From time to time prior to the Closing,
the parties shall promptly supplement or amend any materials previously
disclosed to another party pursuant hereto with respect to any matter hereafter
arising which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in materials previously
disclosed to the other party or which is necessary to correct any information in
such materials or statement herein which has been rendered inaccurate thereby;
no such supplement or amendment to such materials shall be deemed to have
modified the representations, warranties and covenants of the parties or to cure
any misrepresentations or breach of warranty, for the purpose of determining
whether the conditions set forth in Article VI hereof have been satisfied.
5.12 Failure to Fulfill Conditions. In the event that any party hereto
determines that a condition to its respective obligations to consummate the
transactions
contemplated hereby cannot be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other parties. Each party will promptly
inform the other parties of any facts applicable to it that would be likely to
prevent or materially delay approval of the transaction contemplated hereby by
any third party or which would otherwise prevent or materially delay completion
of such transactions.
5.13 Execution of Assignments. Concurrent with the Closing, each Seller
shall execute and assign, and Buyer may, at its option, accept an assignment of,
all leases, vendor agreements and any other executory contracts to be assumed by
Buyer and each Seller shall deliver to Buyer at the Closing executed consents to
such assignments by all landlords, vendors and other applicable third parties,
at the sole expense of such Seller. Buyer understands and acknowledges that
Seller can give no assurance that it will obtain all such consents; provided,
however, that the procurement of all such consents shall remain a condition
precedent to Buyer's obligation to close the transactions contemplated by this
Agreement.
5.14 Preservation of Seller. For a period of three (3) years beginning
on the Closing Date, the Sellers and the Shareholders shall take no action to
dissolve or liquidate either of the Sellers without the prior delivery to Buyer
of the assumption in writing by another Person satisfactory to Buyer, in its
sole discretion, of all the duties, liabilities, responsibilities and
obligations of the Sellers under this Agreement. Sellers and Buyer shall use
good faith efforts to agree upon acceptable entities prior to the Closing.
5.15 Financial Statements. Buyer shall be entitled to cause the
preparation of the following financial statements for each Seller (collectively
the "Financial Statements") within sixty (60) days after the Closing Date and
distribute copies to the Shareholders within 15 days after the date such
Financial Statements are completed: (i) audited consolidated and unaudited
consolidating balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1999,
December 31, 2000, and December 31, 2001, for the Seller; and (ii) unaudited
consolidated and consolidating balance sheets and statements of income, changes
in stockholders' equity, and cash flow as of and for the ten (10) months ended
October 31, 2001, for the Seller. The Financial Statements (including the notes
thereto) shall be prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP") throughout the periods covered thereby,
shall present fairly the financial condition of the Seller as of such dates and
the results of operations of the Seller for such periods, and shall be correct
and complete, and consistent with the books and records of the Seller (which
books and records are correct and complete); provided, however, that the
unaudited financial statements described in (ii) above shall be subject to
normal year-end adjustments (which will not be material individually or in the
aggregate) and may lack footnotes and other presentation items. The Sellers and
the Shareholders shall (i) pay 50% of all costs and expenses incurred by Buyer
in connection with the preparation of the Financial Statements and (ii) provide
such information and otherwise cooperate with Buyer to the extent necessary to
prepare the Financial Statements within the specified time frame.
For a period of four years beginning on the Closing Date, Buyer shall
provide each Shareholder with monthly and annual reports regarding receivables,
open credit and other financial results of the operation of the Business
containing at least the same types of information as contained in the reports
that were provided to the Sellers prior to the Closing. Buyer and the
Shareholders shall consult with each other, and make good faith efforts to
reconcile, any issues that may arise in connection with such reports.
5.16 Covenant not to Compete, Non-Solicitation, Confidentiality.
(a) For a period of eight (8) years beginning on the Closing
Date, none of the Sellers or the Shareholders shall directly or
indirectly, engage (whether as owner, operator, partner, shareholder,
investor, franchisee, licensee, director, officer, manager, employee,
agent or consultant) in any business which offers or sells temporary
nurses, ORTs and certified nurse's aides to hospitals, nursing homes,
and other health care facilities or engages in any of the activities
engaged in by either Seller under the DSI Franchise Agreement or the
DSS Franchise Agreement, respectively, in the Restricted Territory, nor
shall any such person divert any business of Buyer to any other entity;
provided, however, that the foregoing restrictions shall not prohibit
any such Person from (i) owning up to 5% of the outstanding common
equity of any company listed on a public securities market or (ii)
performing his duties as an employee of Buyer or (iii) acting in
accordance with the terms of a written agreement with Buyer.
(b) It is the desire and intent of the parties that the
provisions of this Section 5.16 shall be enforced to the fullest extent
permitted under the laws and public policies of each jurisdiction in
which enforcement is sought. If the final judgment of any court of
competent jurisdiction determines that any provision of this Section
5.16 is invalid or unenforceable, such court shall have the power to
reduce the duration or geographical or temporal scope of such
provision, as the case may be, to delete specific words or phrases, or
to replace any invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and as so modified, such provision shall be enforceable; it
is the intention of the parties that the foregoing restrictions shall
not be terminated but shall be deemed amended to the extent required to
render them valid and enforceable, such amendment to only apply with
respect to the operation of this Section 5.16 in the jurisdiction of
the court that has made the adjudication.
(c) For a period of eight (8) years beginning on the Closing
Date, none of the Sellers or the Shareholders shall, directly or
indirectly, solicit any temporary or staff employee of Buyer, or
persuade, encourage or induce any such employee to cease his employment
with Buyer or to become employed by or affiliated in any capacity with
any person or firm engaged in the same or similar
business as Buyer, or to contact or communicate with any such employee
for any purpose prohibited by this Section 5.16(c).
(d) Each of the Sellers and the Shareholders will treat and
hold as such all of the Confidential Information, refrain from using
any of the Confidential Information except in connection with this
Agreement, and deliver promptly to the Buyer or destroy, at the request
and option of the Buyer, all tangible embodiments (and all copies) of
the Confidential Information which are in his or its possession. In the
event that any of the Sellers and the Shareholders is requested or
required (by oral question or request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information,
that Seller and/or Shareholder will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an appropriate
protective order or waive compliance with the provisions of this
Section 5.16(d). If, in the absence of a protective order or the
receipt of a waiver hereunder, any of the Sellers and Shareholders is,
on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that
Seller and/or Shareholder may disclose the Confidential Information to
the tribunal; provided, however, that the disclosing Seller and/or
Shareholder shall use his or its reasonable best efforts to obtain, at
the reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer shall
designate.
(e) The parties acknowledge and agree that (i) the
restrictions contained in Sections 5.16(a), (b), (c) and (d) are a
reasonable and necessary protection of the immediate interests of
Buyer, (ii) any violation of these restrictions would cause substantial
injury to Buyer for which no adequate remedy at law may be available.
Accordingly, the Sellers and the Shareholders hereby consent to the
entry of an injunction prohibiting any conduct by a Seller or a
Shareholder in violation of the restrictions set forth in this Section
5.16, without the necessity or proving actual damages, the inadequacy
of monetary damages or posting any bond or security; provided, however,
that such right to injunctive relief shall not be construed as
prohibiting Buyer from pursuing any other available remedies for such
breach or threatened breach.. The parties agree that it may
conclusively be presumed that any violation of the terms of the
covenants not to compete in Section 5.16(a) was accomplished by and
through unlawful utilization of Buyer's confidential information,
know-how, methods and procedures. Further, the Sellers and the
Shareholders expressly agree that the existence of any claims any of
them may have against Buyer shall not constitute a defense to the
enforcement by Buyer of the covenants set forth in this Section 5.16.
The prevailing party shall be awarded costs and expenses (including
reasonable attorneys' fees) incurred by it in connection with (i) the
enforcement of the covenants set forth herein, or (ii) a breach of any
of the terms of this Agreement.
5.17 "Key Man" Life Insurance. On or prior to the Closing Date,
Xxxxxxxx XxXxxxxx shall obtain from a reputable insurer, and thereafter
maintain, a "key man" life insurance policy insuring the life of Xxxxxxxx
XxXxxxxx. Such policy shall be for an amount of at least twenty million dollars
($20,000,000) and shall name Buyer as sole beneficiary thereunder. After the
Closing, Buyer shall be responsible for payment of all premiums in respect of
said policy, and said premiums will be deemed to be Direct Costs for purposes of
calculating the Annual Net Income pursuant to Section 1.7.
5.18 Subordination. It is the intention of the parties that the rights
of the Sellers and the Shareholders under the Promissory Notes and the Sellers'
security interest shall be subordinate to the rights of HFG and/or any lender
providing financing to Buyer, provided that the terms of subordination required
by such lender are not more onerous to the Sellers and the Shareholders than the
terms contained in the Subordination Agreement to be entered into as a condition
to the Closing in accordance with Section 6.1(j). Accordingly, the Sellers and
the Shareholders agree to sign any documentation reasonably requested by HFG
and/or such other lender to evidence such subordination of the Promissory Notes
to the interests of the lender, provided, that the terms of subordination are
not more onerous to the Sellers and the Shareholders than the terms contained in
the Subordination Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Buyer. The obligations of Buyer to effect
the transactions contemplated by this Agreement shall be subject to satisfaction
of the following conditions at or prior to the Closing Date, unless waived by
Buyer.
(a) The representations and warranties of the Sellers and the
Shareholders set forth in Articles III and IIIA hereof shall be true
and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing
Date.
(b) The Sellers and the Shareholders shall have performed in
all material respects all obligations and covenants required to be
performed by them pursuant to this Agreement on or prior to the Closing
Date.
(c) Each Seller shall have procured all of the third party
consents specified in Section 5.3 above.
(d) There shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement.
(e) Each Seller shall have delivered to Buyer a certificate,
dated the Closing Date and signed by the President of such Seller, to
the effect that the conditions set forth in Section 6.1(a)-(d) have
been satisfied.
(f) All certificates, opinions, instruments, and other
documents required to be delivered or obtained by the Sellers or the
Shareholders effect the transactions contemplated hereby (including but
not limited to bills of sale and such other instruments of assignment
as shall be necessary or advisable to vest in Buyer all right, title
and interest in and to the Acquired Assets) will be satisfactory in
form and substance to the Buyer.
(g) Buyer shall have received an opinion of counsel from legal
counsel to each Seller as to the matters set forth in Exhibit I in a
form satisfactory to Buyer and its counsel.
(h) Each of Xxxxxxxx XxXxxxxx and Xxxxxx Xxxxxx shall have
delivered to Buyer duly executed Employment Agreements.
(i) Xxxxxxxx XxXxxxxx shall have obtained, the "key man" term
life insurance policy described in Section 5.15.
(j) Buyer shall have obtained the consent of HFG to the
transactions contemplated by this Agreement. The Sellers and the
Shareholders agree to execute and deliver to HFG at the Closing a
subordination agreement (the "Subordination Agreement") in form and
substance acceptable to HFG and Sellers, and such other documents as
HFG may require, and Seller shall approve, in order to consent to the
transactions contemplated by this Agreement.
6.2 Conditions Precedent - Sellers and Shareholders. The obligations of
the Sellers and the Shareholders to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction of the following conditions on or
prior to the Closing Date, unless waived by the Sellers.
(a) The representations and warranties of Buyer set forth in
Article IV hereof shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date (or on the
date when made in the case of any representation and warranty which
specifically relates to an earlier date).
(b) Buyer shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to
this Agreement on or prior to the Closing Date.
(c) There shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement.
(d) Buyer shall have delivered to the Seller a certificate,
dated the Closing Date and signed by the President of Buyer, to the
effect that the conditions set forth in Sections 6.3(a)-(c) have been
satisfied.
(e) Buyer shall have delivered to each of Xxxxxxxx XxXxxxxx
and Xxxxxx Xxxxxx duly executed Employment Agreements.
(f) All certificates, instruments, and other documents
required to be delivered obtained by Buyer to effect the transactions
contemplated hereby will be satisfactory in form and substance to the
Sellers.
(g) Buyer shall have delivered to Sellers a duly executed
guaranty of ATC Healthcare, Inc. in a form that is mutually acceptable
to Sellers and Buyer.
ARTICLE VII
(b) SURVIVAL AND INDEMNIFICATION
7.1 Survival. All of the representations and warranties of the Sellers
and the Shareholders contained in Sections 3.6-3.10, Sections 3.11-3.26 and
Sections 3A.2-3A.3
shall survive the Closing and continue in full force and effect for a period of
three years thereafter. All of the other representations and warranties of
Buyer, each of the Sellers and/or the Shareholders contained in or made pursuant
to this Agreement will survive the Closing and continue in full force and effect
forever thereafter (subject to any applicable statutes of limitation). The
provisions of this Article VII are in addition to any other remedy any party
hereto may have.
7.2 Seller's Indemnification Obligation.
(a) Each Seller and its Shareholders shall jointly and
severally indemnify and hold harmless Buyer and its Affiliates and
their officers, directors and shareholders ("Buyer Indemnified
Parties") from and against any and all Losses which are incurred by or
asserted against one or more Buyer Indemnified Parties:
(i) resulting from the breach of any representation,
warranty, covenant or agreement made by such Seller
or any of its Shareholders in this Agreement, and, if
there is an applicable survival period pursuant to
Section 7.1 above, provided that Buyer makes a
written claim for indemnification within such
survival period; or
(ii) constituting or arising from any Liability of
such Seller or its Shareholders or otherwise relating
to the Acquired Assets, which is not an Assumed
Liability.
(b) Buyer Indemnified Party shall have no right to offset any
claims for indemnification under Section 7.2(a) against any payment to
be made to or for the account of such Seller or its Shareholders
pursuant to this Agreement, including without limitation on account of
payments due under the Promissory Notes.
7.3 Buyer's Indemnification Obligation. Buyer shall indemnify and hold
harmless each of the Sellers and their respective officers, directors and
Shareholders ("Seller Indemnified Parties") from and against any and all Losses
which are incurred by or asserted against one or more Seller Indemnified
Parties:
(a) resulting from the breach of any representation, warranty,
covenant or agreement made by Buyer in this Agreement; or
(b) resulting from a failure to pay any Assumed Liability.
The provisions of this Section 7.3 shall be subject to the provisions
of the Subordination Agreement.
7.4 Procedure. (a) Any claim for indemnification under Sections 7.2 or
7.3 will be made in accordance with this Section 7.4. In the case of any claim
for indemnification arising from a claim or demand of a third Person, an
Indemnified Party will give prompt written notice, in no event more than thirty
(30) days following such Indemnified Party's receipt of such claim or demand, to
the Indemnifying Party describing in reasonable detail the basis of such claim
or demand as to which it may request indemnification hereunder. Any other claim
for indemnification will be made within a reasonable time after the time the
Indemnified Party becomes aware of the facts forming the basis of such claim.
Notwithstanding the foregoing, failure or delay in giving such notices shall not
relieve the Indemnifying Party from its obligation to indemnify the Indemnified
Party except to the extent the Indemnifying Party is actually and materially
prejudiced by such failure or delay.
(b) The Indemnifying Party will have the right to defend and
to direct the defense against any such claim or demand, in its name or
in the name of the Indemnified Party, as the case may be, at the
expense of the Indemnifying Party and with counsel selected by the
Indemnifying Party and reasonably satisfactory to the Indemnified
Party, provided that (i) the Indemnifying Party accepts responsibility
for any such claim or demand by written notice to the Indemnified Party
within ten (10) days of receipt of the notice described above, (ii) the
Indemnifying Party provides assurances that it will and makes provision
to satisfy any Losses in respect thereof, which assurances and
provision shall be reasonably satisfactory to the Indemnified Party,
(iii) the claim or demand involves only money damages and does not seek
an injunction or other equitable relief, (iv) settlement of, or an
adverse judgment with respect to, such claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential
custom or practice materially adverse to the Business, and (v) the
Indemnifying Party conducts the defense of the claim or demand actively
and diligently.
The Indemnifying Party shall keep the Indemnified Party fully
informed in the defense of any such claim or demand. The Indemnified
Party will have the right to participate in (but not control) the
defense of any claim or demand as to which the Indemnifying Party has
assumed control with counsel employed by it at the expense of the
Indemnified Party. Subject to the provisions of (d) below, the
Indemnifying Party will have no indemnification obligations with
respect to any such claim or demand that is settled by the Indemnified
Party without the prior written consent of the Indemnifying Party
(which consent may not be unreasonably withheld or delayed).
In the event that any of the conditions in Section 7.4(b)
above is or becomes unsatisfied, however, or, if the Indemnifying Party
is also a party to any such proceeding and the Indemnified Party
determines in good faith that joint representation would be
inappropriate, then (i) the Indemnifying Party may not settle or
compromise any such claim or demand without the written consent of the
Indemnified Party, (ii) the Indemnified Party may defend against, and
consent to
the entry of any judgment or enter into any settlement with respect to,
the claim or demand in any manner it reasonably may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent
from, any Indemnifying Party in connection therewith), (iii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the claim or demand
(including reasonable attorneys' fees and expenses), and (iv) the
Indemnifying Party will remain responsible for any Losses the
Indemnified Party may suffer resulting from, arising out of or caused
by the claim or demand, to the fullest extent provided in this Article
VII.
.2.2. ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. Certain of the parties may terminate this
Agreement as provided below:
(a) the Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Sellers on or before the 20th day following the date of
this Agreement if the Buyer is not satisfied with the results of its
continuing business, legal, and accounting due diligence regarding each
of the Sellers;
(c) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (i) in the event
either of the Sellers has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Buyer has notified the Sellers of the breach, and the
breach has continued without cure for a period of 5 days after the
notice of breach or (ii) if the Closing shall not have occurred on or
before January 31, 2002, by reason of the failure of any condition
precedent under Section 6.1 hereof (unless the failure results
primarily from Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement); and
(d) either of the Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (i)
in the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Sellers have notified the Buyer of the breach, and the
breach has continued without cure for a period of 5 days after the
notice of breach or (ii) if the Closing shall not have occurred on or
before January 31, 2002, by reason of the failure of any condition
precedent under Section 6.2 hereof (unless the failure results
primarily from any of the Sellers or the Shareholders breaching any
representation, warranty, or covenant contained in this Agreement).
8.2 Effect of Termination. If any party terminates this Agreement
pursuant to Section 8.1 above, all rights and obligations of the parties
hereunder shall terminate without any Liability of any party to any other party
(except for any Liability of any Party then in breach).
.2.3. ARTICLE IX
(a) MISCELLANEOUS
9.1 Expenses. Each of the Buyer, the Sellers and the Shareholders will
bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
9.2 Notices. Any notice or other communication required or permitted to
be given hereunder will be in writing and will be mailed by prepaid registered
or certified mail, timely deposited with an overnight courier such as Federal
Express, or delivered against receipt (including by confirmed facsimile
transmission), as follows:
(a) In the case of the Sellers, to each of:
Xxxxxxxx X. XxXxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (___)
Xxxxxx Xxxxxx
000 Xxxxxx Xxxx
Xxx Xxxxxxxx, XX 00000
Facsimile: (___)
Xxxxxx Xxxxxxxx
000 Xxxxx Xxx
Xxxxxxxx, XX 00000
Facsimile: (___)
Xxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: (___)
with a copy to:
Xxxxxx Xxxxxxx Meloff, Xxxxxx & Xxxxx
Attn: Xxxxx X. Xxxxxx, Esquire
000 Xxxxxx Xxxxxxx
Xxxxxxxx 000
X.X. Xxx 0000
Xxxx Xxxx, XX 00000
(b) In the case of Buyer, to:
ATC Staffing Services, Inc.
0000 Xxxxxx Xxxxxx
Xxxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
with a copy to:
Kasowitz, Benson, Xxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the party may have furnished in writing in
accordance with the provisions of this Section. Any notice or other
communication shall be deemed to have been given, made and received upon
receipt; provided, that any notice or communication that is received other than
during regular business hours of the recipient shall be deemed to have been
given at the opening of business on the next business day of the recipient.
9.3 Assignment. This Agreement and all provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other party, except that Buyer
may assign its rights and obligations hereunder to any Affiliate or transferee
of that part of its business to which such rights and obligations relate. Any
assignment in violation of this Agreement shall be null and void.
9.4 Entire Agreement. This Agreement and the Ancillary Documents embody
the entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and thereby and supersede all prior written or
oral commitments, arrangements or understandings with respect hereto. There is
no restriction, agreement, promise, warranty, covenant or undertaking with
respect to the transactions contemplated hereby and thereby other than those
expressly set forth herein and therein.
9.5 Amendment; Waiver.
(a) This Agreement may only be amended or modified in a
writing signed by the party against whom enforcement of any such
amendment or modification is sought.
(b) No breach of any covenant, agreement, representation or
warranty made herein shall be deemed waived unless expressly waived in
writing by the party who might assert such breach. No omission or
failure to exercise and no delay in exercising any right, remedy or
power hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy or power hereunder preclude
any other or further exercise thereof or the exercise of any other
right, remedy or power provided herein or by law or in equity. The
waiver by any party hereto of a breach of any term or provision of this
Agreement will not be construed as a waiver of any subsequent breach.
9.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which will be considered one and the same agreement and
each of which will be deemed an original.
9.7 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK (REGARDLESS OF THE LAWS THAT MIGHT BE APPLICABLE UNDER
PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS, INCLUDING, WITHOUT
LIMITATION, MATTERS OF VALIDITY, CONSTRUCTION, EFFECT AND PERFORMANCE.
9.8 Severability. If any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement will
not be affected thereby, and the parties will use their reasonable efforts to
substitute one or more valid, legal and enforceable provisions which insofar as
practicable implement the purposes and intent hereof. To the extent permitted by
applicable law, each party waives any provision of law which renders any
provision of this Agreement invalid, illegal or unenforceable in any respect.
9.9 Specific Performance. Each of the parties recognizes that any
breach of the terms of this Agreement may give rise to irreparable harm for
which money damages would not be an adequate remedy. Accordingly, each of the
parties agrees that the other party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, in addition to any other remedy to
which it may be entitled, at law or in equity.
9.10 Third Person Beneficiaries. This Agreement is not intended to
confer upon any other Person any rights or remedies hereunder, except that Buyer
and Seller may
assert the rights of the Buyer Indemnified Parties and Seller Indemnified
Parties, respectively, hereunder.
9.11 Bulk Transfer Law. The parties hereby waive compliance by Buyer
and Seller with the provisions of any applicable bulk sales law and, without
limitation of any other remedy Buyer may have, Seller agrees to indemnify and
hold harmless Buyer Indemnified Parties from any Loss asserted against any Buyer
Indemnified Party or which any Buyer Indemnified Party may suffer or incur by
virtue of any noncompliance by Buyer or Seller with such laws.
9.12 Transfer Taxes. Seller shall pay all sales, use, transfer and
other similar tax and fees resulting from the transactions contemplated by this
Agreement.
9.13 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.14 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
9.15 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
9.16 Submission to Jurisdiction. Each of the parties submits to the
jurisdiction of any state or federal court sitting in New York, New York, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
ATC STAFFING SERVICES, INC.
By:
--------------------------
Name:
Title:
DIRECT STAFFING, INC.
By:
--------------------------
Name:
Title:
DSS STAFFING CORP.
By:
--------------------------
Name:
Title:
DSI SHAREHOLDERS: DSS SHAREHOLDERS:
----------------------------- ------------------------------
Xxxxxxxx XxXxxxxx Xxxxxxxx XxXxxxxx
----------------------------- ------------------------------
Xxxxxx Xxxxxx Xxxxxx Xxxxxxxx
------------------------------
(a) Xxxxxx Xxxxxxxx
ATC HEALTHCARE, INC.,
solely in respect of the provisos in
Section 1.8(a)(ii)(1) of the Agreement
By:
-----------------------------
Name:
Title:
(A) EXHIBIT A
(1) DEFINITIONS
"AFFILIATE" shall mean, with respect to a Person, another Person
heretofore, now or hereafter, directly or indirectly, through one or more
intermediaries, controlled by, under common control with or which controls, the
Person specified (in each case in their capacities as such).
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504(a) [or any similar group defined under a similar provision of
state, local, or foreign law].
"AGREEMENT" shall mean this Agreement.
"ALL CARE SUBSIDIARY" shall mean either the Buyer or another wholly
owned subsidiary of Buyer's parent company, ATC Healthcare, Inc., which entity
will operate the All Care business.
"ANCILLARY DOCUMENTS" means all agreements, instruments, documents or
certificates contemplated to be executed and/or delivered by any of the Sellers
pursuant to Section 2.2(a) and (c).
"APPROVAL" shall mean any franchise, license, certificate of
compliance, authorization, consent, order, permit, approval or other action of,
or any filing, registration or qualification with, any federal, state, municipal
or other governmental, administrative or judicial body, agency or authority.
"ACQUIRED ASSETS" shall have the meaning set forth in Section 1.1.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 1.6.
"ASSUMED AGREEMENTS" shall have the meaning set forth in Section
1.1(b).
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"BUSINESS" shall have the meaning set forth in the recitals to this
Agreement.
"BUYER" shall have the meaning set forth in the heading to this
Agreement.
"BUYER INDEMNIFIED PARTIES" shall have the meaning set forth in Section
7.2.
"CLOSING" shall have the meaning set forth in Section 2.1.
"CLOSING DATE" shall have the meaning set forth in Section 2.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Sellers that is not already generally available to
the public.
"CONSENT" shall mean any consent or approval of, or notice,
declaration, report or statement filed with or submitted to, any Person (other
than an Approval).
"DICORCIA EMPLOYMENT AGREEMENT" shall mean the employee agreement to be
entered into at the Closing between Buyer and Xxxxxxxx XxXxxxxx in a form that
is mutually acceptable to Buyer and Xxxxxxxx XxXxxxxx.
"DSI" and "DSI SHAREHOLDERS" shall have the meanings set forth in the
heading to this Agreement.
"DSI FRANCHISE AGREEMENT" shall mean the Franchise Agreement dated July
7, 1998 between Buyer and DSI and any amendments, modifications or supplements
thereto.
"DSS" and "DSS SHAREHOLDERS" shall have the meanings set forth in the
heading to this Agreement.
"DSS FRANCHISE AGREEMENT" shall mean the Franchise Agreement dated
September 8, 1996 between Buyer and DSS and any amendments, modifications or
supplement thereto.
"EMPLOYMENT AGREEMENTS" shall mean the DiCorcia Employment Agreement
and the Weiner Employment, collectively.
"ERISA" shall mean the Employee Retirement Income Security Act, as
amended.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 1.2.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.7.
"INDEMNIFIED PARTY" shall mean the Buyer Indemnified Party or Seller
Indemnified Party seeking indemnification pursuant to Article VII.
"INDEMNIFYING PARTY" shall mean the party from which indemnification is
sought pursuant to Article VII.
"IP RIGHTS" shall have the meaning set forth in Section 1.1(c).
"KNOWLEDGE" with respect to Seller means knowledge of any person who is
an officer, Shareholder or employee of Seller on the day prior to the Closing
Date.
"LEGAL REQUIREMENTS" shall have the meaning set forth in Section 3.7.
"LIENS" means any lien, encumbrance, charge, security interest or
adverse claim.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LOSSES" shall mean all liabilities, obligations, losses, damages,
claims, actions, Liens, deficiencies, costs or expenses (including without
limitation settlement costs and attorneys', accountants' and experts' fees and
court costs and any reasonable cost or expense incurred in enforcing rights
pursuant to this Agreement), less any insurance recoveries in respect thereof.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PERSON" means and includes an individual, corporation, partnership
(limited, limited liability or general), joint venture, association, trust, any
other unincorporated organization or entity and a governmental entity or any
department or agency thereto.
"PLANS" shall have the meaning set forth in Section 3.22.
"PROMISSORY NOTE" shall have the meaning set forth in Section 1.7(b).
"RESTRICTED TERRITORY" shall mean:
(a) During the period of four (4) years beginning on the Closing Date,
(i) Nassau, Suffolk, Queens, Kings, New York, Bronx, Richmond, Westchester,
Rockland, Orange and Xxxxxx counties in the State of New York, (ii) Bergen,
Passaic, Union, Xxxxxx, Middlesex, Essex, Warren, Mercer, Monmouth, Ocean,
Xxxxxx, Hunterdon, Sussex and Somerset counties in the state of New Jersey,
(iii) any territory in which Buyer or its Affiliates, either directly or through
a franchisee or licensee, engages in the business of providing supplemental
staffing, outsourcing and human resources to the
healthcare industry and (iv) the territory within 100 miles of any of the
counties listed in (i), (ii) and (iii) above.
(b) During the period of four (4) years beginning on the fourth
anniversary of the Closing Date, only the territories specified in clauses
(a)(i) and (ii) above.
"RETAINED LIABILITIES" shall have the meaning set forth in Section 1.5.
"SELLER" or "SELLERS" means DSS and/or DSI.
"SELLER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 7.3.
"SHAREHOLDERS" means the DSI Shareholders and the DSS Shareholders,
collectively.
"SUBORDINATION AGREEMENT" shall have the meaning set forth in Section
6.1(j).
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"WEINER EMPLOYMENT AGREEMENT" shall mean the employment agreement to be
entered into at the Closing between Buyer and Xxxxxx Xxxxxx in a form that is
mutually acceptable to Buyer and Xxxxxx Xxxxxx.
