Exhibit No. 1
Headway Corporate Resources, Inc.
Form 8-K dated June 29, 1998
File No. 0-23170
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of June 29, 1998, among HEADWAY
CORPORATE RESOURCES, INC., a Delaware corporation ("Headway"),
[HEADWAY CORPORATE STAFFING SERVICES OF NEW JERSEY, L.L.C., a
Delaware limited liability company] ("Buyer"), PHOENIX
COMMUNICATION GROUP, INC. OF N.J., a New Jersey corporation
("Seller"), XXXXX XXXXXXXXX ("Xxxxxxxxx") and XXXXXXX XXXXX
("Xxxxx"; Xxxxxxxxx and Xxxxx being sometimes collectively
referred to as the "Stockholders" and each, individually, as a
"Stockholder").
W I T N E S S E T H:
WHEREAS, Buyer wishes to purchase, and Seller wishes to
sell, the assets and business of Seller specified in this
Agreement;
NOW, THEREFORE, the parties agree as follows:
Purchase and Sale of the Acquired Assets.
1.1 Acquired Assets. Subject to the terms and
conditions of this Agreement, and in reliance on the
representations, warranties and agreements set forth herein, at
the Closing (as defined in Section 2), Seller shall sell, convey,
transfer, assign and deliver to Buyer, and Buyer shall purchase
from Seller, all of Seller's right, title and interest in and to
all of the assets of Seller of every kind, tangible and
intangible, wherever located, excepting only those assets
specifically excluded in Section 1.2, and including, without
limitation:
(a) the office furniture, equipment, computers and
fixtures of Seller listed in Schedule 1.1.A;
(b) all computer software, programs and databases
owned by Seller and Seller's interest in any transferable
computer software licensed by it from others;
(c) all office supplies owned by Seller;
(d) the client agreements and arrangements of Seller
set forth in Schedule 1.1.B;
(e) the office leases, equipment leases and other
agreements, contracts and instruments of Seller listed in
Schedule 1.1.C;
(f) all rights of Seller with respect to any of
Seller's temporary, permanent, leased or "payrolled" (as that
term is defined in Section 1.3(h)) personnel, including, without
limitation, "self-incorporated" personnel who are placed or
provided by Seller through corporations or other entities of
which it is a shareholder or other owner;
(g) all prepayments and deposits of Seller, including
without limitation, security deposits under leases;
(h) the corporate name "Phoenix Communication Group,
Inc. of N.J.", all assumed names, logos, trademarks, service
marks, domain names, trade names and copyrights and registrations
and applications for registration of any of them, and any other
intellectual property rights of Seller, all of which are listed
in Schedule 1.1.D;
(i) originals or true copies of all books and records
of Seller pertaining to the assets referred to in subparagraphs
(a) through (h) above, as appropriate, including customer lists
and credit files, and all those pertaining to Seller's employees
who are hired by Buyer pursuant to Section 10.3;
(j) all permits, licenses, approvals and other
governmental authorizations relating to Seller's business which
are transferable to Buyer, all of which are listed in Schedule
1.1.E;
(k) the Acquired Cash and Acquired Receivables (as
defined in Section 1.3(b)) listed in Schedule 1.1.F;
(l) any other assets (to the extent transferable) not
referred to in Section 1.2 which are used by Seller in connection
with its business of the placement or provision of temporary,
permanent, leased or payrolled personnel (including, without
limitation, self-incorporated personnel), including, without
limitation, telephone and facsimile numbers, Internet and e-mail
addresses; and
(m) the goodwill pertaining to Seller's business;
all as the same exist on the date hereof and shall exist on the
Closing Date, subject only to changes occurring in the ordinary
course of business of Seller. All such assets to be acquired are
referred to together as the "Acquired Assets".
1.2 Excluded Assets. The following assets of Seller
are excluded from the Acquired Assets: (a) the consideration
payable to Seller by Buyer, (b) any cash (excluding the Acquired
Cash), bank deposits, certificates of deposit, marketable
securities, notes, drafts, checks or other cash equivalents or
similar instruments owned by Seller, (c) Seller's accounts
receivable (excluding the Acquired Receivables) as of the Closing
Date (the "Non-Acquired Accounts Receivables") and any amounts
accrued by Seller for services rendered prior to the Closing
Date, but which have not been billed as of the Closing Date (the
"Accruals"), (d) all claims and rights of Seller to any federal,
state or local refunds, credits, rebates, claims, repayments or
benefits of Taxes (as defined in Section 6.14), (g) any loans
receivable of Seller, (h) any refundable portions of paid
insurance premiums and prepaid federal, state or local income
taxes, (i) Seller's interest in any life insurance policies
maintained by Seller on the life of any employee, (j) Seller's
tax records and any books and records which Seller shall be
required to retain pursuant to any applicable law, rule or
regulation (provided, that at Buyer's request and expense, Seller
shall provide Buyer with copies of any record or document
retained by Seller and, similarly, Buyer, at Seller's request and
expense, shall provide Seller with copies of any record or
document transferred to Buyer hereunder) and (k) all records and
correspondence relating to the foregoing excluded assets.
1.3 Purchase Price.
(a) As consideration for the sale, conveyance,
transfer, assignment and delivery to Buyer of the Acquired
Assets, Buyer shall pay to Seller a purchase price of $18,000,000
(the "Purchase Price"), subject to adjustment as provided in
Sections 1.3(b) and (c), as follows:
(i) $17,000,000 payable on the
Closing Date (the "Closing Payment");
(ii) on the Closing Date, that
number of shares (the "Shares") of the Common
Stock, par value $.0001 per share, of Headway
(the "Common Stock"), as are determined by
dividing $1,000,000 by the "Closing Average
Price" (defined as the average closing bid
and asked prices of the Common Stock on The
NASDAQ SmallCap Market for the five business
days immediately preceding the Closing Date);
and
(iii) the "Earnout" on the "Earnout
Payment Dates" (as defined in Sections 1.3(c)
and 1.3(e), respectively).
All amounts payable by Buyer pursuant to Sections 1.3(a) and
1.3(c) shall be paid by wire transfer in immediately available
funds to accounts designated by Seller to Buyer not later than
two business days prior to the scheduled date of such payment.
(b) On the Closing Date, Seller shall sell, convey,
transfer, assign and deliver to Buyer a combination of, at
Seller's discretion, cash and cash equivalents reasonably
acceptable to Buyer (the "Acquired Cash") and accounts receivable
(the "Acquired Receivables") in an aggregate amount of
$3,000,000, as set forth in Schedule 1.1.F, which Schedule shall
include a detailed listing of the Acquired Receivables. If the
aggregate amount of the Acquired Cash and Acquired Receivables is
less than $3,000,000, the Closing Payment shall be reduced by
$1.00 for each $1.00 of such deficiency.
(c) Each of the four consecutive twelve-month periods
commencing on the Closing Date is referred to as an "Earnout
Period". Buyer shall pay to Seller an amount for each such
Earnout Period (each, an "Earnout") as follows:
(i) for the first Earnout Period, that amount, if any,
equal to 4 times (A) the EBITA (as defined in Section
1.3(d)) of Buyer for such first Earnout Period in excess of
(B) $2,800,000;
(ii) for the second Earnout Period, that amount, if
any, equal to the lesser of (A) 2 times (I) the EBITA of
Buyer for such second Earnout Period in excess of (II) the
EBITA of Buyer for the first Earnout Period, or (B) 2 times
(I) the EBITA of Buyer for such second Earnout Period in
excess of (II) $2,800,000; provided, that the Earnout for
the second Earnout Period may not exceed $1,000,000;
(iii) for the third Earnout Period, that amount, if
any, equal to the lesser of (A) 2 times (I) the EBITA of
Buyer for such third Earnout Period in excess of (II) the
EBITA of Buyer for the second Earnout Period, or (B) 2 times
(I) the EBITA of Buyer for such third Earnout Period in
excess of (II) $2,800,000; provided, that the Earnout for
the third Earnout Period may not exceed $1,000,000; and
(iv) for the fourth Earnout Period, that amount, if
any, equal to (A) 5 times the Average Annualized EBITA (as
defined in Section 1.3(d)) of Buyer less (B) the sum of (I)
$15,000,000 and (II) the Earnouts, if any, paid pursuant to
clauses (i), (ii) and (iii) above.
The calculation of the Earnout for each Earnout Period
shall be independent of the calculations for the other Earnout
Periods, and, except for the purposes of Section 1.3(c)(iv),
there shall be no cumulation of EBITA from one Earnout Period to
another. In no event may any Earnout be less than zero. The
Business shall be operated as a separate division of Buyer during
all Earnout Periods.
(d) For the purposes of this Agreement, (i) "EBITA"
means, for an Earnout Period, "Net Income" (as defined below)
without taking into account (A) provisions for income taxes, (B)
interest expense resulting from Buyer's purchase of Seller and
(C) amortization of goodwill and other intangible assets
resulting from Buyer's purchase of Seller and (ii) "Average
Annualized EBITA" means the sum of Buyer's EBITA for the second,
third and fourth Earnout Periods, divided by 3.
"Net Income" means the net income (or loss) of Buyer
for an Earnout Period directly attributable to Buyer's operation
of Seller's business (the "Business"), as reasonably determined
by Headway in accordance with generally accepted accounting
principles. The calculation of Net Income shall take into
account the following expenses to the extent incurred in the
ordinary course of the Business: (i) wage, salary and commission
expense of all temporary, payrolled and full-time employees of
Buyer, and all independent consultants and contractors retained
by Buyer, directly associated with the Business, including,
without limitation, salary and other compensation (other than
payments due under this Agreement) paid to Mercatili and Xxxxx
under their respective Employment Agreements (as defined in
Section 3.5); (ii) reasonable travel and entertainment expenses
incurred by Buyer's employees and its independent contractors and
consultants directly associated with the Business, (iii) bonuses
paid to Buyer's employees directly associated with the Business
and reasonably acceptable to each Stockholder (but only to the
extent that such Stockholder remains employed by Buyer pursuant
to the terms of his Employment Agreement); (iv) all amounts
attributable to FICA and any other federal, state and local taxes
paid by Buyer on behalf of such employees; (v) all unemployment
insurance premiums, workers' compensation premiums, medical and
disability coverage and any other benefits provided by Buyer to
such employees; (vi) Buyer's general and administrative expenses
directly attributable to the Business; (vii) sales commissions
directly attributable to the Business; (viii) any fall-offs,
rebates, discounts, offsets or concessions granted by Buyer to
clients of the Business; (ix) depreciation on any fixed assets
purchased for the Business after the Closing Date, including,
without limitation, depreciation in connection with the
acquisition by Headway, Buyer or any other subsidiary of Headway
of computer and telecommunications equipment for use by the
Business consistent with that used by the Headway group of
companies; (x) any expenses reasonably and necessarily incurred
by Headway, Buyer or any other subsidiary of Headway in
connection with the transition of the operation of the Business
to Buyer as part of the Headway group of companies, including,
without limitation, expenses for the installation and
implementation at Buyer of the third party accounting and
operating software used by Headway; and (xi) an annual charge of
$100,000 for technical and financial support provided by the
Headway group of companies; provided, that, solely with respect
to the Earnout calculated pursuant to Section 1.3(c)(i), such
$100,000 amount shall not be deducted in determining the Net
Income for such first Earnout Period but shall be deducted from
the amount of the Earnout for such period, if any. For the
purposes of determining EBITA pursuant to this Section 1.3(d),
any reserves established by Buyer directly attributable to the
Business for bad debts with respect to its receivables during any
Earnout Period shall be added to Net Income to the extent
deducted therefrom. Commencing on the Closing Date, Buyer shall
combine the operations of Certified Technical Staffing, Inc.
("CTS") with those of the Business.
(e) In the event of a material change in the
ownership, management or operations of Buyer or Headway during
the Earnout Periods that, in the reasonable discretion of the
Stockholders, would materially and adversely affect the revenues
of the Business, including without limitation, changes resulting
from one or more sales or other dispositions of substantially all
of the assets of the Business, an organizational or ownership
restructuring (such as a merger, consolidation or other
reorganization involving its business, or a spin-off, split-up or
other divisional restructuring, or a substantial sale of its
stock to an unaffiliated organization) or any other organic
change that reduces operations, then the parties shall agree to
discuss and evaluate the then current definition of Net Income to
assure that the Earnout calculation set forth in this Section 1.3
continues to be a fair and relevant method to measure the EBITA
of the Business and the Net Income defined herein, and whether
adjustments should be made to the method of calculation to take
into account the effect of such changes. Such adjustments might
include augmenting the EBITA of the Business with portions of the
EBITA of affiliated organizations that are attributable to assets
or resources of the Business transferred to or shared with such
other organizations. Buyer and Headway agree not to take actions
calculated to minimize EBITA or to reduce Net Income for the
purpose of avoiding any Earnout obligations hereunder, or to
reduce any Earnout to which Seller would otherwise be entitled to
hereunder (including using affiliated organizations to compete
with the Business or using marketing or business plans intended
to cause the diversion of revenue from the Business to Buyer's
affiliated organizations). Each of Buyer and Headway agree to
conduct itself in good faith and to use commercially reasonable
efforts to maximize EBITA and Net Income during the Earnout
Periods.
(f) Each Earnout shall be paid 90 days following the
close of the related Earnout Period (each, an "Earnout Payment
Date"). If any such day is not a business day, the Earnout
Payment Date shall be the next succeeding business day. If, as
of the close of business on the day prior to any Earnout Payment
Date, any account receivable included as income in the
calculation of Net Income has not been fully collected, the
uncollected amount of such account receivable shall (if not
previously deducted from Net Income pursuant to this Section
1.3(f)) be deducted from Net Income and EBITA and the Earnout
shall be reduced accordingly. Buyer shall use reasonable
collection efforts to collect any such uncollected amounts. If
such account receivable is thereafter collected after the Earnout
Payment Date, Buyer shall pay Seller the amount by which such
Earnout had been reduced in respect of such account receivable,
net of any direct collection costs and net of an interest charge
for any account receivable paid more than 120 days after the date
of invoice (a "Restoration Amount"), with the interest rate
determined by reference to the interest rate then in effect for
Eurodollar Loans under the Credit Agreement (as defined in
Section 3.13), within 15 days after the end of each month in
which such payments are received (together with a detailed
statement setting forth in reasonable detail the amounts received
and the Earnout paid); provided, that with respect to the Earnout
Payment Date for the third Earnout Period, Buyer shall be
obligated to pay Seller a Restoration Amount with respect to any
such account receivable only if such account receivable is
collected within 120 days of such third Earnout Payment Date.
(g) Buyer agrees to deliver to Seller (i) by no later
than 30 days following the end of each month during the Earnout
Periods (commencing July 1998), an income statement with respect
to, such month for the Business; and (ii) on each Earnout Payment
Date, a computation setting forth in reasonable detail the EBITA
and the Earnout Payment, if any, with respect to such Earnout
Period. If Seller and the Stockholders shall disagree with the
calculation of EBITA for any Earnout Period, the Stockholders and
their accountants shall be entitled to meet with Headway and its
accountants for the purpose of resolving any such dispute.
(h) For the purposes of this Agreement, "payrolled"
personnel means (i) those employees of Headway, Buyer or Seller,
as the case may be, who are hired by Headway, Buyer or Seller on
behalf of a client and are considered as full-time employees of
such client, but whose compensation is paid by Headway, Buyer or
Seller or (ii) those employees of Headway, Buyer or Seller who
are considered to be payrolled employees under industry practice
or understanding prevailing at the time.
(i) Headway guarantees to Seller and the Stockholders
the full and timely performance and payment of all of Buyer's
obligations under this Agreement.
1.4 Assumption of Liabilities. As additional
consideration for the purchase of the Acquired Assets, Buyer
shall assume and agree to pay, perform and discharge in full the
following debts, contracts, obligations and liabilities of Seller
(the "Assumed Liabilities"), and no others, as and when due, and
to indemnify and hold Seller harmless therefrom:
(a) all obligations and liabilities of Seller arising
on or after the Closing Date under its office lease for the
premises located at 00 Xxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx; and
(b) all obligations and liabilities of Seller arising
on or after the Closing Date under Seller's client agreements and
arrangements set forth in Schedule 1.1.B and Seller's equipment
leases and other agreements, contracts and instruments set forth
in Schedule 1.1.C.
1.5 Liabilities Not Assumed. Other than the
liabilities referred to in Section 1.4, Buyer shall not assume or
be deemed to have assumed any of the liabilities or obligations
of Seller of any kind (together, the "Unassumed Liabilities"),
including, without limitation:
(a) any liability claims with respect to the business
and affairs of Seller and the acts and omissions of its current
or former officers, directors, employees and agents, either
before or after the Closing Date;
(b) any obligation or liability of Seller to any of
the Stockholders or to any current or former officer or director
of Seller;
(c) any obligation or liability for federal, state,
local or foreign income or other taxes (including any related
penalties, fines and interest) of Seller, including, without
limitation, any and all taxes arising out of the transactions
contemplated hereby;
(d) any obligation or liability arising out of the
operation of Seller's business prior to the Closing Date,
including any rebates, discounts, offsets or concessions
attributable to amounts invoiced to Seller's clients prior to the
Closing Date;
(e) any obligation or liability to Seller's temporary,
payrolled, leased or full-time employees who are providing
services on behalf of Seller for salary, wages, bonuses or other
compensation or benefits, including any with respect to
retirement plans, and accrued vacation, sick and holiday time and
pay incurred prior to the Closing Date, including, without
limitation, any liabilities of Seller contemplated by Section
10.3 but excluding any liabilities set forth in Schedule 1.7;
(f) any liabilities of Seller with respect to any
pension, retirement, savings, profit-sharing or other benefit
plans;
(g) any obligation or liability which is inconsistent
with any representation or warranty of Seller or the
Stockholders;
(h) any liability arising out of, and any expenses
relating to, any claim, action, dispute or litigation involving
Seller;
(i) any liability of Seller for fines, penalties,
damages or other amounts payable to any government or
governmental agency or instrumentality; and
(j) any obligation or liability of Seller or the
Stockholders for any expenses incurred in preparing or
negotiating this Agreement and consummating the transactions
contemplated hereunder or thereunder.
1.6 Allocation of Purchase Price. Buyer and Seller
agree to report this transaction for United States federal income
tax purposes in accordance with Schedule 1.6. Buyer and Seller
each agree to file Form 8594 pursuant to Section 1060 of the
Internal Revenue Code, as amended (the "Code"), with their
respective federal income tax returns filed for the taxable year
in which the Closing Date occurs. The consideration paid on the
Closing Date consisting of the Closing Payment and the Shares
(valued as agreed below) shall be allocated on Form 8594
consistent with the allocation of the purchase price set forth on
Schedule 1.6. Buyer and Seller acknowledge and agree that (i)
Buyer's consideration includes its costs incurred to effect the
transactions under this Agreement, (ii) for purposes of
calculating the purchase price received by Seller for federal
income tax purposes, the Shares shall be valued at $800,000 and
(iii) the amounts paid by Buyer under the Earnout shall be
allocated by Buyer and Seller to the goodwill of Seller, and each
of Buyer and Seller shall file with its federal income tax return
for each taxable year in which an Earnout is paid, supplemental
Form 8594, and Buyer and Seller shall each allocate any Earnout
to Class IV assets on Part III of such supplemental Form 8594.
Seller's taxpayer identification number is 00-0000000 and Buyer's
taxpayer identification number is 00-0000000.
1.7 Closing Date Adjustments. On or before the
Closing, Buyer and Seller shall determine and agree on, as of the
Closing Date, (i) any amounts that Seller may have prepaid for
equipment or office leases included in the Acquired Assets in
respect of periods beginning on or after the Closing Date, (ii)
any amounts that Seller may have prepaid for sales, use or
similar taxes, license fees (exclusive of corporate franchise
fees), insurance, services or other expenses relating to the
Acquired Assets in respect of periods beginning on or after the
Closing Date, (iii) any security deposits on office leases or
equipment leases being transferred to Buyer hereunder and any
security deposits for utility services for premises covered by
such office leases, (iv) the amount of any accrued salaries,
bonuses, commissions, vacation, sick or holiday time or pay as of
the Closing Date with respect to temporary, payrolled, leased or
full-time employees of Seller retained by Buyer pursuant to
Section 10.3, as set forth in Schedule 1.7 and (v) any amounts of
the type described in clauses (i) and (ii) in respect of periods
prior to the Closing Date which are expected to be billed after
the Closing Date. All amounts relating to periods ending prior
to the Closing Date shall be for the account of Seller and all
amounts relating to periods beginning on or after the Closing
Date shall be for the account of Buyer. The respective amounts
shall be netted against each other at the Closing. If the result
is an amount owing to Seller, Buyer shall pay such amount to
Seller at the Closing. If the result is an amount owing to
Buyer, Seller shall pay such amount to Buyer at the Closing.
1.8 Collection of Accounts Receivable.
(a) On or within 15 days after the Closing, Buyer and
Seller shall determine and agree on, as of the close of business
on the business day immediately preceding the Closing Date, the
amount of the Accruals. Promptly after the Closing, Buyer, in
coordination with Seller, shall render invoices to Seller's
clients for the Accruals. Buyer shall remit to Seller all
payments received by it on account of the Accruals and any Non-
Acquired Receivables within 15 days after the end of each month
in which such payments are received. While Buyer shall use
reasonable efforts to collect the Accruals and any Non-Acquired
Receivables outstanding on the Closing Date commensurate with the
efforts it would use to collect its own accounts receivable,
Buyer shall not be required to institute litigation or other
collection proceedings in order to do so and, in any event, Buyer
shall have no liability to Seller for any Accruals or Non-
Acquired Receivables that are not collected. Seller shall have
the right to institute collection proceedings with respect to any
Accruals or Non-Acquired Receivables that are aged more than 120
days after the date of the related invoice, but shall notify
Buyer of any such action not less than five business days before
it is instituted.
(b) Buyer shall use reasonable efforts to collect the
Acquired Receivables commensurate with the efforts that it would
use to collect its own accounts receivables, but shall not be
required to institute litigation or other collection proceedings
in order to do so and shall in no event have any liability to
Seller for any Acquired Receivables that are not collected. To
the extent that any of the Acquired Receivables remain
uncollected (the "Uncollected Receivables") for a period greater
than 120 days from the Closing Date, Seller and the Stockholders,
jointly and severally, shall, within 5 days of receipt of written
notice from Buyer setting forth in detail such Uncollected
Receivables, pay to Buyer such uncollected amount. Seller shall
have the right to institute collection proceedings with respect
to the Uncollected Receivables but only after payment in full is
made with respect to such receivables in accordance with this
Section 1.8(b). Upon payment in full, Buyer shall be deemed to
have conveyed, transferred and assigned the Uncollected
Receivables to Seller.
(c) Seller shall promptly pay to Buyer, if and when
received, any amounts which are received by it after the Closing
Date in respect of any of the Acquired Assets (including, without
limitation, any Acquired Receivables) or with respect to any
accounts receivable generated by Buyer with respect to periods on
or after the Closing Date. Similarly, if Buyer receives after
the Closing any payments with respect to any assets of Seller not
included in the Acquired Assets (other than the Accruals and the
Non-Acquired Receivables (which shall be governed by Section
1.8(a)), Buyer shall promptly pay such amounts to Seller. Any
amounts received by Buyer or Seller in respect of accounts
receivable shall be applied to the receivables specifically
identified by the client. If no such identification is provided,
Buyer or Seller, as the case may be, shall inquire of client for
written identification and apply the amount received accordingly.
1.9 Restrictions on Transfer of Shares.
(a) Seller understands that Headway has no obligation
to register the Shares under the Securities Act of 1933, as
amended (the "Act"), and, accordingly, the Shares shall be
subject to restrictions under the Act, the rules and regulations
promulgated thereunder and applicable state securities laws. At
the Closing, Headway shall deliver to Seller one or more
certificates in proper form in the name of Seller evidencing the
Shares being issued on such date. Each certificate shall bear an
appropriate legend as to the lack of registration of the Shares
and the resulting restrictions on transfer.
(b) No Shares shall be transferable except in
compliance with the provisions of this Section 1.9(b). Seller
shall be restricted from transferring any Shares for a period of
two years from the Closing Date; provided, that Seller shall
have the right, in the event of a reorganization, consolidation
or merger to which Headway is a party, to exchange the Shares for
that kind and number of shares or other securities, cash of
property that holders of the Common Stock are entitled to receive
as a result of such reorganization, consolidation or merger; and
provided, further, that (i) Seller may transfer any or all of the
Shares to the Stockholders, who agree, by their signature to
this Agreement, to be bound by the provisions of this Section 1.9
and (ii) the Stockholders may transfer any or all of such Shares
to up to five employees of the Business; provided, that, prior to
such transfer, any such employee shall agree in a writing
reasonably satisfactory to Headway to be bound by the provisions
of this Section 1.9. Thereafter, Seller agrees that, prior to
any proposed transfer of any Shares, it shall give Headway notice
of its intention to effect such transfer. Such notice shall
describe briefly the manner and circumstances of the proposed
transfer in sufficient detail, and shall include such information
as is reasonably necessary to enable counsel for Headway to
render the opinion contemplated by this Section 1.9(b). If, in
the opinion of such counsel, the proposed transfer of such Shares
may be effected without registration or qualification thereof
under the Act or applicable state securities laws, Headway, as
promptly as is practicable, shall notify Seller of such opinion,
whereupon Seller shall be entitled to transfer such Shares in
accordance with the terms of its notice. Unless, in the opinion
of such counsel, subsequent disposition of such Shares by the
transferee may require such registration or qualification,
Headway shall promptly on such transfer deliver certificates for
such Shares not bearing the restrictive legend contemplated
above. If, in the opinion of such counsel, subsequent
disposition by the transferee of such Shares may require such
registration or qualification, Seller shall not transfer such
Shares unless and until its transferee confirms to Headway in
writing its agreement to be bound by the provisions of this
Section 1.9(b). If, in the opinion of Headway's counsel, the
proposed transfer may not be effected without registration or
qualification thereof, Seller shall not transfer the same until
such registration or qualification is effected.
1.10 Nonassignable Contracts. Nothing in this
Agreement shall be construed as an attempt to assign any contract
which is by law nonassignable without the consent of any other
party thereto unless and until such consent is given.
Closing. The consummation of the purchase and
sale of the Acquired Assets shall take place at 10:00 a.m. on
June 29, 1998, at the offices of Xxxxxxx & Xxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other time, date and
place as the parties may agree (the "Closing Date").
Conditions to the Obligations of Buyer. The
obligations of Buyer under Section 1 are subject to the
satisfaction, on or before the Closing Date, of the following
conditions:
3.1 Due Performance. Seller and the Stockholders
shall have in all material respects fully performed and complied
with all agreements and conditions required under this Agreement
to be performed or complied with by it or them on or prior to the
Closing Date.
3.2 Accuracy of Representations and Warranties. All
representations and warranties of Seller and the Stockholders set
forth in Section 6 of this Agreement shall be true and correct in
all material respects on and as of the Closing Date as if made on
and as of such date.
3.3 Certificate. Buyer shall have received a
certificate from each of Seller and the Stockholders to the
effect set forth in Sections 3.1 and 3.2.
3.4 Mercatili Employment Agreement. Buyer, Headway
and Mercatili shall have entered into an Employment Agreement in
a form satisfactory to all such parties (the "Mercatili
Employment Agreement").
3.5 Xxxxx Employment Agreement. Buyer, Headway and
Xxxxx shall have entered into an Employment Agreement in a form
satisfactory to all such parties (the "Xxxxx Employment
Agreement"; the Mercatili Employment Agreement and the Xxxxx
Employment Agreement being sometimes collectively referred to as
the "Employment Agreements" and each, individually, as an
"Employment Agreement").
3.6 Lease. On the Closing Date, Buyer shall have
entered into an assignment of the existing lease for the
Woodbridge office and an amendment of said lease, each in form
and substance satisfactory to Buyer.
3.7 Acquired Cash and Receivables. On the Closing
Date, Seller shall have delivered to Buyer a combination of cash
and accounts receivables in an aggregate amount of no less than
$3,000,000, as set forth in Schedule 1.1.F.
3.8 UCC-3 Termination Statements. On or prior to the
Closing Date, Buyer shall have received from National Westminster
Bank NJ ("NatWest") original, signed Form UCC-3's releasing all
liens held by NatWest with respect to the Acquired Assets, all
such releases to be in form and substance satisfactory to Buyer.
3.9 Related Instruments. Seller shall have executed
and delivered to Buyer a General Xxxx of Sale in customary form
with respect to the Acquired Assets, as well as such other
instruments of assignment with respect to specific Acquired
Assets as Buyer shall reasonably request.
3.10 Financial Statements. Seller and the
Stockholders shall have prepared and delivered to Buyer and
Headway, (a) on or before April 30, 1998, audited financial
statements as of and for the fiscal year ended December 31, 1997
(the "1997 Audited Financial Statements") and, (b) on or before
[May 27, 1998], unaudited financial statements for (i) the fiscal
years ended December 31, 1994 and 1995 and (ii) as of and for the
three-month periods ended March 31, 1997, June 30, 1997,
September 30, 1997, December 31, 1997 and March 31, 1998
(collectively, the "Unaudited Financial Statements"; the 1997
Audited Financial Statements and the Unaudited Financial
Statements being collectively referred to as the "Financial
Statements"). The Financial Statements shall be prepared at the
expense of Seller and the Stockholders in accordance with
generally accepted accounting principles applied on a basis
consistent throughout all periods presented and on an accrual
basis. The 1997 Audited Financial Statements may be prepared by
Seller's accounting firm, as long as such firm is registered to
practice in front of the Securities and Exchange Commission (the
"SEC") and agrees to provide consents, as needed, for the
inclusion of their audit reports in SEC filings made by Headway
that include such financial statements, but in any event will be
prepared at the expense of Seller and the Stockholders.
3.11 Legal Opinion. Buyer shall have received an
opinion of Messrs. Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP,
counsel for Seller and the Stockholders, dated the Closing Date,
reasonably satisfactory in form and substance to counsel for
Buyer and covering the matters set forth in Sections 6.1
(exclusive of the last sentence thereof), 6.2, 6.3, 6.4(a) and,
on a knowledge basis, 6.8.
3.12 Corporate Action. Buyer shall have received
copies, certified, by the Secretary of Seller, of resolutions of
its Boards of Directors and stockholders approving the execution
of this Agreement and the consummation of the transactions
contemplated hereby and thereby.
3.13 No Adverse Change. There shall have been no
material adverse change in the business, results of operations or
financial condition of Seller since December 31, 1997.
3.14 Consents and Governmental Approvals. Headway and
Buyer shall have received any material consents of third parties,
and any authorizations, orders, grants, consents, permits and
approvals of all relevant governmental authorities, required in
connection with the consummation of the transactions contemplated
under this Agreement, without the imposition of any materially
burdensome conditions or restrictions, which shall continue to be
in full force and effect on the Closing Date, including the
consent of (i) NationsBank, National Association ("NationsBank"),
under the Credit Agreement, dated as of March 19, 1998 (the
"Credit Agreement"), by and among Headway, as Borrower,
NationsBank, as Agent and the Issuing Bank, and the various
lenders, including NationsBank, parties thereto, (ii) the holders
of the Series F Convertible Preferred Stock of Headway (the
"Preferred Stock") under the Certificate of Designations,
Preferences and Rights of Series F Convertible Preferred Stock of
Headway (the "Certificate of Designations") and (iii) the
holders of the Increasing Rate Senior Subordinated Notes Due 2006
of Headway (the "Subordinated Notes") under the Indenture, dated
as of March 19, 1998 (the "Indenture"), between Headway and State
Street Bank and Trust Company, N.A..
3.15 No Claims. No claim, action, suit, investigation
or proceeding shall be pending or threatened against any of the
parties which, if adversely determined, is reasonably likely to
(i) prevent or hinder consummation of the transactions
contemplated by this Agreement, (ii) result in the payment of
substantial damages by Buyer or Headway as a result of the
transactions contemplated hereby or (iii) materially and
adversely affect the business or assets of Seller, Buyer or
Headway.
Conditions to the Obligations of Seller. The
obligations of Seller and the Stockholders under Section 1 are
subject to the satisfaction, on or before the Closing Date, of
the following conditions:
4.1 Due Performance. Headway and Buyer shall have in
all material respects fully performed and complied with all
agreements and conditions required under this Agreement to be
performed or complied with by them on or prior to the Closing
Date.
4.2 Accuracy of Representations and Warranties. All
representations and warranties of Headway and Buyer set forth in
Section 7 of this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and
as of such date.
4.3 Certificate. Seller and the Stockholders shall
have received a certificate from each of Buyer and Headway to the
effect set forth in Sections 4.1 and 4.2.
4.4 Related Instruments. Buyer shall have executed
and delivered to Seller a General Instrument of Assumption in
customary form with respect to the Assumed Liabilities, as well
as such other instruments of assumption with respect to specific
Assumed Liabilities as Seller shall reasonably request.
4.5 Mercatili Employment Agreement. Buyer, Headway
and Mercatili shall have entered into the Mercatili Employment
Agreement.
4.6 Xxxxx Employment Agreement. Buyer, Headway and
Xxxxx shall have entered into the Xxxxx Employment Agreement.
4.7 Legal Opinion. Seller shall have received an
opinion of Messrs. Xxxxxxx & Xxxxxx, counsel for Buyer and
Headway, dated the Closing Date, reasonably satisfactory in form
and substance to counsel for Seller and the Stockholders and
covering the matters set forth in Sections 7.1 (exclusive of the
last sentence thereof), 7.2, 7.3, 7.4 (a) and, on a knowledge
basis, 7.6.
4.8 Corporate and Member Action. Seller shall have
received copies, in the case of Headway, of resolutions of its
Board of Directors certified by the Secretary of Headway, and in
the case of Buyer, of resolutions of its sole member certified by
the Secretary of Buyer, in each instance approving the execution
of this Agreement, the Mercatili Employment Agreement and the
Xxxxx Employment Agreement and the consummation of the
transactions contemplated hereby and thereby.
4.9 Consents and Governmental Approvals. Seller shall
have received any material consents of third parties, and any
authorizations, orders, grants, consents, permits and approvals
of all relevant governmental authorities, required in connection
with the consummation of the transactions contemplated under this
Agreement, without the imposition of any materially burdensome
conditions or restrictions, which shall continue to be in full
force and effect on the Closing Date.
4.10 No Claims. No claim, action, suit, investigation
or proceeding shall be pending or threatened against any of the
parties which, if adversely determined, is reasonably likely to
(i) prevent or hinder consummation of the transactions
contemplated by this Agreement, (ii) result in the payment of
substantial damages by Seller as a result of the transactions
contemplated hereby or (iii) materially and adversely affect the
business or assets of Seller, Buyer or Headway.
Waiver of Conditions. Each of the parties shall
have the right to waive, in whole or in part, any of the
conditions to its performance set forth in this Agreement and, on
such waiver, the waiving party may proceed with the consummation
of the transactions contemplated herein, it being understood
that such waiver shall not constitute a waiver of any right which
such party may have by reason of the breach by the other party of
any representation, warranty or agreement contained herein, or by
reason of any misrepresentation made by such other party herein.
Representations and Warranties of Seller. Seller
represents and warrants to Buyer and Headway as follows:
6.1 Due Organization and Qualification. Seller is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of [New Jersey], with full
corporate power and authority to own, lease and operate its
properties and to carry on its business in the places and in the
manner currently conducted or proposed to be conducted. Seller
is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the
activities conducted by it or the character of the properties
owned or leased by it makes such qualification necessary and the
failure to so qualify would have a material adverse effect on its
business or the Acquired Assets.
6.2 Authority; Due Authorization. Seller has all
requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
hereby and thereby. Seller has taken all corporate action
necessary for the execution and delivery by it of this Agreement
and for the consummation of the transactions contemplated hereby
and thereby. Each of the Stockholders has the requisite power
and authority to execute and deliver, and has taken all action
necessary for the execution and delivery of, this Agreement and
the Mercatili Employment Agreement and the Xxxxx Employment
Agreement, as the case may be, and for the consummation of the
transactions contemplated hereby and thereby.
6.3 Valid Obligation. This Agreement, when executed
and delivered by each of Seller and the Stockholders, shall
constitute the valid and binding obligation of each of Seller and
the Stockholders, the Mercatili Employment Agreement, when
executed and delivered by Mercatili, shall constitute his valid
and binding obligation, and the Xxxxx Employment Agreement, when
executed and delivered by Xxxxx, shall constitute his valid and
binding obligation, in each case enforceable in accordance with
its terms, except as may be limited by principles of equity or by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally.
6.4 No Conflicts or Defaults. The execution and
delivery of this Agreement by each of Seller and the
Stockholders, the Mercatili Employment Agreement by Mercatili,
and the Xxxxx Employment Agreement by Xxxxx, and the consummation
of the transactions contemplated hereby and thereby, do not and
shall not (a) contravene the Certificate of Incorporation or By-
Laws of Seller or (b) with or without the giving of notice or the
passage of time, (i) materially violate or conflict with, or
result in a material breach of, or a material default or loss of
rights under, any agreement, lease, mortgage, instrument, permit
or license to which Seller is a party and which is included in
the Acquired Assets, or to which any of the Acquired Assets are
subject, or any judgment, order, decree, law, rule or regulation
to which any of the Acquired Assets are subject, (ii) result in
the creation of, or give any party the right to create, any lien,
charge, encumbrance or any other right or adverse interest on or
with respect to any of the Acquired Assets or (iii) terminate or
give any party the right to terminate, abandon or refuse to
perform any material agreement, arrangement or commitment to
which Seller is a party and which is included in the Acquired
Assets or to which any of the Acquired Assets are subject.
6.5 Copies of Charter Documents. Copies of the
Certificates of Incorporation and By-Laws of Seller, in each case
as amended to the date hereof, have been delivered to Buyer or
its representatives and are true and complete copies of such
documents as in effect on the date of this Agreement.
6.6 Capitalization of Seller. The Stockholders hold
all of the issued and outstanding capital stock of Seller. There
are no outstanding options, warrants, rights, conversion rights,
preemptive rights, calls, commitments or demands of any character
obligating Seller or the Stockholders to issue, sell, redeem or
repurchase any capital stock or any other security giving a right
to shares of its capital stock, or obligating any of the
Stockholders to sell or otherwise dispose of any of its shares of
capital stock of Seller.
6.7 Subsidiaries and Related Parties. Seller's
business is conducted entirely by and through Seller. Seller has
no direct or indirect subsidiaries, nor are there any other
entities that Seller otherwise directly or indirectly controls or
in which it has any ownership or other interest. Except as set
forth in Schedule 6.7, no stockholder, director, member, officer
or key employee of Seller or any of their respective affiliates
or relatives has any direct or indirect interest (other than an
ownership interest of up to 5% of the voting securities of any
corporation, the securities of which are publicly-traded) in any
assets used in Seller's business or in any corporation,
partnership or other entity that (a) competes with Seller, (b)
sells or purchases products or services to or from Seller, (c)
leases real or personal property to or from Seller or (d)
otherwise does business with Seller.
6.8 Authorizations. Except as set forth in Schedule
6.8, no authorization, approval, order, license, permit or
consent of, or filing or registration with, any court or
governmental authority, regulatory entity or official body, and
no consent of any other party, is required in connection with the
execution, delivery and performance of this Agreement by each of
Seller and the Stockholders, the Mercatili Employment Agreement
by Mercatili or the Xxxxx Employment Agreement by Xxxxx.
6.9 The Acquired Assets.
(a) On the Closing Date, Seller shall have and shall
transfer to Buyer, good and marketable title to all of the
Acquired Assets (including, without limitation, the Acquired
Receivables), free and clear of all claims, liens, security
interests, charges, restrictions and other encumbrances except:
(i) any created pursuant to this Agreement; (ii) any arising
under leases of real or personal property to which Seller is a
party and which have been specifically disclosed to Buyer; or
(iii) mechanics' or other liens arising or incurred in the
ordinary course of business and which do not interfere materially
with the possession, ownership or use of any real or personal
property used by Seller.
(b) Set forth in Schedule 6.9 is a list of all real
property leased by Seller, with a brief description of the
premises. Seller owns no real property.
(c) The office equipment, furniture, computers,
computer software, office supplies and leasehold improvements
included in the Acquired Assets are, in all material respects, in
good operating condition and repair, reasonable wear and tear
excepted, and are satisfactory for the requirements of Seller's
business.
6.10 Client Agreements.
(a) Schedule 1.1.B sets forth a true and complete list
of all written and oral client agreements and arrangements to
which Seller is party (the "Client Agreements"). Seller has
furnished Buyer with a true copy of each Client Agreement or a
written description of any Client Agreement that has not been
reduced to writing. The Client Agreements constitute all of the
contracts, agreements, understandings and arrangements pursuant
to which Seller provides any temporary, permanent, leased or
payrolled employee services for or with respect to the clients
who are parties to such agreements. Except as set forth in
Schedule 6.10, (i) each Client Agreement was entered into in the
ordinary course of Seller's business, (ii) to the best knowledge
of Seller, is in full force and effect on the date of this
Agreement and is valid, binding and enforceable in accordance
with its terms, subject to bankruptcy and insolvency laws and
general equitable principles, (iii) Seller is not in material
breach or default under any of the Client Agreements and has not
received any notice or claim of any such breach or default from
any party, (iv) the relationship of Seller with the clients that
are parties to the Client Agreements is good and there has been
no expression of any intention to terminate or materially modify
any of such relationships, (v) Seller has no knowledge of any
material breach or default under any of the Client Agreements by
any other party thereto, (vi) no event or action has occurred, is
pending or, to Seller's best knowledge, is threatened, which,
after the giving of notice, passage of time or otherwise, could
constitute or result in any such material breach or default by
Seller or any other party under any of the Client Agreements and
(vii) no material amount claimed to be payable to Seller under
any of the Client Agreements is being disputed by any client.
(b) Except as set forth in Schedule 6.10.A, (i) for
its services under each Client Agreement, Seller receives the
compensation provided under such Client Agreement, without
discount, offset or concessions of any kind, and Seller has
neither proposed nor agreed to offer or accept any discount,
offset or concession and (ii) the payment history of the clients
under the Client Agreements is good as judged by industry
standards. Set forth in Schedule 6.10.B is an aging schedule for
all of Seller's accounts receivable and accounts payable as of
the Closing Date, which list is accurate in all material
respects.
(c) All of the accounts receivable reflected on the
books and records of Seller on Schedule 6.10.B are the result of
bona fide transactions in the ordinary course of business of
Seller and are fully collectible by Seller, subject to no
defenses, counterclaims, set-offs or recoupments, except to the
extent appropriately reserved for on the books and records of
Seller and except as disclosed in Schedule 6.10.A.
6.11 Financial Statements.
(a) The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied
on a basis consistent throughout all periods presented. Such
statements are correct and complete in all material respects, are
reconcilable to the books and records of Seller, and present
fairly the financial position of Seller as of the dates, and the
results of operations, cash flows and changes in financial
position of Seller for the periods, indicated, except in the case
of interim or unaudited financial statements, for the omission of
footnotes and for year-end review adjustments which are not
expected to be material.
(b) Except as set forth in Schedule 6.11, Seller had
no material liabilities or obligations, whether secured or
unsecured, accrued, determined, absolute or contingent, asserted
or unasserted or otherwise, which are required to be reflected or
reserved in a balance sheet or the notes thereto under generally
accepted accounting principles, but which are not reflected in
the Financial Statements.
6.12 Other Agreements.
(a) Schedule 1.1.C sets forth a true and complete list
of the office leases, equipment leases and other agreements,
contracts and instruments included in the Acquired Assets other
than the Client Agreements (the "Other Agreements"). Together
with the Client Agreements, the Other Agreements constitute all
of the material contracts, agreements, understandings and
arrangements required for the operation of Seller's business, as
currently conducted by Seller, or which have a material effect
thereon.
(b) Except as set forth in Schedule 6.12, (i) each
Other Agreement was entered into in the ordinary course of
Seller's business, and, to the best knowledge of Seller, is in
full force and effect on the date of this Agreement and is valid,
binding and enforceable in accordance with its terms, subject to
bankruptcy and insolvency laws and general equitable principles,
(ii) Seller is not in material breach or default under any of the
Other Agreements and has not received any written notice or claim
of any such breach or default from any party, (iii) Seller and
each of the Stockholders have no knowledge of any material breach
or default under any of the Other Agreements by any party thereto
and (iv) no event or action has occurred, is pending or, to
Seller's best knowledge, is threatened, which, after the giving
of notice, passage of time or otherwise, could constitute or
result in any such material breach or default by Seller or any
other party under any of the Other Agreements.
6.13 Intellectual Property. Schedule 1.1.E sets forth
a true and complete list of all trademarks, service marks, domain
names, trade names and copyrights, and United States or foreign
registrations and applications for registration of any of them,
and any other intellectual property rights, used by Seller in the
Business, all of which intellectual property is included in the
Acquired Assets. To the best knowledge of Seller, Seller owns or
has legal right to use, pursuant to one or more of the Other
Agreements, all such intellectual property without infringing on
the rights or intellectual property of any third party. No
royalties or fees are payable by Seller to any party by reason of
the use by Seller of any of such intellectual property. To
Seller's best knowledge, Seller has not received any claims that
it or its products or services have infringed the rights of
others, and Seller and the Stockholders are not aware of any
infringement by others of Seller's intellectual property.
6.14 Taxes. Except as set forth in Schedule 6.14,
Seller has filed all federal, state, local and foreign returns
and reports which were required to be filed prior to the date
hereof in respect of all income, withholding, franchise, payroll,
excise, property, value-added, sales, use or other taxes,
imposts, duties or assessments (together with any related
penalties, fines or interest, "Taxes"). Each such return and
report is complete and accurate in all material respects, and
Seller has paid, or established adequate reserves for payment of,
all Taxes (and any related penalties, fines and interest) shown
to be due on such returns or reports and any assessments received
with respect thereto. Except as set forth in Schedule 6.14,
Seller has received no notice of any claims pending or threatened
for taxes against it for periods prior to the date hereof, in
excess of such reserves.
6.15 Permits; Compliance with Law. Seller holds all
permits, certificates, licenses, approvals and other
authorizations of governmental authorities as are materially
necessary to the conduct of the Business. Seller is in material
compliance with the terms of each thereof and has not received
any notice or claim pertaining to the failure to obtain, or the
breach or violation of the terms of, any such authorization.
Neither Seller nor any of the Stockholders has received any
notice of any proceeding or investigation likely to result in the
suspension or revocation of any such authorization. Seller is
conducting its business and affairs in material compliance with
all applicable federal, state and local laws, ordinances, rules,
regulations and court or administrative orders and decrees,
including, without limitation, any respecting wage and hour,
withholding and unemployment compensation requirements.
6.16 Litigation. Except as set forth in Schedule 6.16,
there are no claims, actions, suits, proceedings, investigations
or criminal proceedings, at law or in equity, before any court,
tribunal, governmental authority or other forum (collectively,
"Proceedings") pending or, to Seller's best knowledge,
threatened, against Seller or the Stockholders which, if
adversely determined, is reasonably likely to have, singly or in
the aggregate, a material adverse effect on the Business or the
Acquired Assets or the ability of Seller or any of the
Stockholders to perform their respective obligations under this
Agreement or which would challenge the validity or propriety of
the transactions contemplated in this Agreement. Schedule 6.16
contains a list of all Proceedings to which Seller is a party or
to which it or any of the Acquired Assets are subject. There is
no material outstanding and unsatisfied judgment, order, writ,
ruling, injunction, stipulation or decree of any court,
arbitrator or governmental authority against or materially
affecting Seller, any of the Stockholders, the Business or any
material portion of the Acquired Assets.
6.17 Ordinary Course; No Material Adverse Effect.
Except as set forth in Schedule 6.17 and for the transactions
contemplated in this Agreement, since December 31, 1997, Seller
has conducted its business and maintained its assets
substantially in the same manner as previously conducted or
maintained and solely in the ordinary course and, since such
date, there has not been any event that has or would, with or
without the giving of notice or the passage of time, result in a
material adverse effect on Seller or the Business.
6.18 Employee Benefits and Relations.
(a) Except as set forth in Schedule 6.18, Seller does
not maintain or sponsor, or contribute or has any obligation or
liability to, any "employee pension benefit plan", "employee
welfare benefit plan" or "multi-employer plan" (as such terms are
defined in Sections 3(2), 3(1) and 4001(a)(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")).
Set forth in Schedule 6.18 is a list of all bonus, pension,
profit-sharing, deferred compensation, stock ownership, stock
bonus, stock option, phantom stock, retirement, vacation,
disability, death benefit, unemployment, hospitalization,
medical, dental, severance, or other plan, agreement, arrangement
or understanding providing benefits to any current or former
employee, officer, member or director of Seller or to which
Seller has any liability or obligation (all such plans,
agreements, arrangements and understandings are referred to as
"Benefit Plans"). Seller and the Stockholders have delivered to
Buyer and Headway true, complete and correct copies of (i) each
Benefit Plan and all amendments thereto (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (ii) annual
reports on Form 5500 for the past three years (together with
accompanying financial statements) filed with the Internal
Revenue Service or Department of Labor, as applicable, with
respect to each Benefit Plan (if any such report was required),
(iii) all summary plan descriptions for each Benefit Plan for
which such summary plan description is required or otherwise
available and (iv) each trust agreement and group annuity
contract relating to any Benefit Plan. No Benefit Plan provides
for post-retirement medical or life insurance benefits unless the
event giving rise to the benefit entitlement occurs prior to the
employee's retirement (except as required by Title I, Part 6 of
ERISA).
(b) Any accrued obligations of Seller under all
Benefit Plans that are required to be reflected on the balance
sheet of Seller in accordance with generally accepted accounting
principles are reflected thereon as of the dates indicated
thereon and on the books and records of Seller for all periods
thereafter. Seller and the Stockholders have provided Buyer with
copies of all such balance sheets, books and records.
(c) Except as set forth in Schedule 6.18, each Benefit
Plan and any related trust complies currently, and has complied
at all times in the past, both as to form and operation, in all
material respects with the terms of such Benefit Plan and with
the applicable provisions of ERISA, the Code and other applicable
laws. All necessary government approvals for each Benefit Plan
have been obtained on a timely basis.
(d) No Benefit Plan and related trust is under an
Internal Revenue Service ("IRS") Employee Plans examination, as
defined in Section 5.05 of Rev. Proc. 98-22, 1998-12 I.R.B. 11,
or any other examination under applicable law pursuant to any
verbal or written notification. Each "employee Pension benefit
plan" that is intended or has been treated by Seller as a tax
qualified plan under Section 401 of the Code has received a
Favorable Letter, as defined in Section 5.02 of Rev. Proc. 98-22.
Each such "employee pension benefit plan" is eligible to correct
any and all plan document failures, operational failures or
demographic failures under one or more programs of the IRS's
Employee Plans Compliance Resolution System, as set forth in Rev.
Proc. 98-22.
(e) Except as set forth in Schedule 6.18, Seller has
no liability (contingent or otherwise) with respect to any
terminated Benefit Plan. Seller is not a member of, and has no
liability with respect to, a controlled group of corporations or
a trade or business (whether or not incorporated) under common
control which, together with Seller, is or was at any time
treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
(f) Seller is not a party to any union or collective
bargaining contract with respect to any of its employees and
there has not been, nor has Seller or any Stockholder received
written notice threatening, any representational or
organizational activity, strike, slowdown, picketing or work
stoppage by any union or other group of employees against Seller.
(g) Schedule 6.18 sets forth (i) the name of each
director, officer, employee and sales representative of Seller
(other than temporary or payrolled personnel), together with the
annual compensation rate for each such person, (ii) each oral or
written contract, commitment or understanding between Seller and
any current or former director, officer, sales person, employee,
agent or stockholder of Seller or any associate or relative of
such persons (other than temporary or payrolled personnel) and
(iii) each oral or written contract, commitment or understanding
between Seller and any independent contractor or consultant
retained by it.
(h) Seller provides services through and receives
services from personnel that it has correctly classified as
independent contractors. All federal and state tax returns
(including information returns) required to be filed by Seller
with respect to such workers have been filed on a basis
consistent with their treatment as independent contractors.
Employees of Seller do not perform substantially similar job
functions, duties and responsibilities as those performed by
workers that Seller has treated as independent contractors.
Independent contractors do not receive nor are they eligible to
receive any of the employee benefits that Seller provides to its
employees.
6.19 Insurance. All of the insurable Acquired Assets
are, in the judgment of Seller, adequately insured for the
benefit of Seller against loss or damage by theft, fire and all
other hazards and risks of a character usually insured against by
persons operating similar properties in the localities where such
properties are located, under valid and enforceable policies
issued by insurance carriers of substantial assets. A list of
all of insurance policies of Seller, indicating carriers,
coverage and applicable limits of liability, is set forth in
Schedule 6.19. All such policies of insurance are in full force
and effect on the date hereof, and shall remain in full force and
effect through the Closing Date in accordance with their terms.
Neither Seller nor any of Stockholders has received notice of
termination of any such policies.
6.20 Miscellaneous. All representations and warranties
of Seller and each of the Stockholders set forth in this
Agreement and all information set forth in the Schedules are
true, complete and correct in all material respects and no such
representation, warranty or information contains any untrue
statement of a material fact or, to the knowledge of Seller and
each of the Stockholders, omits to state any material fact
necessary in order to make such representation, warranty or
information, in light of the circumstances under which it is
made, not false or misleading. Any disclosure made pursuant to
any of the representations and warranties in this Section 6 shall
be deemed to have been made for purposes of any other such
representations and warranties.
Representations and Warranties of Buyer and
Headway. Buyer and Headway, jointly and severally, represent
and warrant to Seller and each of the Stockholders as follows:
7.1 Due Organization and Qualification. Buyer is a
limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware, with full
power and authority to own, lease and operate its properties and
to carry on its business in the places and in the manner
currently conducted or proposed to be conducted. Headway is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its
properties and to carry on its business in the places and in the
manner currently conducted or proposed to be conducted. Each of
Buyer and Headway is qualified to do business and is in good
standing as a foreign limited liability company or foreign
corporation in which the nature of the activities conducted by it
or the character of the properties owned or leased by it makes
such qualification necessary and the failure to so qualify would
have a material adverse effect on its business.
7.2 Authority; Due Authorization. Buyer has all
requisite power and authority to execute and deliver this
Agreement and the Employment Agreements and to consummate the
transactions contemplated hereby and thereby. Buyer has taken
all member action necessary for the execution and delivery by it
of this Agreement and the Employment Agreements and for the
consummation of the transactions contemplated hereby and thereby.
Headway has all requisite corporate power and authority to
execute and deliver this Agreement and the Employment Agreements
and to consummate the transactions contemplated hereby and
thereby, including, without limitation, the guarantee of Headway
set forth in Section 1.3(i). Headway has taken all corporate
action necessary for the execution and delivery by it of this
Agreement and the Employment Agreements and for the consummation
of the transactions contemplated hereby and thereby, including
without limitation, the guarantee of Headway set forth in Section
1.3(i).
7.3 Valid Obligation. This Agreement and Employment
Agreements, when executed and delivered by each of Buyer and
Headway, shall constitute its valid and binding obligations, in
each case enforceable in accordance with its terms, except as may
be limited by principles of equity or by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
7.4 No Conflicts or Defaults. The execution and
delivery of this Agreement and the Employment Agreements by each
of Buyer and Headway, and the consummation of the transactions
contemplated hereby and thereby, do not and shall not (a)
contravene the Certificate of Formation of Buyer or the
Certificate of Incorporation or the By-Laws of Headway or (b)
with or without the giving of notice or the passage of time,
materially violate or conflict with, or result in a material
breach of, or a material default or loss of rights under, any
agreement, lease, mortgage, instrument, permit or license to
which Buyer or Headway is a party or by which Buyer or Headway
are bound, other than the Credit Agreement, the Indenture and the
Certificate of Designations (the consents of NationsBank and of
the holders of the Series F Preferred Stock and the Subordinated
Notes being a condition precedent to Buyer's consummation of this
transaction), or any judgment, order, decree, law, rule or
regulation to which Buyer or Headway are subject.
7.5 Copies of Charter Documents. Copies of the
Certificate of Incorporation and By-Laws of Headway and the
Certificate of Formation of Buyer, in each case as amended to the
date hereof, have been delivered to Seller and the Stockholders
and are true and complete copies of such documents as in effect
on the date of this Agreement.
7.6 Authorizations. No authorization, approval,
order, license, permit or consent of, or filing or registration
with, any court or governmental authority, regulatory entity or
official body, and no consent of any other party, is required in
connection with the execution, delivery and performance of this
Agreement or the Employment Agreements by Buyer and Headway,
except for the consent of NationsBank under the Credit Agreement,
the holders of the Series F Preferred Stock under the Certificate
of Designations and the holders of the Subordinated Notes under
the Indenture, which consents have been obtained.
7.7 Litigation. There are no Proceedings, pending or
threatened, against Buyer or Headway which, if adversely
determined, is reasonably likely to have, singly or in the
aggregate, a material adverse effect on the ability of Buyer or
Headway to perform their respective obligations under this
Agreement or the Employment Agreements or which would challenge
the validity or propriety of the transactions contemplated in
this Agreement or the Employment Agreements. There is no
material outstanding and unsatisfied judgment, order, writ,
ruling, injunction, stipulation or decree of any court,
arbitrator or governmental authority against or materially
affecting Buyer or Headway or any material portion of their
respective assets.
7.8 1934 Act Reports. All information set forth in
the reports filed by Headway with the Securities and Exchange
Commission [during fiscal years 1997 and 1998 (up to the Closing
Date)] pursuant to its obligations under the Securities Exchange
Act of 1934, as amended, is true, complete and correct in all
material respects.
7.9 Miscellaneous. All representations and warranties
of Buyer and Headway set forth in this Agreement were, as of the
date on which they were made or given, true, complete and correct
in all material respects and no such representation, warranty or
information contains or contained any untrue statement of a
material fact or, to the knowledge of Buyer and Headway, omits or
omitted to state any material fact necessary in order to make
such representation or warranty, in light of the circumstances
under which it is or was made, not false or misleading. Any
disclosure made pursuant to any of the representations in this
Section 7 shall be deemed to have been made for purposes of any
other such representations.
Survival of Representations and Warranties. All
representations and warranties made by any party in this
Agreement or in any document or certificate delivered pursuant to
this Agreement shall survive the Closing for a period of three
years (except that the representations and warranties set forth
in Sections 6.14 and 6.18 relating to Taxes and Benefit Plans
shall survive for a period equal to the statute of limitations
applicable to any claims and liabilities which may result from a
breach thereof) and shall be unaffected by any investigation made
by or on behalf of any party or by any notice of breach of, or
failure to perform under, this Agreement which is not effectively
waived pursuant to Section 5, subject, however, to the
limitations on indemnification set forth in Section 13.5.
Conduct of Seller's Business Prior to Closing
Date.
9.1 Preservation of Representations and Warranties.
Between the date of this Agreement and the Closing Date, Seller
and each of the Stockholders shall refrain from taking, without
the prior written consent of Buyer or Headway, any action which
would render any of the representations or warranties set forth
in Section 6 materially inaccurate as of the Closing Date.
Seller shall notify Buyer and Headway promptly of the occurrence
of any matter, event or change in circumstances after the date
hereof that would render any of such representations and
warranties inaccurate or which would have been required to be
disclosed hereunder if it had occurred on or prior to the date
hereof.
9.2 Preserve Business. Between the date of this
Agreement and the Closing Date, Seller shall use commercially
reasonable efforts to preserve substantially intact its business
organization, keep available the services of its present officers
and key employees and preserve its present relationships with
persons having significant business relations with Seller and
conduct its business solely in the ordinary course. In this
regard and without limitation of the foregoing and except in the
ordinary course of its business, Seller shall not (a) make or
grant any wage or salary increases or bonuses other than pursuant
to pre-existing commitments, (b) terminate, amend or waive any
substantial rights under any Client Agreement or Other Agreement,
(c) sell, encumber or otherwise dispose of any of the Acquired
Assets or (d) enter into any material agreement, commitment or
understanding other than in the ordinary course of business.
9.3 Further Investigation. Between the date of this
Agreement and the Closing Date, Seller shall provide Buyer,
Headway and their respective representatives with full access
during normal business hours, on reasonable prior notice, to
Seller's premises, personnel and files, books and records
concerning Seller's business and the Acquired Assets, and Seller
shall cause its officers, employees and representatives to
furnish such financial and operating data and other information
with respect to Seller's business and the Acquired Assets as
Buyer or Headway shall reasonably request; provided, however,
that any such investigation shall be conducted in such manner as
not to interfere unreasonably with the operation of the Business.
During such investigation, Buyer, Headway and their respective
representatives shall have the right to make copies of, or
excerpts from, such files, books and records as they may deem
advisable.
If the purchase and sale contemplated in this Agreement
are not consummated, each of the parties shall (i) return all
written information and copies and summaries thereof to the party
from which such information originated and (ii) maintain in
confidence (prior to such consummation and thereafter) and not
disclose to third parties any information obtained from the other
party which the other party designated as confidential or with
respect to which the circumstances of its disclosure reasonably
indicated that the other party treated it as confidential. The
foregoing shall not apply to any information that is or becomes
part of public or industry knowledge for reasons other than the
acts or omissions of the party to whom such information is
disclosed in connection with the transactions contemplated
herein. The provisions of this Section 9.3 shall survive the
termination of this Agreement for any reason.
9.4 Releases, Consents, Waivers and Filings. The
parties shall use their respective best efforts and cooperate
with each other to do all things reasonably necessary or
desirable to consummate in an expeditious manner the transactions
contemplated by this Agreement. In this regard, the parties
shall cooperate to obtain from all relevant third parties and
governmental authorities all consents, waivers, permits,
authorizations and licenses to or for, such transactions that may
be required under any agreement, lease, financing arrangement,
license, permit or other instrument or under any applicable law,
rule or regulation, and to obtain and file appropriate
registrations and transfers of Seller's intellectual property.
9.5 No Solicitation. Neither Seller nor any
Stockholder shall, directly or through any other party,
negotiate or conclude an agreement with any other party for a
merger or sale of the securities of Seller or for the sale or
other disposition of the business or assets of Seller, or enter
into any discussions with any other party for such purposes or
knowingly take any other action that might materially prejudice
the consummation of the transactions contemplated herein, unless
this Agreement is terminated in accordance with Section 15.1.
Post-Closing Matters.
10.1 Cessation of Use of Name. As promptly as
practicable after the Closing Date, and in any event not later
than ten days thereafter, Seller shall (a) cease the use of its
name or any other name that contains "Phoenix", "Phoenix
Communication" or "Phoenix Communication Group" or any words
including or formed from such words and (b) file an amendment to
its certificate of incorporation and state qualifications to do
business to effect a change of its corporate name to a name
consistent with the intent of this Section 10.1.
10.2 Operation of Seller's Business During Earnout
Periods.
(a) On or prior to the Closing Date, and as a
condition thereto, the Stockholders, Buyer and Headway Corporate
Staffing Services, Inc. ("HCSSI") shall agree upon a written
annual operating and capital expenditure budget for the first
Earnout Period. For each of the second, third and fourth Earnout
Periods, Buyer and each of the Stockholders (but only to the
extent that such Stockholder remains employed by Buyer pursuant
to the terms of his Employment Agreement) shall prepare and
submit to the HCSSI Board of Directors (the "HCSSI Board") annual
operating and capital expenditure budgets with respect to the
Business, as well as interim budget reports, at such times as the
HCSSI Board reasonably establishes, which budgets shall be
approved in the reasonable discretion of the HCSSI Board. Until
such time as the Stockholders and Buyer shall agree upon and
submit any budget and the HCSSI Board shall approve any such
budget, Buyer shall operate the Business consistent with the
budget previously approved by the HCSSI Board, or if none, the
annual operating and capital expenditure budgets utilized by
Seller for the operation of the Business for the calendar year
ended 1998. After a budget is approved by the HCSSI Board,
Buyer's management shall be authorized to act and to operate the
Business in accordance with such budget. Headway and HCSSI shall
at all times have access to the books and records of Buyer and to
such other information pertaining to its business as they request
from time to time and shall have the right at any time to audit
the books of Buyer. Each of Seller and the Stockholders
acknowledge that Buyer shall, in connection with the operation of
Seller's business, be required to implement the accounting and
operating systems and procedures of the Headway group of
companies. To the extent that the Business is not meeting the
annual operating or capital expenditure budgets then in effect,
or its accounts receivable collection experience is less
favorable than that of other HCSSI subsidiaries, the HCSSI Board
shall have the right to require Buyer to make such changes in its
operations and personnel as the HCSSI Board deems reasonably
necessary.
(b) In the event of a dispute with respect to the
calculation of EBITA for any Earnout Period, to the extent that
the parties cannot resolve their differences after the meeting of
the parties with their accountants contemplated by Section 1.3(g)
and to the extent that neither Stockholder is then employed by
Buyer, the Stockholders shall have the right, under the
supervision of Headway or Buyer personnel, upon reasonable prior
written notice to Buyer and Headway and during normal business
hours, to review the books and records of Buyer and Headway
pertaining to such EBITA calculation; provided, that neither
Stockholder may make copies of any such books and records.
10.3 Seller's Employees. Buyer shall, after
conferring with the Stockholders in such regard, inform Seller
reasonably prior to the Closing Date as to whether it wishes to
employ any of Seller's employees, and if it wishes to do so, the
names of such employees and the positions and compensation Buyer
proposes to offer them. Seller shall permit Buyer to offer
employment to such employees on the terms proposed by Buyer prior
to the Closing Date. Immediately prior to the Closing Date,
Seller shall inform any of Seller's employees to whom Buyer does
not offer employment, or who do not accept Buyer's offer of
employment if made, that they shall be relieved of their duties
with respect to the business of Seller being acquired by Buyer
hereunder, effective on the Closing Date. All liabilities and
obligations associated with the termination of employment by
Seller of any of its employees to whom Buyer does not offer
employment or who do not accept Buyer's offer of employment under
contract or applicable law or otherwise shall be the sole
responsibility of Seller, and Seller and each of the
Stockholders, jointly and severally, shall discharge and
indemnify, defend and hold harmless Buyer and Headway and their
respective officers, directors, employees, agents and
shareholders from all such obligations and liabilities.
10.4 Financial Statements. On or prior to 30 days
following the Closing Date, Seller and the Stockholders shall, at
their expense, prepare and deliver to Buyer and Headway (a)
audited financial statements for the fiscal year ended December
31, 1996 (the "1996 Audited Financial Statements") and unaudited
financial statements as of and for the three-month period ended
June 30, 1998 (the "June 30 Financial Statements"; the 1996
Audited Financial Statements and the Unaudited Financial
Statements being collectively referred to as the "Post-Closing
Financial Statements"). The Post-Closing Financial Statements
shall be prepared at the expense of Seller and the Stockholders
in accordance with generally accepted accounting principles
applied on a basis consistent throughout all periods presented
and on an accrual basis. The 1996 Audited Financial Statements
may be prepared by Seller's accounting firm, as long as such firm
is registered to practice in front of the Securities and Exchange
Commission (the "SEC") and agrees to provide consents, as needed,
for the inclusion of their audit reports in SEC filings made by
Headway that include such financial statements, but in any event
will be prepared at the expense of Seller and the Stockholders.
10.5 Profit Sharing Plan. Seller shall, within 60 days
after the Closing Date, with respect to any "employee pension
benefit plan" intended to be treated by Seller as qualified under
Section 401 of the Code that has one or more "Qualification
Failures" as that term is used in Rev. Proc. 98-22, contact the
IRS or take other appropriate actions to correct such
Qualification Failure or Failures under the appropriate program
or programs, as set forth in Rev. Proc. 98-22, and shall take
such corrective measures and enter into such agreements with the
IRS as may be required for the correction of such Qualification
Failure or Failures and to obtain, where appropriate,
confirmation from the IRS in the form of a compliance statement,
or in such other form as may be provided under Rev. Proc. 98-22,
that the IRS will not treat such plan as disqualified on account
of such Operational Failure or Failures. All costs of the
foregoing shall be borne exclusively by Seller, and Buyer shall
have no responsibility for any such costs nor for any of said
Qualification Failures or Failure. Seller agrees to use its best
efforts to address any such Qualification Failure or Failures
within one year following the Closing Date.
10.6 Insurance Matters. The parties shall cooperate to
preserve the existing insurance coverage of Seller with respect
to the Acquired Assets through the Closing and to effect an
appropriate transition to Buyer's insurance, if requested, at the
time of Closing.
10.7 Further Assurances. Whenever reasonably requested
to do so by a party to this Agreement, on or after the Closing
Date, any other party shall do, execute, acknowledge and deliver
all such acts, bills of sale, assignments, confirmations,
consents and any and all such further instruments and documents,
in form reasonably satisfactory to the requesting party, as shall
be reasonably necessary or advisable to carry out the intent of
this Agreement, including, without limitation, to vest in Buyer
all of the right, title and interest of Seller in and to the
Acquired Assets.
10.8 Authorization to Buyer. Without limiting in any
respect the right, title and interest in and to the Acquired
Assets to be acquired by Buyer hereunder, Seller irrevocably
authorizes, effective upon the Closing Date, Buyer and its
successors and assigns, to demand and receive, from time to time,
any and all of the Acquired Assets, to give receipts and releases
for or in respect of the same, to collect, assert or enforce any
claim, right or title of any kind therein or thereto and, for
such purpose, from time to time, to institute and prosecute in
the name of Seller (but only if Seller consents to such use of
its name), or otherwise, any and all proceedings at law, in
equity or otherwise, which Buyer shall deem expedient or
desirable.
10.9 Correspondence. Seller authorizes Buyer, on and
after the Closing Date, to receive and open mail addressed to
Seller and to deal with the contents thereof in a responsible
manner; provided, that such mail relates to the Acquired Assets
or to the business of Seller to be carried on by Buyer. Buyer
shall promptly deliver to Seller all other mail addressed to
Seller which is received by Buyer. Seller shall have the right,
on its request and its expense, to inspect any such mail
addressed to it and retained by Buyer and to make copies thereof.
Non-Competition.
11.1 General. Each of Seller and each of the
Stockholders agrees, for a period of [six] years after the
Closing Date (the "Term"), that it or he shall not, in the State
of New Jersey or in any other area in which Headway or Buyer
conducts the business of the placement or provision of temporary,
permanent, leased or payrolled personnel (including self-
incorporated personnel) during the Term (or for such lesser area
or such lesser period as may be determined by a court of
competent jurisdiction to be a reasonable limitation on the
competitive activity of each of Seller and the Stockholders),
directly or indirectly:
(a) engage, for or on behalf of itself or any person
or entity other than Buyer or Headway, in the business of the
placement or provision of temporary, permanent, leased or
payrolled personnel (including self-incorporated personnel);
(b) solicit or attempt to solicit business for
services offered by Seller, Buyer or Headway from any parties who
(i) are clients of Seller on the Closing Date or at any time
during the 12 months prior to the Closing Date or to whom Seller
has made or makes proposals for services during the 12 months
preceding the Closing Date or (ii) are clients of Buyer or
Headway during the Term or to whom Buyer or Headway makes
proposals for services during the Term;
(c) otherwise divert or attempt to divert from Buyer
or Headway any business involving the placement or provision of
temporary, permanent, leased or payrolled personnel (including
self-incorporated personnel) of the type now or during the Term
conducted by Seller, Buyer or Headway;
(d) solicit or attempt to solicit for any business
endeavor any employee of Buyer or Headway, including any employee
of Seller who is employed by Buyer after the Closing Date; or
(e) render any services as a joint venturer, partner,
consultant or otherwise to, or have any interest as a
stockholder, partner, member, lender or otherwise in, any person
or entity which is engaged in activities which, if performed by
Seller or the Stockholders, would violate this Section 11.1.
The foregoing shall not prevent Seller or any of the Stockholders
from purchasing or owning (i) up to 5% of the voting securities
of any corporation, the securities of which are publicly-traded,
or (ii) any interest in any entity which is not also engaged in
the business of the placement or provision of temporary,
permanent, leased or payrolled personnel (including self-
incorporated personnel). Seller and the Stockholders shall,
during the Term, direct any business opportunities in the
temporary, permanent, leased or payrolled personnel placement
business that may come to their attention to Buyer and Headway.
Notwithstanding the foregoing, to the extent that either
Stockholder is terminated without cause under Section 3.2 of its
Employment Agreement with Buyer and Headway and not as a result
of such Stockholder's death or disability pursuant to Section 3.3
of such Employment Agreement, Section 11.1(a) shall no longer
apply to such Stockholder. References to Headway and Buyer in
this Section 11 shall also be deemed to refer to their respective
divisions and subsidiaries.
11.2 Injunctive Relief. Because Buyer and Headway
would not have an adequate remedy at law to protect their
businesses from any breach of the provisions of Section 11.1,
Buyer and Headway shall be entitled, in the event of such a
breach or threatened breach thereof by Seller or any of the
Stockholders, to injunctive relief, in addition to such other
remedies and relief that would be available to Buyer. In the
event of such a breach, in addition to any other remedies, Buyer
and Headway shall be entitled to receive from Seller and the
Stockholders, jointly and severally, payment of, or
reimbursement for, their reasonable attorneys' fees and
disbursements incurred in successfully enforcing any such
provision. The provisions of this Section 11 shall survive the
Closing Date.
12. Bulk Sales. Buyer waives compliance by Seller
with the provisions of any applicable bulk sales law. Seller
shall promptly pay or otherwise discharge all valid claims of its
creditors (as defined by the applicable bulk sales law), as and
when they become due and payable (in accordance with Seller's
customary and commercially reasonable practices), and Seller and
each Stockholder, jointly and severally, shall indemnify and hold
harmless Buyer and Headway from any and all liabilities, costs
and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by Buyer and arising
from the failure of Seller to satisfy the claims of such
creditors.
13. Indemnification.
13.1 Obligations of Seller and the Stockholders.
Seller and each Stockholder, jointly and severally, shall
indemnify, defend and hold harmless Buyer and Headway and their
respective officers, directors, employees, agents, shareholders,
successors and assigns from and against any Damages (as defined
in Section 13.3) in connection with:
(a) any breach of any representation, warranty or
agreement of either Seller or the Stockholders contained in this
Agreement or in any certificate, instrument or other agreement
delivered by either of them in connection with this Agreement;
(b) all Unassumed Liabilities and the operation of
Seller's business at any time prior to the Closing Date;
(c) any liabilities or obligations of Seller in
connection with, arising out of, or resulting from any Benefit
Plan, including, without limitation, the Profit-Sharing Plan;
(d) the termination of the employment of any of
Seller's employees, as contemplated in Section 10.3; and
(e) any claim, action, suit or proceeding asserted or
instituted on the basis of any matter described in clauses (a),
(b) or (c) of this Section 13.1;
provided, however, that, except in connection with liabilities
under clauses (b) or (c) above, the breach of the representations
and warranties set forth in Sections 6.14 and 6.18 relating to
Taxes and Benefit Plans or the breach of the provisions set forth
in Section 11 relating to non-competition (as to which the
limitations of this proviso shall not apply), no payment
hereunder shall be required to be made by Seller or the
Stockholders unless and until the aggregate amount of any such
losses, damages, liabilities, costs and expenses exceeds $100,000
and Seller and the Stockholders shall not be required to make
payments hereunder in excess of the Purchase Price; provided,
that to the extent that the amount of such losses, damages,
liabilities, costs and expenses exceeds $100,000, Seller and the
Stockholders shall be liable under this Section 13.1 for all
amounts in excess of $50,000; and provided, further, that the
amount of such losses, damages, liabilities, costs and expenses
shall be offset by any insurance proceeds received by Buyer or
Headway with respect to the foregoing.
13.2 Obligations of Buyer and Headway. Buyer and
Headway, jointly and severally, shall indemnify, defend and hold
harmless Seller and each of the Stockholders and their respective
heirs, executors, officers, directors, employees, agents,
shareholders, successors and assigns, as applicable, from and
against any Damages in connection with:
(a) any breach of any representation, warranty or
covenant of either Buyer or Headway (and their respective
successors and assigns) contained in this Agreement or in any
certificate, instrument or other agreement delivered by either of
them in connection with this Agreement;
(b) all Assumed Liabilities and the operation by Buyer
of the business of Seller being acquired by Buyer hereunder at
any time on or after the Closing Date; and
(c) any claim, action, suit or proceeding asserted or
instituted on the basis of any matter described in clauses (a) or
(b) of this Section 13.2;
provided, however, that, except in connection with clause (b)
above (as to which the limitations of this proviso shall not
apply), no payment hereunder shall be required to be made by
Buyer or Headway unless and until the aggregate amount of any
such losses, damages, liabilities, costs and expenses exceeds
$100,000 and Buyer and Headway shall not be required to make
payments hereunder in excess of the Purchase Price; provided,
that to the extent that the amount of such losses, damages,
liabilities, costs and expenses exceeds $100,000, Buyer and
Headway shall be liable under this Section 13.2 for all amounts
in excess of $50,000; and provided, further, that the amount of
such losses, damages, liabilities, costs and expenses shall be
offset by any insurance proceeds received by Seller or the
Stockholders with respect to the foregoing.
13.3 Damages. For purposes of this Section 13,
"Damages" means any loss, liability, damage or expense suffered
or incurred by a party in connection with the matters described
in Sections 13.1 or 13.2, as the case may be, including, without
limitation, assessments, fines, penalties, judgments,
settlements, costs, reasonable attorneys' fees and reasonable
disbursements and other reasonable out of pocket expenses of the
party incident to any matter as to which the party is entitled to
indemnification under such Sections, or incident to any
allegations or claims which, if true, would give rise to Damages
subject to indemnification hereunder, or incident to the
enforcement by the party of its rights and remedies under this
Section 13.
13.4 Proceedings. Any party seeking indemnification
pursuant to this Section 13 (the "Indemnified Party") shall give
the party from which indemnification is sought (the "Indemnifying
Party") prompt notice of any claim, allegation, action, suit or
proceeding which it believes might give rise to indemnification
under this Section 13, stating the nature and extent of any such
claim, allegation, suit or proceeding with reasonable
specificity, and the amount thereof, if known. Any failure to
give such notice shall not affect the indemnification provided
hereunder except to the extent that the Indemnifying Party is
actually prejudiced as a result of such failure. The
Indemnifying Party shall have the right to participate in, and,
with the consent of the Indemnified Party, which consent shall
not be unreasonably withheld or delayed, to control, the defense
of any such claim, allegation, action, suit or proceeding, at the
Indemnifying Party's expense, and with counsel of its own
choosing reasonably acceptable to the Indemnified Party;
provided, however, that if Buyer and Headway are the Indemnified
Parties, they shall have the right to withhold such consent and
to retain control of such defense in the case of any claim,
action, suit or proceeding with respect to which an adverse
outcome could have a material adverse effect on Buyer or Headway,
with the expense of any counsel retained by Buyer and Headway in
any such instance to be at Buyer's and Headway's expense. No
settlement or compromise of any such claim, action, suit or
proceeding shall be made without the prior consent of the
Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed by either of them.
13.5 Limitations on Indemnification. No right to
indemnification may be asserted under this Section 13 after the
third anniversary of the Closing Date, except any such rights to
indemnification arising in connection with (a) any matter
referred to in Sections 6.14 or 6.18, none of which shall be
subject to any time limitation other than any statutes of
limitation applicable to such matters, (b) any matter covered by
Section 11 or (c) any claim as to which the notice required by
Section 13.4 has been given on or prior to the third anniversary
of the Closing Date.
13.6 Offset. It is agreed that, without limiting any
other rights of Buyer and Headway, they shall have the right to
set off against and deduct from any amounts payable pursuant to
the provisions of Section 1.3 the amount of any Damages for which
they are entitled to indemnification under this Section 13 and
the amount of any Uncollected Receivables for which Buyer shall
not have been repaid by Seller and the Stockholders pursuant to
Section 1.8(b). In order to set off any such indemnity claim
against any amount payable to Seller pursuant to Section 1.3,
Buyer must, in each instance, provide a certificate to Seller
setting forth the claim in reasonable detail. If Seller does
not agree to such claim in writing within 10 days after delivery
of such notice, Buyer agrees (a) to deposit into escrow, in an
interest bearing account, the amount of such claim, with Xxxxxxx
& Xxxxxx as escrow agent, under a form of escrow agreement to be
mutually agreed by the parties, with the costs of such escrow
arrangement to be borne equally by the parties, and (b) to
utilize the arbitration procedures set forth in Section 14 to
resolve such claim.
14. Arbitration.
14.1 General. Any controversy or claim arising out of
or relating to this Agreement shall be finally resolved by
arbitration pursuant to the Commercial Arbitration Rules of the
American Arbitration Association; provided, however, that this
Section 14.1 shall not in any way affect the right of Buyer and
Headway to seek injunctive relief or any other remedies pursuant
to Section 11.2. Any such arbitration shall take place in New
York, New York, before three arbitrators, one of which shall be
appointed by Buyer or Headway, one by Seller and the
Stockholders, and the third by the arbitrators so appointed;
provided, however, that the parties may by mutual agreement
designate a single arbitrator. The parties further agree that
(i) the arbitrators shall be empowered to include arbitration
costs and attorney fees in the award to the prevailing party in
such proceedings and (ii) the award in such proceedings shall be
final and binding on the parties. The arbitrators shall apply
the law of the State of New York, exclusive of conflict of laws
principles, to any dispute. Judgment on the arbitrators' award
may be entered in any court having the requisite jurisdiction.
Nothing in this Agreement shall require the arbitration of
disputes between the parties that arise from actions, suits or
proceedings instituted by third parties.
14.2 Consent to Jurisdiction; Service of Process. Each
party irrevocably submits to the jurisdiction and venue of the
arbitration described in Section 14.1 and to the jurisdiction and
venue of the federal and state courts sitting in New York County,
New York, for the enforcement of any judgment on the arbitrators'
award, and waives any objection it may have with respect to the
jurisdiction of such arbitrations or courts or the inconvenience
of such forums or venues. Buyer and Headway appoint Messrs.
Xxxxxxx & Xxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxxx X. Xxxxxxxxx, Esq., and Seller and the
Stockholders appoint Messrs. Wolf, Block, Xxxxxx and Xxxxx-Xxxxx
LLP, Twelfth Floor, Packard Building, S.E. Xxxxxx 00xx xxx
Xxxxxxxx Xxxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000,
Attention: Xxxxxxx X. Xxxxxxx, Esq. and Xxxxx Xxxxxx, Esq., as
their respective attorneys-in-fact and authorized agents solely
to receive on their behalf, service of any demands for, or any
notice with respect to, arbitration hereunder or any service of
process. Service on either of such attorneys-in-fact may be made
by registered or certified mail or by personal delivery, in any
case return receipt requested, and shall be effective (but only
to the extent actually received) as service on Buyer and Headway
or Seller and the Stockholders, as the case may be. Nothing
herein shall be deemed to affect any right to serve any such
demand, notice or process in any other manner permitted under
applicable law.
15. Miscellaneous.
15.1 Termination. This Agreement may be terminated at
any time prior to the Closing Date by the mutual written consent
of all the parties.
15.2 Entire Agreement; Amendments; No Waivers. This
Agreement, together with the Schedules, sets forth the entire
understanding of the parties with respect to its subject matter
and merges and supersedes all prior and contemporaneous
understandings of the parties with respect to its subject matter.
No provision of this Agreement may be waived or modified, in
whole or in part, except by a writing signed by each of the
parties. Failure of any party to enforce any provision of this
Agreement shall not be construed as a waiver of its rights under
such or any other provision. No waiver of any provision of this
Agreement in any instance shall be deemed to be a waiver of the
same or any other provision in any other instance.
15.3 Communications. All notices, consents and other
communications given under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when delivered by
hand or by Federal Express or a similar overnight courier to, (b)
five days after being deposited in any United States post office
enclosed in a postage prepaid registered or certified mail
envelope addressed to, or (c) when successfully transmitted by
facsimile (with a confirming copy of such communication to be
sent as provided in (a) or (b) above) to, the party for whom
intended, at the address or facsimile number for such party set
forth below, or to such other address or facsimile number as may
be furnished by such party by notice in the manner provided
herein; provided, however, that any notice of change of address
or facsimile number shall be effective only on receipt.
If to Buyer or Headway: with a copy to:
Headway Corporate Resources, Inc. Xxxxxxx & Xxxxxx
000 Xxxxx Xxxxxx 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, President Attention: Xxxxxxxx
X. Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000 Fax No.: (000) 000-0000
If to Seller or the Stockholders:
Xx. Xxxxx Xxxxxxxxx with a copy to:
_________________
_________________ Wolf, Block, Xxxxxx and
Xxxxx-Xxxxx LLP
Twelfth Floor
Xx. Xxxxxxx Xxxxx Packard Building
_________________ X.X. Xxxxxx 00xx xxx
Xxxxxxxxx Xxxxxxx
_________________ Xxxxxxxxxxxx, XX 00000-
2678
Attention: Xxxxxxx X.
Xxxxxxx, Esq.
Xxxxx Xxxxxx, Esq.
Fax: (000) 000-0000/2336
15.4 Successors and Assigns. This Agreement shall be
binding on, enforceable against and inure to the benefit of, the
parties and their respective heirs, successors and permitted
assigns (whether by merger, consolidation, acquisition or
otherwise), and nothing herein is intended to confer any right,
remedy or benefit upon any other person. No party may assign its
rights or delegate its obligations under this Agreement without
the express written consent of all of the other parties;
provided, however, that Buyer may assign its rights or delegate
its obligations hereunder, either before or after the Closing, to
Headway or any other wholly-owned subsidiary of Headway.
15.5 Expenses. Each of the parties shall bear and pay,
without any right of reimbursement from any other party, all
costs, expenses and fees incurred by it or on its or his behalf
incident to the preparation, execution and delivery of this
Agreement and the performance of such party's obligations
hereunder, whether or not the transactions contemplated in this
Agreement are consummated, including, without limitation, the
fees and disbursements of attorneys, accountants and consultants
employed by such party, and shall indemnify and hold harmless the
other parties from and against all such fees, costs and expenses.
15.6 Brokers and Finders. Each party represents to the
others that no agent, broker, investment banker, financial
advisor or other person or entity is or shall be entitled to any
broker's or finder's fee or other commission or similar fee in
connection with the transactions contemplated by this Agreement,
other than Gelcor, Inc., whose fee shall be payable by Seller,
and Staff Solutions, Inc., whose fee shall be payable by Buyer.
Each party shall indemnify and hold harmless the others from and
against any claim, liability or obligation with respect to any
fees, commissions or expenses asserted by any person or entity on
the basis of any act or statement alleged to have been committed
or made by such indemnifying party or any of its affiliates.
15.7 Public Announcements. No oral or written public
announcement or disclosure with respect to this Agreement and the
transactions contemplated herein prior to the Closing Date shall
be made by or on behalf of any party without the prior approval
of the other parties, except to the extent required by applicable
securities laws or the rules and regulations of any stock
exchange, by court order or as otherwise required by law.
15.8 Governing Law. This Agreement shall in all
respects be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and fully
to be performed in such state, without giving effect to conflicts
of law principles.
15.9 Severability and Savings Clause. If any provision
of this Agreement is held to be invalid or unenforceable by any
court or tribunal of competent jurisdiction, the remainder of
this Agreement shall not be affected thereby, and such provision
shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or
unenforceability. In this regard, the parties agree that the
provisions of Section 11, including, without limitation, the
scope of the territorial and time restrictions, are reasonable
and necessary to protect and preserve Buyer's legitimate
interests. If the provisions of Section 11 are held by a court
of competent jurisdiction to be in any respect unreasonable, then
such court may reduce the territory or time to which it pertains
or otherwise modify such provisions to the extent necessary to
render such provisions reasonable and enforceable.
15.10 Counterparts. This Agreement may be executed
in multiple counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
15.11 Construction. Headings used in this
Agreement are for convenience only and shall not be used in the
interpretation of this Agreement. References to Sections and
Schedules are to the sections and schedules of this Agreement.
As used herein, the singular includes the plural and the
masculine, feminine and neuter gender each includes the others
where the context so indicates.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first set forth above.
HEADWAY CORPORATE RESOURCES, INC. HEADWAY CORPORATE STAFFING
SERVICES OF NEW JERSEY, L.L.C.
By Xxxxx X. Xxxxxxx, President By Xxxxxxx List,
President
PHOENIX COMMUNICATION
GROUP, INC. OF N.J.
By Xxxxxxx Xxxxx, President /s/ XXXXXXX XXXXX
/s/ XXXXX XXXXXXXXX
