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EX-2.07
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of July 2, 1998 (this "Agreement"),
is by and among Corporate Staffing Resources, Inc., a Delaware corporation (the
"Purchaser") and Xxxxx X. Xxxx and Xxxx X. Xxxx, Trustees Under The Xxxxx X.
Xxxx Living Trust Dated May 11, 1998 and Xxxxxx X. Xxxxxx (each, a "Seller"
and collectively, the "Sellers").
RECITALS
A. The Purchaser desires to purchase from the Sellers, and the Sellers
desire to sell to Purchaser all of the issued and outstanding capital stock of
Programming Management & Systems, Inc., a Missouri corporation (the "Subject
Company") upon the terms and subject to the conditions contained herein (the
"Acquisition").
B. In connection with the Acquisition, the parties desire to set forth
certain agreements, representations, warranties and covenants made by one or
more parties to the other or others as an inducement to the consummation of
the Acquisition, upon the terms and subject to the conditions contained herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Accounts Receivable" shall have the meaning set forth in Section 5.8.
"Acquisition" shall have the meaning set forth in recital A to this
Agreement.
"Advisors" shall have the meaning set forth in Section 7.1.
"Affiliate" shall mean any Person that, directly or indirectly, Controls
or is Controlled by, or is under common control with, the Subject Company.
"Control" includes, without limitation, the possession, directly or indirectly,
of the power to direct the management and policies of the Subject Company,
through the ownership of voting securities, as a director, or otherwise.
"Agreement" shall mean this Stock Purchase Agreement.
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"Applicable Contract" shall mean any Contract (a) under which the Subject
Company has acquired any rights, (b) under which the Subject Company has become
subject to any obligation or liability, or (c) by which the Subject Company or
any of the assets owned or used by it is bound.
"Balance Sheet" shall have the meaning set forth in Section 5.4.
"Best Efforts" shall mean the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions that would result in a Material
Adverse Change in the benefits to such Person of this Agreement and the
Transactions.
"Breach" shall mean and a breach of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any Transaction Documents
will be deemed to have occurred if there is or has been any inaccuracy in or
breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision.
"Claim" shall have the meaning set forth in Section 10.2(d).
"Claim Notice" shall have the meaning set forth in Section 10.2(d).
"Closing" shall have the meaning set forth in Section 4.1.
"Closing Balance Sheet" shall have the meaning set forth in Section
2.5(a).
"Closing Date" shall have the meaning set forth in Section 11. l(d).
"Closing Month" shall mean the month in which the Closing occurs.
"Closing Payment" shall have the meaning set forth in Section 2.3.
"Confidential Information" shall have the meaning set forth in Section
12.10(b).
"Consent" shall mean any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Consideration" shall have the meaning set forth in Section 2.2.
"Contingent Amounts" shall have the meaning set forth in Section 2.4.
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"Contract" shall mean any agreement, contract, obligation, promise, or
undertaking (whether written or oral) that is legally binding.
"Copyrights" shall have the meaning set forth in Section 5.19(a).
"Covenant Payments" shall have the meaning set forth in Section 3.1.
"Damages" shall have the meaning set forth in Section 10.2(a).
"Disclosure Schedules" shall mean the schedules prepared and delivered
by the Sellers for and to the Purchaser and dated as of the date hereof which
set forth the exceptions to the representations and warranties contained herein
and certain other information called for by this Agreement. Unless otherwise
specified, each reference in this Agreement to any numbered schedule is a
reference to that numbered schedule which is included in the Disclosure
Schedules.
"EBIT" shall mean earnings before interest expense and taxes determined
in accordance with GAAP.
"Employment Agreements" shall have the meaning set forth in Section
4.3(a).
"Encumbrance" shall mean any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
"Environment" shall mean soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins and wetlands), groundwater, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life and any
other environmental medium or natural resource.
"Environmental. Health and Safety Liabilities" shall mean any cost,
damage, expense, Liability, obligation or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to:
(a) any environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial or
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inspection costs and expenses arising under any Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any Cleanup required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for
any natural resource damages; or
(d) any other compliance, corrective, investigative or remedial
measures required under any Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial" and "response action" include the types
of activities covered by CERCLA.
"Environmental Law" shall mean all federal, state, district, local and
foreign laws, all rules or regulations promulgated thereunder and all orders,
consent orders, judgments, notices, permits or demand letters issued,
promulgated or entered pursuant thereto, relating to pollution or protection of
the Environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including without limitation
(i) laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, materials, wastes or other substances into
the Environment and (ii) laws relating to the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport or other handling of pollutants, contaminants, chemicals,
industrial materials, wastes or other substances. Environmental Laws shall
include, without limitation, CERCLA, the Toxic Substances Control Act, as
amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water Act, as amended, the
Safe Drinking Water Act, as amended, the Clean Air Act, as amended, the
Occupational Safety and Health Act, as amended, and all analogous laws
promulgated or issued by any state or other governmental authority.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"ERISA Affiliate" shall mean any other Person that, together with the
Subject Company, is or was required to be treated as a single employer under IRC
Section 414(b) or (c), and solely for the purposes of potential liability under
ERISA Section 302(c)(ii) and IRC Section 412(c)(ii) and the lien created under
ERISA Section 302(f) and IRC Section 412(n), under IRC Section 414(m) or (o).
"Financial Statements" shall have the meaning set forth in Section 5.4.
"Fixed Amount" shall have the meaning set forth in Section 2.2.
"GAAP" shall mean United States generally accepted accounting
principles.
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"Governmental Authorization" shall mean any approval, Consent, license,
permit, waiver or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" shall mean any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity
and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Hazardous Activity" shall mean the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about or from the facilities of the Subject Company or any part thereof into the
Environment and any other act, business, operation or thing that increases the
danger or risk of danger or poses an unreasonable risk of harm to Persons or
property on or off the Facilities or that may affect the value of the Facilities
or the Subject Company.
"Hazardous Materials" shall mean any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined to be,
hazardous, radioactive or toxic or a pollutant or a contaminant subject to
regulation, control or remediation under any Environmental Law (whether solids,
liquids or gases), including any mixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor, polychlorinated biphenyls and asbestos or asbestos-containing
materials.
"Intellectual Property Assets" shall have the meaning set forth in
Section 5.19(a).
"IRC" shall mean the Internal Revenue Code of 1986, as amended, or any
successor law
"IRS" shall mean the United States Internal Revenue Service or any
successor agency.
"Knowledge" shall mean and an individual will be deemed to have
"Knowledge" of a particular fact or other matter if:
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(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual should be aware of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as a
director, executive officer, partner, executor or trustee of such Person (or in
any similar capacity) has, Knowledge of such fact or other matter.
"Knowledge of the Sellers" or other similar phrases shall mean the
Knowledge of any of the Sellers and the actual knowledge of any other executive
officer of the Subject Company.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.
"Liability" shall mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether known, unknown, accrued, absolute,
contingent, matured or unmatured.
"Marks" shall have the meaning set forth in Section 5.19(a).
"Material Adverse Effect" or "Material Adverse Change" shall mean any
significant and substantial adverse effect or change in the condition (financial
or other), business, results of operations, liabilities or operations of any
party, its business and/or assets or on the ability of such party or its
stockholders or shareholders, as the case may be, to consummate the
Transactions, or any event or condition which would, with the passage of time,
constitute a "Material Adverse Effect" or "Material Adverse Change."
"Multiemployer Plan" shall have the meaning set forth in ERISA Section
3(37)(A).
"Noncompetition Period" shall have the meaning set forth in Section 3.4.
"Occupational Safety and Health Law" shall mean any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program designed to provide safe
and healthful working conditions.
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"Order" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" shall describe any action taken by a
Person if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be authorized by the parent
company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or
by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
"Organizational Documents" shall mean (a) the articles or certificate of
incorporation, all certificates of determination and designation, and the bylaws
of a corporation; (b) the partnership agreement and any statement of partnership
of a general partnership; (c) the limited partnership agreement and the
certificate or articles of limited partnership of a limited partnership; (d) the
operating agreement, limited liability company agreement and the certificate or
articles of organization or formation of a limited liability company; (e) any
charter or similar document adopted or filed in connection with the creation,
formation or organization of a Person; and (f) any amendment to any of the
foregoing.
"Other Benefit Obligations" shall mean all obligations, arrangements or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees or agents, other than obligations, arrangements and
practices that are Plans. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon the amount of
service rendered, sabbatical policies, severance payment policies and fringe
benefits within the meaning of IRC Section 132.
"Patents" shall have the meaning set forth in Section 5.19(a).
"Pension Plan" shall have the meaning set forth in ERISA Section
3(2)(A).
"Person" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union or
other entity or Governmental Body.
"Plan" shall have the meaning set forth in ERISA Section 3(3).
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"Plan Sponsor" shall have the meaning set forth in ERISA Section
3(16)(B).
"Post-Closing Partial Period" shall have the meaning set forth in
Section 10.3(b).
"Pre-Closing Partial Period" shall have the meaning set forth in Section
10.3(a).
"Proceeding" shall mean any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"Proposed Acquisition Transaction" shall have the meaning set forth in
Section 7.6.
"Purchaser" shall have the meaning set forth in the first paragraph of
this Agreement.
"Purchaser Indemnified Parties" shall have the meaning set forth in
Section 10.2(b).
"Qualified Plan" shall mean any Plan that meets or purports to meet the
requirements of IRC Section 401(a).
"Release" shall mean any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping or other releasing into the Environment,
whether intentional or unintentional.
"Representative" shall mean any officer, director, principal, attorney,
agent, employee or other representative.
"Seller Indemnified Parties" shall have the meaning set forth in
Section 10.2(a).
"Sellers" shall generally have the meaning set forth in the first
paragraph of this Agreement. However, for purposes of Article III "Sellers"
shall mean Xxxxx X. Xxxx and Xxxxxx X. Xxxxxx and for purposes of Articles V and
X "Sellers" shall include Xxxxx X. Xxxx individually.
"Sellers' Accountant" shall have the meaning set forth in Section
2.4(c).
"Sellers' Closing Documents" shall have the meaning set forth in Section
5.2(a).
"Shareholders' Equity" shall have the meaning set forth in Section
2.5(d).
"Shareholder's Equity Deficiency" shall have the meaning set forth in
Section 2.5(c).
"Stock" shall have the meaning set forth in Section 2.1.
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"Staffing Services Business" shall have the meaning set forth in Section
3.4.
"Straddle Period" shall have the meaning set forth in Section 10.3(b).
"Subject Company" shall have the meaning set forth in Recital A of this
Agreement.
"Subsidiary" shall mean, with respect to any Person (for the purposes of
this definition, the "Owner"), any corporation or other Person of which
securities or other interests having the power to elect a majority of that
corporation's or other Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not occurred) are
held by the Owner or one or more of its Subsidiaries .
"Tax" or "Taxes" shall mean any federal, state, local, foreign or other
tax, levy, impost, fee, assessment or other governmental charge, including
without limitation income, estimated income, gross receipts, business,
occupation, franchise, property, payroll, personal property, sales, transfer,
use, employment, commercial rent, occupancy, franchise or withholding taxes, and
any premium, including without limitation, interest, penalties and additions in
connection therewith.
"Tax Return" shall mean any return (including any information return),
report, statement, schedule, notice, form or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of, or compliance with, any Legal Requirement relating to any
Tax.
"Territory" shall have the meaning set forth in Section 3.4.
"Threatened" shall describe any claim, Proceeding, dispute, action or
other matter if (i) any demand or statement has been made (orally or in writing)
with respect to such claim, Proceeding, dispute, action or other matter, (ii)
any notice has been given (orally or in writing) with respect thereto or (iii)
any other event has occurred or any other circumstances exist, that would lead a
prudent Person to conclude that such a claim, Proceeding, dispute, action or
other matter is likely to be asserted, commenced, taken or otherwise pursued in
the future.
"Threshold" shall have the meaning set forth in Section 10.2(e).
"Title IV Plans" shall mean all Pension Plans that are subject to
regulation under Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than
Multiemployer Plans.
"Trade Secrets" shall have the meaning set forth in Section 5.19(a).
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"Transaction Documents" shall mean this Agreement, the Employment
Agreement, and all instruments executed, filed or otherwise prepared, exchanged
or delivered in accordance with this Agreement.
"Transactions" shall mean the Acquisition and the other transactions
contemplated by the Transaction Documents.
"Welfare Plan" shall have the meaning given in ERISA Section 3(1).
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 Transfer of Stock.
Upon the terms and subject to the conditions set forth herein, on the
Closing Date each of the Sellers shall sell, convey, transfer, assign and
deliver to the Purchaser, and the Purchaser shall purchase from the Sellers,
all of the outstanding shares of capital stock of the Subject Company (the
"Stock"), which Stock is owned by each of the Sellers in the amounts set forth
next to the name of each such Seller in Schedule 2.1.
2.2 Consideration. Upon the terms and subject to the conditions set
forth herein, in consideration for the transfer of the Stock pursuant to Section
2.1, the Purchaser shall pay to the Sellers, at the times hereafter set forth,
the Closing Payment pursuant to Section 2.3, as adjusted pursuant to Section 2.5
and the Contingent Amounts pursuant to Section 2.4. The Closing Payment as
adjusted pursuant to Section 2.5 is referred to herein as the "Fixed Amount" and
together with the Contingent Amounts, collectively referred to as the
"Consideration." The Consideration shall be allocated among the Sellers as set
forth in Schedule 2.2 hereto.
2.3 Closing Payment. On the Closing Date, the Purchaser shall pay to
the Sellers an aggregate amount of $7,772,284 in cash by wire transfer of
immediately available funds to the account or accounts designated by the
respective Sellers at least two (2) business days prior to the Closing (the
"Closing Payment").
2.4 Contingent Amounts.
(a) On or before the times hereinafter set forth, the Purchaser shall
pay to the Sellers the additional cash amounts hereinafter described (the
"Contingent Amounts"):
(i) An amount equal to six (6) multiplied by the excess of (A)
Adjusted EBIT for the 12-month period ending May 31, 1999 (the "1999
Adjusted EBIT") over (B) $1,303,714; plus
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(ii) An amount equal to five (5) multiplied by the excess of (A)
Adjusted EBIT for the 12-month period ending May 31, 2000 (the "2000
Adjusted EBIT") over (B) the greater of $1,303,714 or [ii] the 1999
Adjusted EBIT.
(b) "Adjusted EBIT" as used in determining 1999 and 2000 EBIT shall
mean EBIT of the Subject Company for such period adjusted as provided in
Schedule 2.4.
(c) Within sixty (60) days after the end of each of the 12-month
periods for the calculation 1999 and 2000 EBIT, the Purchaser shall cause
the Subject Company to prepare and deliver to the Sellers an Adjusted EBIT
statement for the respective 12-month period (the "Adjusted EBIT Report").
Each Adjusted EBIT Report shall include an income statement prepared in
accordance with GAAP, a listing by item and amount of each adjustment to
EBIT in accordance with Schedule 2.4 and Purchaser's determination of the
amount of the Adjusted EBIT for the applicable period. Each Adjusted EBIT
Report shall be accompanied by a certificate of the Chief Financial Officer
of Purchaser to the effect that the Adjusted EBIT Report presents fairly in
accordance with GAAP the EBIT of the Subject Company for the period covered
thereby and properly and fully reflects each adjustment required to
determine Adjusted EBIT in accordance with Schedule 2.4. The Sellers and a
firm of independent public accountants designated by the Sellers (the
"Sellers' Accountant") will be entitled to access to all relevant records
and working papers of the Subject Company and its accountants to aid in
their review of the Adjusted EBIT Report. The Sellers will be solely
responsible for all costs of the Sellers' Accountants. Each Adjusted EBIT
Report shall be deemed to be accepted by and shall be conclusive for the
purposes of determining the applicable Contingent Amount except to the
extent, if any, that the Sellers or the Sellers' Accountant shall have
delivered within sixty (60) days after the date on which the Adjusted EBIT
Report is delivered to the Sellers (which period shall be tolled and
extended in the event the Sellers do not receive timely all such applicable
relevant records and working papers requested of the Subject Company for the
Sellers' review), a written notice to Purchaser stating each and every item
to which the Sellers take exception as not being in accordance with GAAP or
Schedule 2.4, or as having computational errors, specifying in reasonable
detail the nature and extent of any such exception (it being understood that
any amounts not disputed shall be paid promptly). If a change proposed by
the Sellers is disputed by Purchaser, then Purchaser and the Sellers shall
negotiate in good faith to resolve such dispute. If, after a period of
twenty (20) days following the date on which the Sellers give Purchaser
notice of any such proposed change, any such proposed change still remains
disputed, then Purchaser and the Sellers shall together choose an
independent firm of public accountants of nationally recognized standing
(the "Accounting Firm") to resolve any remaining disputes. The Accounting
Firm shall act as an arbitrator to determine, based solely on presentations
by the Sellers and Purchaser, and not by independent review, only those
issues still in dispute. The decision of the Accounting Firm shall be final
and binding and shall be in accordance with the provisions of this Section
2.4. All of the fees and expenses of the Accounting Firm shall be paid by
Purchaser and the Sellers based on the
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Accounting Firm's Adjusted EBIT determination in relation to the Adjusted
EBIT proposals submitted by the parties. For purposes of illustration, if
Purchaser's submitted Adjusted EBIT is $1,000,000, the Sellers' submitted
Adjusted EBIT is $1,100,000 and the Accounting Firm's determined Adjusted
EBIT is $1,075,000, Purchaser shall pay 75% and the Sellers shall pay 25%.
(d) Subject to the provisions of Section 2.4(f), all payments of
Contingent Amounts shall be made within thirty (30) days following the
applicable Adjusted EBIT Report Delivery Date. The term "Adjusted EBIT
Report Delivery Date" shall mean the date by which the Adjusted EBIT Report
is to be delivered as provided in Section 2.4(c); provided, however, if any
change to the Adjusted EBIT Report is agreed to by Purchaser and the Sellers
in accordance with this Section 2.4, then the date on which Purchaser and
the Sellers agree in writing to such change shall be the Adjusted EBIT
Report Delivery Date; and, provided, further, that if any dispute with
respect to the Adjusted EBIT Report is resolved in accordance with this
Section 2.4, then the date on which the Accounting Firm delivers its
decision with respect to such dispute shall be the Adjusted EBIT Report
Delivery Date; provided, however, that any amounts not disputed shall be
paid promptly within ten (10) days after written acknowledgment between the
parties that the amount is undisputed.
(e) Any portion of any Contingent Amounts not paid within 60 days
following the end of the applicable 12-month period shall be payable with
interest at the per annum rate of three percent (3%) in excess of the prime
interest rate published in the Wall Street Journal money rates section
accruing from such date of the year in which the Adjusted EBIT Report is to
be delivered to the date of payment.
(f) Subordination. Each of the Sellers acknowledges, covenants and
agrees that the Contingent Amounts shall be subordinated upon and pursuant
to the following terms and provisions set forth in this Section 2.4(f)
(collectively the "Subordination Provisions").
(1) As used in these Subordination Provisions, the following
terms shall have the following meanings:
"Administrative Agent" shall mean ING (U.S.) Capital
Corporation or any subsequent administrative agent or trustee for the
holders of indebtedness outstanding under a Debt Agreement.
"Debt Agreement" shall mean (A) that certain Amended and
Restated Loan Agreement (as at any time amended) dated as of May 14,
1998 among Corporate Staffing Resources, Inc. (the "Purchaser"), as
Borrower, ING (U.S.) Capital Corporation, a Delaware corporation, and
Creditanstalt Corporate Finance, Inc., a Delaware corporation, as
Co-Agents, ING (U.S.) Capital Corporation, Creditanstalt Corporate
Finance, Inc. and Societe Generale, as Lenders, and ING (U.S.) Capital
Corporation, as Administrative Agent (the "Loan Agreement"), or (B)
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any loan or similar credit agreement hereafter entered into by the
Purchaser, as Borrower, evidencing a refinancing of the credit
facilities of the Purchaser presently provided by the Loan Agreement
described in subsection (A) above or (C) any other instrument, indenture
or agreement evidencing or setting forth the terms and conditions of any
present or future indebtedness of Purchaser for borrowed money or
evidenced by notes, debentures or other debt securities.
"Default" means any event or condition which, after
satisfaction of any requirement expressly set forth in the Debt
Agreement for the giving of notice or the lapse of time, or both, would
become an Event of Default.
"Event of Default" means (i) any event upon the occurrence
of which Senior Creditors may accelerate the maturity of any Senior
Obligations and (ii) failure to pay any Senior Obligations at maturity.
"Senior Creditors" shall mean the holders of indebtedness
outstanding under a Debt Agreement and each Administrative Agent.
"Senior Obligations" shall mean all obligations and
liabilities of the Purchaser under each Debt Agreement, whether for
principal, interest, premium, fees, costs, taxes, indemnification or
otherwise.
(2) The Sellers hereby absolutely and irrevocably subordinate
the payment and performance of the Contingent Amounts to the Senior
Obligations, provided that unless and until the Administrative Agent has
given written notice to the Sellers that a Default or Event of Default has
occurred and is continuing, the Sellers shall be entitled to receive and
retain (and the Purchaser shall pay) the Contingent Amounts as and when they
become due under the terms of this Agreement (but not any prepayments).
This subordination shall be continuing in nature, and shall not be affected
by any bankruptcy or insolvency of the Purchaser or any of its subsidiaries.
The Sellers agree that any written notice of a Default or an Event of
Default which is delivered to the Sellers by the Administrative Agent shall
be conclusive as to the existence thereof in the absence of a contrary
determination by a court of competent jurisdiction. Upon written notice
from the Administrative Agent to the Sellers that such Default or Event of
Default has been cured or waived in accordance with the applicable
provisions of the Debt Agreement, the Sellers may again receive payments of
the Contingent Amounts as and when they become due, including Contingent
Amounts the payment of which was previously suspended (but not prepayments).
(3) In the event the Purchaser or any of its subsidiaries become
debtors in any voluntary or involuntary bankruptcy proceeding, the Sellers
shall have the following rights:
(A) The Sellers may file one or more proofs of claim in
such bankruptcy with respect to the Contingent Amounts, provided that
the Sellers shall
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not be entitled to receive payment of their claims prior to payment in
full of the Senior Obligations, and, in the event of any distribution to
the Sellers with respect to the Contingent Amounts at a time when any
Senior Obligations remain unpaid, the Sellers shall pay over such
distribution to the Senior Creditors to be applied by the Senior
Creditors in reduction of the Senior Obligations, and the Sellers shall
become subrogated to the Senior Creditors' claims to the extent of any
such payments made at such time, if any, as the Senior Obligations due
the Senior Creditors are fully and finally satisfied, but not sooner.
(B) The Sellers may appear and be heard on any matter
relating to their claim in any bankruptcy proceeding, but shall not seek
to assert rights contrary to these Subordination Provisions.
If the Sellers should fail to file a proof of claim within 30
days prior to the expiration of the time period within which creditors must
file their proofs of claim or take any other action advisable to preserve
their claims against the Purchaser within 30 days prior to the relevant bar
date or other time limit, the Administrative Agent may file such claim or
take such action as the attorney in fact for the Sellers. In the event of
any financing of the Purchaser or any of its subsidiaries by the Senior
Creditors during any bankruptcy, arrangement or reorganization proceeding
with respect to the Purchaser or any of its subsidiaries, the Sellers agree
that the Contingent Amounts shall be and continue to remain subordinate and
subject to the subordination provided herein, and the Sellers agree to take
all such actions in such proceedings as may be required in order to further
effectuate and continue such subordination.
(4) The Sellers represent and warrant to the Senior Creditors
that they have not assigned or transferred the Contingent Amounts to any
third party, nor do they have, or shall they assert the benefit of, (A) any
lien or security interest in the property or assets of the Purchaser any of
its subsidiaries or the Subject Company, (B) any agreement prohibiting the
granting of any lien or security interest in the property or assets of the
Purchaser or its subsidiaries or (C) any guaranty or other suretyship
arrangement by any affiliate of the Purchaser in their favor. No Seller may
assign or transfer any interest in the Contingent Amounts unless the
assignee or transferee has first assumed the obligations of the Seller under
these Subordination Provisions in a writing in form and substance acceptable
to the Administrative Agent.
(5) The Sellers agree that the Senior Creditors may at any time
and from time to time, without the Sellers' consent, and without notice, do
any one or more of the following in the Senior Creditors' sole and absolute
discretion, and without affecting the subordination provided hereby: (A)
renew, accelerate, extend the time for payment of, or increase the Senior
Obligations and any or all of the obligations of the Purchaser and its
Subsidiaries, of any guarantors of the obligations of the Purchaser or any
of its Subsidiaries, or of any other party at any time directly or
contingently liable for the payment of any of the
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Senior Obligations; (B) grant any other indulgence to the Purchaser or any
other person in respect of any or all of the Senior Obligations or any other
matter; (C) amend, alter or change in any respect whatsoever any term or
provision relating to any or all of the Senior Obligations, including the
rate of interest thereon; (D) substitute or add, or take any action or omit
to take any action which results in the release of any one or more endorsers
or guarantors of all or any part of the Senior Obligations; (E) apply any
sums received from the Purchaser, any guarantor, endorser, or cosigner, or
from the disposition of any collateral to any indebtedness whatsoever owing
from such person or secured by such collateral in such manner and order as
the Senior Creditors determine in their sole discretion, and regardless of
whether such indebtedness is part of the Senior Obligations, is secured, or
is due and payable; (F) permit the Purchaser and its Subsidiaries to use
proceeds of the collateral for any purpose; (G) make loans or advances or
other credit accommodations to the Purchaser and its Subsidiaries secured in
whole or in part by the collateral or refrain from making any such loans or
advances or credit accommodations; (H) accept partial payments of,
compromise or settle, refuse to enforce, or release all or any parties to,
any or all of the Senior Obligations; (I) settle, release (by operation of
law or otherwise), compound, compromise, collect or liquidate any of the
Senior Obligations or the collateral in any manner permitted by applicable
law; (J) accept, release, waive, surrender, enforce, exchange, modify,
impair, or extend the time for the performance, discharge, or payment of,
any and all property of any kind securing any or all of the Senior
Obligations or any guaranty of any or all of the Senior Obligations, or on
which the Administrative Agent or any of the Senior Creditors at any time
may have a lien, or refuse to enforce its rights or make any compromise or
settlement or agreement therefor in respect of any or all of such property,
and/or (K) fail to perfect, subordinate or terminate any lien in favor of
the Senior Creditors. The Senior Creditors are not under and shall not
hereafter be under any obligation to marshal any assets in favor of the
Sellers or Shareholders or against or in payment of any or all of the Senior
Obligations, and may proceed against any of the collateral in such order and
manner as it elects.
(6) Unless and until the Senior Obligations have been paid and
discharged in full, the Sellers shall not seek to attach any asset of the
Purchaser or any of its subsidiaries and the Sellers shall not, without the
giving of ten (10) days prior written notice to the Senior Creditors,
directly or indirectly take any of the following actions:
(A) Commence any lawsuit or legal proceeding against the
Purchasers to collect the Contingent Amounts or attempt to collect, levy
upon or foreclose upon any property or assets of the Purchaser or its
subsidiaries;
(B) Seek the appointment of a liquidator, trustee,
conservator, receiver, keeper or custodian for the Purchaser, any of its
subsidiaries or any of its assets;
(C) Commence any involuntary bankruptcy or insolvency
proceedings against the Purchaser or any of its subsidiaries; or
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(D) Take any other enforcement action against the Purchaser
or any of its subsidiaries with respect to the Contingent Amounts:
provided, however, that, notwithstanding the foregoing, if a Default or an
Event of Default shall occur, the Administrative Agent may, by written
notice to the Sellers, suspend Sellers' right to take any of the actions
listed in clauses (A) - (D) above for a period of not greater than 180 days
after the Administrative Agent gives Sellers written notice that such
Default or Event of Default shall have occurred and be continuing (each, a
"Blockage Period"); provided, further, however, that the Administrative
Agent's right to suspend Sellers' right to take such actions as a result of
a specific event or circumstance that gave rise to the Default or Event of
Default shall be limited to 180 days during any consecutive 360 days. The
foregoing shall not, however, limit or restrict the Administrative Agent's
right to suspend the taking of such actions with respect to a Default or an
Event of Default that is created by the occurrence of a different event or
circumstance. Any Blockage Period shall immediately terminate in the event
the Administrative Agent waives in writing, the Default or Event of Default
that gives rise thereto. Notwithstanding any other provisions contained in
this Subsection 6, Sellers shall have no right to take any of the actions
listed in clauses (A) - (D) above if the Senior Creditors shall have elected
to accelerate the maturity of the Senior Obligations until the Senior
Obligations have been paid and discharged in full.
(7) These Subordination Provisions shall be binding upon and
inure to the benefit of the Sellers and the Senior Creditors and their
successors and assigns. Without limiting the generality of the foregoing,
the Sellers acknowledge that the Senior Creditors may freely assign their
interests in the Senior Obligations, or sell participations therein. The
Sellers agree that "Senior Creditor" shall refer also to any assignees or
participants of any of the Senior Creditors party to any Debt Agreement.
These Subordination Provisions (i) are for the sole benefit of the Senior
Creditors, the Sellers and their respective successors in interest, (ii)
shall be enforceable by the Senior Creditors as third party beneficiaries
hereof, and (iii) may not be amended or waived as to any Secured Creditor
except with the written consent of that Senior Creditor. No other person or
entity shall have any rights hereunder or is a third party beneficiary.
(8) In the event that any payment of all or any portion of the
Senior Obligations is avoided or required to be returned pursuant to any of
Sections 544, 545, 547, 548 or 549 of the Bankruptcy Code or for any other
reason, these Subordination Provisions shall be revived and reinstated, and
all such avoided or returned Senior Obligations shall be entitled to the
benefits of these Subordination Provisions, and the Contingent Amounts shall
be subordinated to all such avoided or returned Senior Obligations.
(9) In the event of any action based upon or arising out of
these Subordination Provisions, the prevailing party shall be entitled to
recover from the non-prevailing party all out-of-pocket costs, fees and
reasonable expenses incurred in connection therewith, including, without
limitation, reasonable attorneys' fees.
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(10) All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given and effective upon
delivery, if personally delivered or sent by telegram, telex, or telecopy,
or effective three (3) business days after mailing if sent by express,
certified or registered mail, to the Sellers at the address set forth in
Section 12.2 or to the Senior Creditors at ING (U.S.) Capital Corporation,
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX 00000, Attn: Xxxx
Xxxxxxx V.P. with a copy of ING (U.S.) Capital Corporation, 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, X.X. 00000, Attn: Xxxxxx Xxxx, Loan Dept., or to such
other place and with such other copies as the Senior Creditors may designate
by written notice to the Sellers.
2.5 Post-Closing Adjustment
(a) As promptly as practicable after the Closing Date (but in no event
more than sixty (60) days after the Closing Date), the Purchaser at its
expense shall prepare and deliver to the Sellers a balance sheet of the
Subject Company as of the close of business on the Closing Date (the
"Closing Balance Sheet"). The Closing Balance Sheet will be prepared in
accordance with GAAP, applied on a basis consistent with the Balance Sheet.
The Sellers and Sellers' Accountant will be entitled to access to all
relevant records and working papers of the Subject Company to aid in the
review of the Closing Balance Sheet. The Sellers will be solely
responsible for all costs of the Sellers' Accountant. The Closing Balance
Sheet shall be deemed to be accepted by and shall be conclusive for the
purposes of the adjustment described in Section 2.5(b) hereof with respect
to the Sellers except to the extent, if any, that the Sellers shall have
delivered, within thirty (30) days after the date on which the Closing
Balance Sheet is delivered to the Sellers (which period shall be tolled and
extended in the event the Sellers do not receive timely all such applicable
relevant records and working papers requested of the Subject Company by the
Sellers), a written notice to the Purchaser stating each and every item to
which the Sellers take exception as not being in accordance with GAAP
applied on a basis consistent with the Balance Sheet or as having
computational errors, specifying in reasonable detail the nature and extent
of any such exception (it being understood that any amounts not disputed
shall be paid promptly). If a change proposed by the Sellers is disputed by
the Purchaser then the Purchaser and the Sellers shall negotiate in good
faith to resolve such dispute. If, after a period of twenty (20) days
following the date on which the Sellers give the Purchaser notice of any
such proposed change, any such proposed change still remains disputed, then
the Purchaser and the Sellers shall together choose an independent firm of
public accountants of nationally recognized standing (the "Accounting Firm")
to resolve any remaining disputes. The Accounting Firm shall act as an
arbitrator to determine, based solely on presentations by the Sellers and
the Purchaser and not by independent review, only those issues still in
dispute. The decision of the Accounting Firm shall be final and binding and
shall be in accordance with the provisions of this Section 2.5(a). All of
the fees and expenses of the Accounting Firm, if any, shall be paid by the
Purchaser and the Sellers in the proportions that the Accounting Firm's
determination of Shareholders' Equity Deficiency bears to the Shareholders'
Equity Deficiency proposals submitted by the parties to the Accounting Firm;
provided, however, that, if the Accounting
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Firm determines that either party's position is totally correct, then the
other party shall pay one hundred percent (100%) of the costs and expenses
incurred by the Accounting Firm in connection with any such determination.
(b) In the event that there is a Shareholders' Equity Deficiency (as
defined below), the Sellers shall pay to the Purchaser, as an adjustment to
the Consideration, an amount equal to the Shareholders Equity Deficiency.
Any payments required to be made by the Sellers pursuant to this Section
2.5(b) shall be made within ten (10) days after the amount of the
Shareholders' Equity Deficiency has been determined pursuant to Section
2.5(a) by wire transfer of immediately available funds to an account
designated by the Purchaser.
(c) The term "Shareholders' Equity Deficiency" shall mean with respect
to the Subject Company the amount, if any, by which the Shareholders' Equity
is less than __________________.
(d) The term "Shareholders' Equity" shall mean, with respect to the
Subject Company, the amount by which the total assets of the Subject Company
exceeds the total liabilities of the Subject Company, all determined in
accordance with GAAP, in each case as set forth on the Closing Balance
Sheet; provided, however, that if any change to the Closing Balance Sheet is
agreed to by the Purchaser and the Sellers in accordance with Section
2.5(a), or any dispute between the Purchaser and the Sellers with respect to
the Closing Balance Sheet is resolved in accordance with Section 2.5(a),
then "Shareholders' Equity " shall be calculated after giving effect to any
such change or resolution.
(e) All payments required to be made pursuant to this Section 2.5 shall
be paid with interest thereon at per annum rate of three percent (3%) in
excess of the prime interest rate published in the Wall Street Journal money
rates section and accruing from the Closing Date to the date of payment.
ARTICLE III
SELLERS' AGREEMENTS RESPECTING
POST-CLOSING COMPETITION
3.1 Reasons For Agreements. The Purchaser is making a substantial
investment pursuant to this Agreement in reliance upon the fact that the
knowledge and expertise developed by the Sellers in their management of the
business and affairs of the Subject Company will be preserved and will not be
used in competition with the Purchaser, the Subject Company or its Affiliates.
It is necessary for the protection of the Purchaser, the Subject Company and
its Affiliates that the Sellers provide the agreements and assurances set forth
in this Article III and the Sellers do so in consideration of the additional
payment by the Purchaser to each of the Sellers of Twenty-Five Thousand Dollars
($25,000) (the "Covenant Payments").
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3.2 The Sellers' Agreements. Each of the Sellers agrees that the
Seller will not, directly or indirectly, except for the benefit of the
Purchaser or its Affiliates, or with the consent of the Purchaser, which consent
may be granted or withheld at the Purchaser's sole discretion:
(a) during the Noncompetition Period (as defined in Section 3.4
thereof), become a stockholder, partner, member, manager, associate,
employee, owner, agent, creditor, independent contractor, co-venturer, a
consultant or otherwise, or encourage, counsel, advise or financially assist
or support a spouse of a Seller or any other member of the immediate family
that resides with him or her to be or become, or a Seller to himself or
herself be, or be interested in or associated with any other Person, firm or
business engaged in the Staffing Services Business in the Territory (both
as defined in Section 3.4 hereof); provided, however, that nothing herein
shall be construed to prohibit owning not more than one percent (1%) of any
class of securities issued by an entity which is subject to the reporting
requirements of the Securities Exchange Act of 1934 or traded in the
over-the-counter market; or
(b) during the Noncompetition Period, solicit, cause or authorize,
directly or indirectly, to be solicited for or on behalf of such Seller or
third parties, from parties who are, or within the preceding three hundred
sixty-five (365) days were, customers of the Subject Company any Staffing
Services Business transacted by or with such customer by the Subject
Company; or
(c) during the Noncompetition Period, in the Territory, accept or cause
or authorize, directly or indirectly, to be accepted for or on behalf of
such Seller or for third parties, any such Staffing Services Business from
any such customers described in (b) above; or
(d) during the Noncompetition Period, use, publish, disseminate or
otherwise disclose, directly or indirectly, any information heretofore or
hereafter acquired, developed or used by the Subject Company relating to the
business or the operations, employees or customers of the Subject Company
which constitutes proprietary or confidential information of the Subject
Company ("Confidential Information"), including without limitation any
Confidential Information contained in any customer lists, mailing lists and
sources thereof, statistical data and compilations, patents, copyrights,
trademarks, trade names, inventions, formulae, methods, processes,
agreements, contracts, manuals or any other documents, and (2) from and
after the date hereof, use, publish, disseminate or otherwise disclose,
directly or indirectly, any information heretofore or hereafter acquired,
developed or used by the Purchaser which constitutes Confidential
Information, but excluding any Confidential Information which has become
part of common knowledge or understanding in the staffing services business
industry or otherwise in the public domain (other than from disclosure by
Sellers in violation of this Agreement); provided, however, that this
Section shall not be applicable to the extent that any of the Sellers is
required to testify in a judicial or regulatory proceeding pursuant to the
order of a judge or administrative law judge after such Seller requests that
the confidentiality of such Confidential Information be preserved, and in
the event that the Sellers receive a subpoena or other order to produce or
testify as to Confidential Information, the Sellers shall notify the
Purchaser in order to provide the Purchaser with an opportunity to quash at
the Purchaser's expense; or
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(e) during the Noncompetition Period,
(1) solicit, entice, persuade or induce, directly or indirectly,
any employee (or person who within the preceding three hundred and
sixty-five (365) days was an employee) or staffing contractor of the
Subject Company to terminate his or her employment, by, or contractual
relationship with, the Subject Company or to refrain from extending or
renewing the same (upon the same or new terms) or to refrain from
rendering services to or for the Subject Company or to become employed
by or to enter into contractual relations with any Persons other than
the Subject Company or to enter into a relationship with a competitor
of the Subject Company;
(2) approach any such employee or staffing contractor for any of
the foregoing purposes, or
(3) authorize or approve or assist in the taking of any such
actions by any person other than the Subject Company, the Purchaser or
its Affiliates.
3.3 Interpretation and Remedies.
(a) The invalidity or non-enforceability of Section 3.2 in any respect
shall not affect the validity or enforceability of Section 3.2 in any other
respect or of any other provisions of this Article III. In the event that
any provision of Section 3.2 shall be held invalid or unenforceable by a
court of competent jurisdiction by reason of the geographic or business
scope or the duration thereof, such invalidity or unenforceability shall
attach only to the scope or duration of such provision and shall not affect
or render invalid or unenforceable any other provision of Section 3.2 and,
to the fullest extent permitted by law, this Section 3.2 shall be construed
as if the geographic or business scope or the duration of such provision had
been more narrowly drafted so as not to be invalid or unenforceable and
further, to the extent permitted by law, such geographic or business scope
or the duration thereof may be re-written by a court of competent
jurisdiction to make such sufficiently limited to be enforceable.
(b) The Sellers acknowledge that the Purchaser's remedy at law for any
breach of the provisions of Section 3.2 is and will be insufficient and
inadequate and that the Purchaser shall be entitled to equitable relief,
including by way of temporary restraining order, temporary injunction, and
permanent injunction, in addition to any remedies the Purchaser may have at
law. If either party files suit to enforce or to enjoin the enforcement of
any of the provisions of this Section 3.2, the prevailing party shall be
entitled to recover, in addition to all other damages or remedies provided
for herein, all of its costs incurred in prosecuting or defending such suit,
including reasonable attorneys' fees.
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3.4 Definitions. "Noncompetition Period" shall mean the period
commencing on the Closing Date and ending five (5) years after the Closing Date,
provided, however, that if a Seller violates any of the provisions of Section
3.2, the term of the Noncompetition Period shall be automatically extended for a
period of time equal to the period of the Seller's violation of any of the
provisions of Section 3.2.
"Staffing Services Business" shall mean recruiting and/or training
and/or testing employees or independent contractors and assigning them to
clients to provide staffing help services for such client to support or
supplement the client's work force in work situations such as employee absences,
temporary skill shortages, seasonal workloads and special assignments and
projects.
"Territory" shall mean the state of Missouri.
3.5 Termination of Sellers' Agreements. If the Purchaser fails to pay
to the Sellers any of the Contingent Amounts within one hundred eighty (180)
days following the date provided in Section 2.4(d), then all of the agreements
of the Sellers set forth in this Article III and all of the agreements of the
Sellers set forth in Section 6 of their respective Employment Agreements shall
terminate and be of no further force or effect.
ARTICLE IV
CLOSING
4.1 Closing. Upon the terms and subject to the conditions set forth
herein, the closing of the Transactions (the "Closing") shall be held at 10:00
a.m. local time on the Closing Date at the offices of the Purchaser, 000
Xxxxxxxx Xxxxxx, 000 X. Xxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxx 00000,
unless the parties hereto otherwise agree.
4.2 Deliveries at Closing.
(a) Consideration. The Purchaser will deliver the Closing Payment
(allocated among the Sellers as set forth in Schedule 2.2) to each of the
Sellers.
(b) The Purchaser will deliver the Covenant Payments to each of the
Sellers.
(c) Stock Certificates. At the Closing, the Sellers shall deliver to
the Purchaser certificates evidencing the Stock (duly endorsed in blank for
transfer or accompanied by stock powers duly executed in blank).
(d) Purchaser Certificates. The Purchaser will furnish the Sellers
with such certificates of its officers and others to evidence compliance
with the conditions set forth in this Agreement as may be reasonably
requested by the Sellers, which shall include, but not be limited to a
certificate executed by the Secretary or an Assistant Secretary of the
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Purchaser, certifying, as of the Closing Date, (A) a true and complete copy
of the Organizational Documents of the Purchaser, (B) a true and complete
copy of the resolutions of the board of directors of the Purchaser
authorizing the execution, delivery and performance of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby and
(C) incumbency matters.
(e) Sellers' Certificates. The Sellers will furnish the Purchaser with
such certificates of the Sellers and the officers of the Subject Company and
others to evidence compliance with the conditions set forth in this
Agreement as may be reasonably requested by the Purchaser, which shall
include, but not be limited to a certificate executed by the Secretary or an
Assistant Secretary of the Subject Company certifying as of the Closing
Date (A) a true and complete copy of the Organizational Documents of the
Subject Company, and (B) incumbency matters;
4.3 Other Closing Transactions.
(a) Employment Agreements. At the Closing, the Subject Company shall
enter into Employment Agreements with each of Xxxxx X. Xxxx and Xxxxxx X.
Xxxxxx in the form of Exhibit A hereto (collectively, the "Employment
Agreements").
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
Each of the Sellers hereby, jointly and severally, represents and
warrants to the Purchaser that the following representations and warranties are,
as of the date hereof, and will be, as of the Closing Date, true and correct:
5.1 Organization and Good Standing.
(a) The Subject Company is duly organized, validly existing, and in
good standing under the laws of its jurisdiction of formation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own
or use, and to perform all its obligations under Contracts to which it is a
party. The Subject Company is duly qualified to do business and is in good
standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of
the activities conducted by it, requires such qualification, except where
the failure to be so qualified or in good standing would not reasonably be
expected to have a Material Adverse Effect on the Subject Company. Schedule
5.1 contains a complete and accurate list of jurisdictions in which the
Subject Company is authorized to do business.
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(b) Subsidiaries. The Subject Company has no Subsidiaries and has no
direct or indirect stock or other equity or ownership interest (whether
controlling or not) in any corporation, association, partnership, joint
venture or other entity.
(c) Business. Except as set forth in Schedule 5.1, since its
organization, the Subject Company has not engaged in any business other than
the Staffing Services Business.
5.2 Authority; No Conflict.
(a) This Agreement and the other Transaction Documents to which the
Sellers or the Subject Company are a party (the "Sellers' Closing
Documents") have been duly executed and delivered by the Sellers and the
Subject Company, to the extent that they are a party thereto, and constitute
the legal, valid, and binding obligations of the Sellers and/or the Subject
Company, as the case may be, enforceable against the Sellers and/or the
Subject Company in accordance with their respective terms, in each case
except as such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization and other similar laws affecting creditors'
rights generally and (ii) the general principles of equity, regardless of
whether asserted in a proceeding in equity or at law. The Sellers and the
Subject Company have all requisite power, authority and capacity to execute
and deliver this Agreement and/or the Sellers' Closing Documents and to
perform their respective obligations under this Agreement and the Sellers'
Closing Documents.
(b) Except as set forth in Schedule 5.2, neither the execution and
delivery of this Agreement and the Sellers' Closing Documents nor the
consummation or performance of any of the Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in a violation of (A) any
provision of the Organizational Documents of the Subject Company or (B)
any resolution adopted by the board of directors of the Subject Company
or the shareholders or other equity owners of the Subject Company;
(ii) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of
the Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Subject Company or any
of the assets owned or used by the Subject Company, may be subject;
(iii) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Subject Company or that otherwise
relates to the business of, or any of the assets owned or used by, the
Subject Company;
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(iv) contravene, conflict with or result in a violation or breach
of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify, any Applicable
Contract; or
(v) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Subject
Company,
except in the case of each of clauses (ii) through (v) above, for such
contraventions, conflicts, violations, Liabilities, reassessments, revaluations,
breaches or creations of Encumbrances which, individually and in the aggregate,
would not have a Material Adverse Effect on the Subject Company.
Except as set forth in Schedule 5.2, the Subject Company is not, nor
will be, required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Transactions, other than notices or Consents the
absence of which would not have a Material Adverse Effect on the Subject
Company.
5.3 Capitalization. Schedule 5.3 contains a complete and accurate
description of the capitalization of the Subject Company (including the identity
of each shareholder (or holder of other equity interest) of the Subject Company
and the number of shares (or other equity interests) held by each such Person).
The Sellers have, or will have at Closing, title to all of the Stock, in each
case, free and clear of all Encumbrances. All of the Stock is and will be, as of
the Closing Date, duly authorized, validly issued, fully paid and
non-assessable. Except as set forth on Schedule 5.3, there are no outstanding
subscriptions, calls, commitments, warrants or options for the purchase of
shares of any capital stock or other securities of the Subject Company or any
securities convertible into or exchangeable for shares of capital stock or other
securities issued by the Subject Company, or any other commitments of any kind
for the issuance of additional shares of capital stock or other securities
issued by the Subject Company. None of the outstanding capital stock or equity
interests or other securities of the Subject Company was issued in violation of
the Securities Act.
5.4 Financial Statements. The Sellers have delivered to the Purchaser
(a) balance sheets of the Subject Company as of December 31, 1995 and 1996 and
the related statements of income for the years then ended compiled by Xxxxxx
Xxxxxxxxx, Certified Public Accountant, (b) an audited balance sheet of the
Subject Company as of December 31, 1997 (the "Balance Sheet") and the related
statements of income, changes in shareholders' equity and cash flow for the year
then ended, together with the report thereon of Xxxxx Xxxxxx, Certified Public
Accountants, (including the notes thereto), and (c) the statement of normalized
EBIT (computed in the manner requested by the Purchaser) for each month of the
12-month period ending April 30, 1998 (collectively, clauses (a), (b) and (c),
above are referred to herein as the "Financial Statements"). Except as provided
in Schedule 5.4, the Financial Statements fairly and accurately present the
financial condition and the results of operations, income, expenses, assets,
liabilities, changes in
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stockholders' equity, and cash flow of the Subject Company as of the respective
dates of, and for the periods referred to in, the Financial Statements, all in
accordance with GAAP and reflect the consistent application of such accounting
principles throughout the periods involved. No financial statements of any
Person other than the Subject Company are required by GAAP to be included in the
Financial Statements. The December 31, 1997 balance sheet and the income
statement contain accruals for, and pro rated anticipated expenses for, periodic
and annual bonuses, incentive compensation, vacation, "flex time" and other
similar benefits (based on then existing compensation arrangements and past
practices).
5.5 Books and Records. The books of account, minute books, stock
record books, and other records of the Subject Company, all of which have been
made available to the Purchaser, are complete and correct in all material
respects and, in all material respects, have been maintained in accordance with
sound business practices, including the maintenance of an adequate system of
internal controls, and, with respect to the books of account, fairly and
accurately reflect the income, expenses, assets and liabilities of the Subject
Company. The minute books of the Subject Company contain, in all material
respects, accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the board of directors, and committees of the
board of directors of the Subject Company, and no meeting of any such
shareholders, board of directors or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of the Subject
Company.
5.6 Title to Properties: Encumbrances. The Subject Company does not
own, and since its inception has not owned, any real property or any interest,
other than a leasehold interest, in any real property. Schedule 5.6 contains a
complete and accurate list of all leasehold interests in real property owned by
the Subject Company. Schedule 5.6 lists and describes all real property leased
by any Subject Company. The Sellers have delivered a copy of all such leases to
the Purchaser and, to the Knowledge of the Sellers, all such leases are legal,
valid, binding, enforceable and in full force and effect, and following the
Closing will continue to be legal, valid, binding and enforceable by the Subject
Company and in full force and effect. There are no disputes, oral agreements or
forbearances in effect as to any such leases. The Subject Company owns all the
properties and assets (whether real, personal or mixed and whether tangible or
intangible) that it purports to own, including all of the properties and assets
reflected in the Balance Sheet (except for personal property sold since the date
of the Balance Sheet in the Ordinary Course of Business), and all of the
properties and assets purchased or otherwise acquired by the Subject Company
since the date of the Balance Sheet (except for personal property acquired and
sold since the date of the Balance Sheet in the Ordinary Course of Business),
which subsequently purchased or acquired properties and assets are listed in
Schedule 5.6. Except as set forth in Schedule 5.6, all material properties and
assets reflected in the Balance Sheet are free and clear of all Encumbrances,
except inchoate tax liens, liens for taxes not yet due and payable and liens not
material in amount.
5.7 No Undisclosed Liabilities. Except as set forth in Schedule 5.7,
the Subject Company has no Liabilities required to be disclosed under GAAP
except for Liabilities reflected or
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reserved against in the Balance Sheet and Liabilities incurred in the Ordinary
Course of Business since the date thereof.
5.8 Accounts Receivable. All Accounts Receivable of the Subject
Company that are reflected on the accounting records of the Subject Company as
of the Closing will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Each of the
Accounts Receivable will be as of the Closing current and collectible, without
any setoff, within ninety days after the day on which it first becomes due and
payable. There is no contest, claim or right of set-off, under any Contract
with any obligor of an Accounts Receivable relating to the amount or validity of
such Accounts Receivable.
5.9 Taxes.
(a) Except as set forth in Schedule 5.9, there have been properly
completed and filed on a timely basis and in correct form all Tax Returns
required to be filed by Subject Company on or prior to the date hereof. As
of the time of filing, the foregoing Tax Returns correctly reflected in all
material respects the facts regarding the income, business, assets,
operations, activities, status or other matters of the applicable entity or
any other information required to be shown thereon. In particular, the
foregoing returns are not subject to penalties under Section 6662 of the
IRC, relating to accuracy-related penalties (or any corresponding provision
of the state, local or foreign Tax law) or any predecessor provision of law.
Except as set forth in Schedule 5.9, an extension of time within which to
file any Tax Return that has not been filed has not been requested or
granted.
(b) With respect to all amounts in respect of Taxes imposed on the
Subject Company or for which the Subject Company is or could be liable,
whether to taxing authorities (as, for example, under law) or to other
Persons or entities (as, for example, under Tax allocation agreements), with
respect to all taxable periods or portions of periods ending on or before
the Closing, all applicable Tax laws and agreements have been complied with
in all material respects, and all such amounts required to be paid by the
Subject Company to taxing authorities or others on or before the date hereof
have been paid.
(c) No material issues have been raised (and are currently pending) by
any taxing authority in connection with any of the Tax Returns of the
Subject Company. No waiver of statute of limitation with respect to any Tax
Return has been given by or requested from the Subject Company. Schedule 5.9
sets forth (i) the taxable years of the Subject Company as to which the
statutes of limitations with respect to Taxes have not expired, and (ii)
with respect to such taxable years, (A) those years for which examinations
have been completed, (B) those years for which examinations are presently
being conducted, and (C) those years for which required Tax Returns have not
yet been filed. Except to the extent shown in Schedule 5.9, all deficiencies
asserted or assessments made as a result of any examinations have been fully
paid, or are fully reflected as a liability in the Financial Statements, or
are
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being contested and an adequate reserve therefor has been established and is
fully reflected in the Financial Statements.
(d) There are no liens for Taxes (other than for current Taxes not yet
due and payable) on the assets of any of the Subject Company.
(e) The Subject Company is not a party to or bound by any Tax
indemnity, Tax sharing or Tax allocation agreement.
(f) The Subject Company has never been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the IRC.
(g) The Subject Company has not agreed to make nor is the Subject
Company required to make any adjustment under Section 481(a) of the IRC by
reason of a change in accounting method or otherwise.
(h) The Subject Company is not a party to any agreement, Contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the IRC.
(i) No stockholder of the Subject Company is a Person other than a
United States Person within the meaning of the IRC.
(j) The Subject Company is not a party to any joint venture,
partnership or other arrangement or contract that could be treated as a
partnership for federal and applicable state income Tax purposes.
(k) Except as set forth in Schedule 5.9, the unpaid Taxes of the
Subject Company does not exceed the reserve for Tax liability (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth or included in the Balance Sheet, as adjusted
for the passage of time through the Closing, in accordance with the past
custom and practice of the Subject Company.
(l) The Subject Company has been properly treated as an S Corporation
(as defined in IRC) since January 1, 1998.
5.10 No Material Adverse Change. Since the date of the Balance Sheet,
there has not been any Material Adverse Change in the business, operations,
properties, prospects, assets or financial condition of the Subject Company,
and, to the Knowledge of the Sellers, no event has occurred or circumstance
exists that may result in such a Material Adverse Change.
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5.11 Employee Benefits.
(a) (i) Schedule 5.11 contains a complete and accurate list of all
Plans and Other Benefit Obligations of the Subject Company, and
identifies as such all Plans that are Qualified Plans.
(ii) Schedule 5.11 contains a complete and accurate list of (A)
all ERISA Affiliates of the Subject Company, and (B) all Plans of which
any such ERISA Affiliate is or was a Plan Sponsor, in which any such
ERISA Affiliate participates or has participated, or to which any such
ERISA Affiliate contributes or has contributed.
(iii) Schedule 5.11 sets forth the financial cost of all
obligations owed under any Plan of the Subject Company or Other Benefit
Obligation of the Subject Company that is not subject to the disclosure
and reporting requirements of ERISA.
(b) Except as provided in Schedule 5.11, the Sellers have delivered to
the Purchaser:
(i) all documents that set forth the terms of each Plan and
Other Benefit Obligations of the Subject Company and of any related
trust, including (A) all plan descriptions and summary plan descriptions
of the Plans of the Subject Company for which plan descriptions and
summary plan descriptions are required to be prepared, filed and
distributed and (B) all summaries and descriptions furnished to
participants and beneficiaries regarding the Plans and the Other Benefit
Obligations of the Subject Company for which a plan description or
summary plan description is not required;
(ii) all personnel and employment manuals and policies of the
Subject Company;
(iii) a written description of any Plan or Other Benefit
Obligation of the Subject Company that is not otherwise in writing;
(iv) all insurance policies purchased by or to provide benefits
under any Plan of the Subject Company;
(v) all reports submitted within the two years preceding the
date of this Agreement by third party administrators, actuaries,
investment managers, consultants or other independent contractors with
respect to any Plan or Other Benefit Obligation of the Subject Company;
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(vi) all notifications to employees of the Subject Company of
their rights under ERISA Section 601 et seq. and IRC Section 4980B;
(vii) the Form 5500 filed with respect to each Plan of the Subject
Company for the most recent three plan years, including all schedules
thereto and the opinions of independent accountants;
(viii) all notices that were given by the Subject Company or any
ERISA Affiliate of the Subject Company or any Plan of the Subject
Company to the IRS or any participant or beneficiary, pursuant to
statute, within the two years preceding the date of this Agreement,
including notices that are expressly mentioned elsewhere in this Section
5.11;
(ix) all notices that were given by the IRS or the Department of
Labor to the Subject Company, any of their ERISA Affiliates or any Plan
of the Subject Company within the four years preceding the date of this
Agreement; and
(x) the most recent IRS determination letter for each Qualified
Plan which is a Plan of the Subject Company.
(c) Except as set forth in Schedule 5.11:
(i) The Subject Company has performed its obligations in all
material respects under all the Plans and Other Benefit Obligation of
the Subject Company. The Subject Company has made appropriate entries in
its financial records and statements under GAAP for all obligations and
liabilities under such Plans and Other Benefit Obligations that have
accrued but are not due.
(ii) No statement, either written or, to the Knowledge of the
Sellers, oral, has been made by the Subject Company to any Person with
regard to any Plan or Other Benefit Obligation that was not in
accordance with the Plan or Other Benefit Obligation and that could have
an adverse economic consequence to the Subject Company.
(iii) The Subject Company, with respect to all the Plans and the
Other Benefit Obligations of the Subject Company, is, and each Plan and
Other Benefit Obligation of the Subject Company is in full compliance in
all material respects with ERISA, the IRC, and other applicable laws
including the provisions of such laws expressly mentioned in this
Section 5.11.
(1) No transaction prohibited by ERISA 406 and no
"prohibited transaction" under IRC 4975(c) has occurred with
respect to any Plan of the Subject Company.
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(2) The Subject Company has no liability to the IRS with
respect to any Plan.
(3) The Subject Company has no liability under ERISA.
(4) All filings required by ERISA and the IRC as to each
Plan of the Subject Company have been timely filed, and all
notices and disclosures to participants required by either ERISA
or the IRC have been timely provided.
(5) All contributions and payments made or accrued by the
Subject Company and the ERISA Affiliates of the Subject Company
with respect to all the Plans and Other Benefit Obligations of the
Subject Company are deductible under IRC Section 162 or 404. No
amount, nor any asset of any Plan of the Subject Company is
subject to Tax as unrelated business taxable income.
(iv) Neither the Subject Company nor any ERISA Affiliate of the
Subject Company sponsors or maintains, previously sponsored or
maintained, or has or had any obligation to contribute to any Title IV
Plan, Multiemployer Plan or any Welfare Plan that provides or will
provide benefits described in Section 3(1) of ERISA to any former
employee or retiree of the Subject Company or any ERISA Affiliate of the
Subject Company, except as required under Part 6 of Title I of ERISA and
Section 4980B of the Code.
(v) Each Plan of the Subject Company which is not a
Multi-Employer Plan can be terminated within thirty days, without
payment of any additional contribution or amount and without the vesting
or acceleration of any benefits promised by such Plan, other than
vesting of any accrued benefits under any Pension Plan.
(vi) To the Knowledge of the Sellers, no event has occurred or
circumstance exists that could result in a material increase in premium
costs of the Plans and Other Benefit Obligations of the Subject Company
that are insured or a material increase in benefit costs of such Plans
and Other Benefit Obligations that are self-insured.
(vii) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Plan
or Other Benefit Obligation of the Subject Company is pending or, to the
Knowledge of the Sellers, is Threatened.
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(viii) Each Qualified Plan of the Subject Company is qualified in
form and operation under IRC Section 401(a); each trust for each such
Plan is exempt from federal income Tax under IRC Section 501(a). No
event has occurred or circumstance exists that will or could give rise
to disqualification or loss of tax-exempt status of any such Plan or
trust.
(ix) No payment that is owed or may become due to any director,
officer, employee or agent of the Subject Company will be non-deductible
to the Subject Company or subject to Tax under IRC Section 280G or
Section 4999; nor will the Subject Company be required to "gross up" or
otherwise compensate any such Person because of the imposition of any
excise Tax on a payment to such Person.
(x) Neither the execution of the Transaction Documents nor the
consummation of the Transactions will result in the payment, vesting or
acceleration of any benefit.
5.12 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Schedule 5.12:
(i) the Subject Company is, and at all times since January 1,
1996 has been, in all material respects, in compliance with each Legal
Requirement that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its assets;
(ii) to the Knowledge of the Sellers, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (A)
may constitute or result in a violation by the Subject Company of, or a
failure on the part of the Subject Company to comply with, any Legal
Requirement or (B) may give rise to any obligation on the part of the
Subject Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature; and
(iii) the Subject Company has not received, at any time since
January 1, 1996, any written or, to the Knowledge of the Sellers, other
notice or other communication from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible or potential material
violation of, or material failure to comply with, any Legal Requirement
or (B) any actual, alleged, possible or potential material obligation on
the part of the Subject Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(b) Schedule 5.12 contains a complete and accurate list of each
material Governmental Authorization that is held by the Subject Company or
that otherwise relates to the business of, or to any of the assets owned or
used by, the Subject Company. Each
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Governmental Authorization listed or required to be listed in Schedule 5.12 is
valid and in full force and effect. Except as set forth in Schedule 5.12:
(i) the Subject Company is, and at all times since January 1,
1996, has been, in all material respects, in full compliance with all of
the terms and requirements of each Governmental Authorization identified
or required to be identified in Schedule 5.12;
(ii) to the Knowledge of the Sellers, no event has occurred or
circumstance exists that may (with or without notice or lapse of time)
(A) constitute or result directly or indirectly in a violation of or a
failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Schedule 5.12 or (B)
result directly or indirectly in the revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Schedule 5.12;
(iii) the Subject Company has not received, at any time since
January 1, 1996, any written or, to the Knowledge of the Sellers, other
notice or communication from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible or potential material
violation of or material failure to comply with any term or requirement
of any Governmental Authorization or (B) any actual, proposed, possible
or potential revocation, withdrawal, suspension, cancellation,
termination of or modification to any Governmental Authorization; and
(iv) all material applications required to have been filed for
the renewal of the Governmental Authorizations listed or required to be
listed in Schedule 5.12 have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other material filings required
to have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental
Bodies.
The Governmental Authorizations listed in Schedule 5.12 collectively
constitute all of the material Governmental Authorizations necessary to permit
the Subject Company to lawfully conduct and operate its business in the manner
it currently conducts and operates such business and to permit the Subject
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
5.13 Legal Proceedings; Orders.
(a) Except as set forth in Schedule 5.13, there is no pending
Proceeding:
(i) that, to the Knowledge of the Sellers, has been commenced
by or against the Subject Company or, to the Knowledge of the Sellers,
that otherwise
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relates to or may affect the business of, or any of the assets owned or
used by, the Subject Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the
Transactions.
To the Knowledge of the Sellers, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding. The
Sellers have delivered to the Purchaser copies of all pleadings, correspondence,
and other documents relating to each Proceeding listed in Schedule 5.13. To the
Knowledge of the Sellers, the Proceedings listed in Schedule 5.13 will not,
individually or in the aggregate, have a Material Adverse Effect on the
business, operations, assets, condition or prospects of the Subject Company.
(b) Except as set forth in Schedule 5.13:
(i) there is no Order to which the Subject Company or any of the
assets owned or used by the Subject Company, is subject;
(ii) none of the Sellers is subject to any Order that relates to
the business of, or any of the assets owned or used by, the Subject
Company; and
(iii) to the Knowledge of the Sellers, no officer, director, agent
or employee of the Subject Company is subject to any Order that
prohibits such officer, director, agent or employee from engaging in or
continuing any conduct, activity or practice relating to the business of
the Subject Company.
(c) Except as set forth in Schedule 5.13:
(i) the Subject Company is, and at all times since January 1,
1995, has been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or
used by it, is or has been subject;
(ii) to the Knowledge of the Sellers, no event has occurred or
circumstance exists that may constitute or result in (with or without
notice or lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which the Subject Company or any of
the assets owned or used by the Subject Company, is subject; and
(iii) the Subject Company has not received, at any time since
January 1, 1995, any written or, to the Knowledge of the Sellers, other
notice or communication from any Governmental Body or any other Person
regarding any actual, alleged, possible or potential material violation
of, or material failure to comply with, any
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term or requirement of any Order to which the Subject Company or any of
the assets owned or used by the Subject Company, is or has been subject.
5.14 Absence of Certain Changes and Events.
Except as set forth in Schedule 5.14, since the date of the Balance
Sheet, the Subject Company has conducted its business only in the Ordinary
Course of Business and there has not been any:
(a) change in authorized or issued capital stock of, or other equity
interests in, the Subject Company; grant of any stock option or right to
purchase shares of capital stock, of or other equity interests in, the
Subject Company; issuance of any security convertible into such capital
stock or other equity interests; grant of any registration rights; purchase,
redemption, retirement or other acquisition by the Subject Company of any
shares of any such capital stock or other equity interests; or declaration
or payment of any dividend or other distribution or payment in respect of
shares of capital stock or other equity interests;
(b) amendment to the Organizational Documents of the Subject Company;
(c) payment or increase by the Subject Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance or similar Contract with any director, officer or
(except in the Ordinary Course of Business) employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees of the
Subject Company;
(e) damage to or destruction or loss of any asset or property of the
Subject Company, whether or not covered by insurance, that would have a
Material Adverse Effect on the Subject Company;
(f) entry into, termination or acceleration of, or receipt of notice
of termination of (i) any material license, distributorship, dealer, sales
representative, joint venture, credit or similar agreement or (ii) any
Contract or transaction involving a Liability by or to the Subject Company
of at least $10,000, except those entered into in the Ordinary Course of
Business;
(g) sale (other than sales in the Ordinary Course of Business), lease
or other disposition of any material asset or property of the Subject
Company or mortgage, pledge or imposition of any lien or other Encumbrance
on any material asset or property of the Subject Company, including the
sale, lease or other disposition of any of the Intellectual Property Assets;
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(h) delay or failure to repay when due any obligation, including
without limitation, accounts payable and accrued expenses, except
non-material obligations in the Ordinary Course of Business;
(i) accrual of any expenses except for such accruals in the Ordinary
Course of Business;
(j) capital expenditures in excess of $10,000;
(k) cancellation or waiver of any claims or rights with a value to the
Subject Company in excess of $10,000;
(l) any payment, discharge or satisfaction of any Liability by the
Subject Company, other than the payment, discharge or satisfaction of
Liabilities, in the Ordinary Course of Business;
(m) incurrence of or increase in, any material Liability, except in
the Ordinary Course of Business, or any deferred payment of or failure to
pay when due, any material Liability;
(n) material change in the accounting methods used by the Subject
Company;
(o) material disagreement or dispute with any key employee of the
Subject Company with respect to compensation, equity ownership, duties or
authority; or
(p) agreement, whether oral or written, by the Subject Company to do
any of the foregoing.
5.15 Contracts; No Defaults.
(a) Schedule 5.15 contains a complete and accurate list, and the
Sellers have made available to the Purchaser true and complete copies, of:
(i) each written Applicable Contract that involves performance
of services or delivery of goods by the Subject Company for a fixed
price or a fixed deliverable;
(ii) each written Applicable Contract that involves performance
of services or delivery of goods or materials to the Subject Company for
a fixed price in excess of $25,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures of the
Subject Company,
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individually or, for a series of related Applicable Contracts, in the
aggregate, in excess of $10,000, or receipts of the Subject Company,
individually or, for a series of related Applicable Contracts, in the
aggregate, in excess of $20,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract of the Subject Company affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $10,000 or with terms of less than one year);
(v) each licensing agreement or other Applicable Contract of
the Subject Company with respect to patents, trademarks, copyrights or
other intellectual property, including agreements with current or former
employees, consultants or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other Applicable
Contract of the Subject Company to or with any labor union or other
employee representative of a group of employees and each other written
employment or consulting agreement with any employees or consultants;
(vii) each joint venture, partnership and other Applicable
Contract of the Subject Company (however named) involving a sharing of
profits, losses, costs or liabilities by the Subject Company with any
other Person;
(viii) each Applicable Contract of the Subject Company containing
covenants that in any way purport to restrict the business activity of
the Subject Company or any Affiliate of the Subject Company or limit the
freedom of the Subject Company or any Affiliate of the Subject Company
to engage in any line of business or to compete with any Person;
(ix) each Applicable Contract of the Subject Company providing
for payments to or by any Person based on sales, purchases or profits,
other than direct payments for goods and compensation arrangements with
employees;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by the Subject Company to be responsible for consequential
damages;
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(xii) each Applicable Contract of the Subject Company for capital
expenditures in excess of $10,000;
(xiii) each Applicable Contract which, to the Knowledge of the
Sellers, will result in a material loss to the Subject Company;
(xiv) each Applicable Contract between the Subject Company and
its former or current stockholders, directors, officers and employees
(other than standard employment agreements previously furnished to or
approved by the Purchaser);
(xv) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the
Subject Company other than in the Ordinary Course of Business; and
(xvi) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
Schedule 5.15 sets forth reasonably complete details concerning such
Contracts, including the parties to the Contracts, the amount of the remaining
commitment of the Subject Company under the Contracts, and the place where
details relating to the Contracts are located.
(b) Except as set forth in Schedule 5.15, to the Knowledge of the
Sellers, no officer, director, agent, employee, consultant or contractor of
the Subject Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant or contractor
to (A) engage in or continue any conduct, activity or practice relating to
the business of the Subject Company or (B) assign to the Subject Company or
to any other Person any rights to any invention, improvement or discovery.
(c) Except as set forth in Schedule 5.15, to the Knowledge of the
Sellers, each Contract identified or required to be identified in Schedule
5.15 is in full force and effect and is valid and enforceable in accordance
with its terms.
(d) Except as set forth in Schedule 5.15:
(i) the Subject Company is in compliance with all material
terms and requirements of each material Contract under which the Subject
Company has any obligation or Liability or by which the Subject Company
or any of the assets owned or used by the Subject Company is bound;
(ii) to the Knowledge of the Sellers, each other Person that has
any obligation or Liability under any material Contract under which the
Subject Company has any rights is in compliance with all material terms
and requirements of such Contract;
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(iii) to the Knowledge of the Sellers, no event has occurred or
circumstance exists that a reasonably prudent person would conclude may
contravene, conflict with, or result in a violation or breach of, or
give the Subject Company or any other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify, any Applicable
Contract; and
(iv) the Subject Company has not given to or received from any
other Person, at any time since January 1, 1996, any written or, to the
Knowledge of the Sellers, other notice or other communication regarding
any actual, alleged, possible or potential material violation or
material breach of, or material default under, any Applicable Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
the Subject Company under current or completed Applicable Contracts with any
Person and no such Person has made written demand for such renegotiation.
(f) The Applicable Contracts relating to the provision of products or
services by the Subject Company have been entered into in the Ordinary
Course of Business and, to the Knowledge of the Sellers, have been entered
into without the commission of any act alone or in concert with any other
Person, or any consideration having been paid or promised, that is or would
be in violation of any Legal Requirement.
5.16 Insurance.
(a) The Subject Company has delivered to the Purchaser:
(i) a true and complete list of all policies of insurance to
which the Subject Company is a party or under which the Subject Company
or any director or officer of the Subject Company, is or has been
covered by the Subject Company at any time within the three years
preceding the date of this Agreement; and
(ii) any statement by the auditor of the Financial Statements
with regard to the adequacy of such entity's coverage or of the reserves
for claims.
(b) Schedule 5.16 describes:
(i) any self-insurance arrangement by or affecting the Subject
Company, including any reserves established thereunder; and
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(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Subject
Company normally covered by insurance.
(c) Schedule 5.16 sets forth, by year, for the current policy year and
each of the three preceding policy years:
(i) a summary of the loss experience under each policy; and
(ii) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such
claims.
(d) Except as set forth in Schedule 5.16:
(i) All policies to which the Subject Company is a party or
that provide coverage to the Subject Company or any director or officer
of the Subject Company:
(l) to the Knowledge of the Sellers, are valid,
outstanding and enforceable;
(2) are sufficient for compliance with all Legal
Requirements and Contracts to which the Subject Company is a party
or by which it is bound;
(3) will continue in full force and effect following the
consummation of the Transactions; and
(4) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of the
Subject Company.
(ii) the Subject Company has not received (A) any refusal of
coverage or any notice that a defense will be afforded with reservation
of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will
not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
(iii) To the Knowledge of the Sellers, the Subject Company has
given notice to the insurer of all claims that may be insured thereby.
5.17 Environmental Matters.
Except as set forth in Schedule 5.17:
(a) The Subject Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law.
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(b) There are no pending or, to the Knowledge of the Sellers,
Threatened claims, Encumbrances or other restrictions of any nature,
resulting from any Environmental, Health and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting (i)
to the Knowledge of the Sellers, any of the Facilities or (ii) any other
properties and assets (whether real, personal or mixed) in which the Subject
Company has or had an interest.
(c) Neither the Subject Company nor, to the Knowledge of the Sellers,
any other Person for whose conduct the Subject Company is or may be held
responsible, has received any citation, directive, inquiry, notice, Order,
summons, warning or other communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual or potential violation or
failure to comply with any Environmental Law.
5.18 Labor Relations; Compliancce: Employees. Since January 1, 1996,
the Subject Company has not been nor is a party to any collective bargaining or
other similar labor Contract. Since January 1, 1996, there has not been, there
is not presently pending or existing, and, to the Knowledge of the Sellers,
there is not Threatened, (a) any strike, slowdown, picketing, work stoppage or
employee grievance process, (b) any Proceeding against or affecting the Subject
Company relating to the alleged violation of any Legal Requirement pertaining to
labor relations or employment matters, including any charge or complaint filed
by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission or any comparable Governmental Body,
organizational activity or other labor or employment dispute against or
affecting the Subject Company or its premises or (c) any application for
certification of a collective bargaining agent. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. Except as set forth in Schedule 5.18, the Subject Company has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health and plant closing. Except as set forth in
Schedule 5.18, the Subject Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
Except as set forth in Schedule 5.18, the Subject Company has not entered into
any severance or similar arrangement in respect of any personnel that provides
for any obligation (absolute or contingent) of the Subject Company or any other
Person to make any payment to any such personnel following termination of
employment.
There is currently in force between the Subject Company and each of its
nonbillable staff employees a written agreement containing the noncompetition
agreements of each such employee set forth in Schedule 5.18.
5.19 Intellectual Property.
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(a) Intellectual Property Assets. The term "Intellectual Property
Assets" includes:
(i) the corporate name of the Subject Company and all
fictional business names, trade names, registered and unregistered
trademarks, service marks and applications owned by, used by or licensed
to the Subject Company (collectively, "the Marks");
(ii) all of the patents, patent applications and inventions and
discoveries that may be patentable of the Subject Company (collectively,
"the Patents");
(iii) all of the copyright rights in both published works and
unpublished works of the Subject Company (collectively, "the
Copyrights"); and
(iv) all trade secrets and confidential information of the
Subject Company (collectively, "the Trade Secrets").
(b) Agreements. Schedule 5.19 contains a complete and accurate list
and summary description, including any royalties paid or received by the
Subject Company, of all Contracts relating to the Intellectual Property
Assets to which the Subject Company is a party or by which the Subject
Company is bound, except for any license implied by the sale of a product
and perpetual, paid-up licenses for commonly available software programs
with a value of less than $1,000 under which the Subject Company is the
licensee. There are no outstanding and, to the Knowledge of the Sellers, no
Threatened disputes or disagreements with respect to any such Contract.
(c) Know-How Necessary for the Business. Except as described in
Schedule 5.19, the Intellectual Property Assets are all those necessary for
the operation of the business of the Subject Company as it is currently
conducted. The Subject Company is the owner of such right, title and
interest in and to each of the Intellectual Property Assets as is necessary
to conduct the business of the Subject Company.
(d) Patents. The Subject Company has not been issued any Patents and
has no Patents pending and no Patents are necessary or currently used by the
Subject Company to conduct its business as it is presently conducted. No
process or know-how used by the Subject Company is known to infringe or is
alleged to infringe any patent or other proprietary right of any other
Person.
(e) Trademarks. The Subject Company has no Marks other than its
corporate name. To the knowledge of the Sellers, the corporate name is not
infringed or known to infringe any trade name of any third party.
(f) Copyrights. The Subject Company has no copyrights.
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(g) Trade Secrets. Except as set forth in Schedule 5.19, the Subject
Company has no Trade Secrets and no Trade Secrets are necessary or currently
used by the Subject Company to conduct its business as it is presently
conducted.
5.20 Certain Payments. Since January 1, 1996, neither the Subject
Company, nor any director, officer or agent of the Subject Company nor the
Sellers has directly or indirectly, (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback or other payment to any Person,
private or public, regardless of form, whether in money, property or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of the Subject
Company or any Affiliate of the Subject Company or (iv) in violation of any
Legal Requirement or (b) established or maintained any fund or asset that has
not been recorded in the books and records of the Subject Company.
5.21 No Other Agreements to Sell Assets or Capital Stock of the Subject
Company. Neither the Subject Company nor the Sellers have any commitment or
legal obligation, absolute or contingent, to any other Person or firm, other
than as contemplated by the Transactions, to sell, assign, transfer or effect a
sale of any of the assets (other than inventory and products in the Ordinary
Course of Business), to sell or effect a sale of the capital stock or other
equity interests of the Subject Company, to effect any merger, consolidation,
liquidation, dissolution or other reorganization of the Subject Company, to
enter into any agreement or cause the entering into of an agreement with respect
to any of the foregoing.
5.22 Relationships with Related Persons. Except as set forth in
Schedule 5.22, neither the Subject Company nor the Sellers has owned (of record
or as a beneficial owner) an equity interest or any other financial or profit
interest in a Person that has (i) had business dealings or a material financial
interest in any transaction with the Subject Company other than business
dealings or transactions conducted in the Ordinary Course of Business with the
Subject Company at substantially prevailing market prices and on substantially
prevailing market terms or (ii) engaged in a business competing with the Subject
Company with respect to any line of the products or services of the Subject
Company in any market presently served by the Subject Company, except for less
than one percent (1%) of the outstanding capital stock of any such competing
business that is publicly traded on any recognized exchange or in the
over-the-counter market. Except as set forth in Schedule 5.22, no Seller of the
Subject Company is a party to any Contract with, or has any claim or right
against, the Subject Company.
5.23 Customers. Schedule 5.23 contains a complete and accurate list of
those customers of the Subject Company which generated revenues in excess of
$100,000 for the Subject Company during the last fiscal year, showing the total
sales by the Subject Company to each such customer during such fiscal year.
Since the date of the Balance Sheet, there has been no adverse change in the
business relationship with any customer named in Schedule 5.23 and no threat or
indication that any such change is reasonably foreseeable.
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5.24 Bank Accounts. Schedule 5.24 sets forth an accurate and complete
list showing the name and address of each bank in which the Subject Company has
any account, safe deposit box, borrowing arrangement or certificate of deposit,
the number of any such account or any such box and the names of all Persons
authorized to draw thereon or to have access thereto.
5.25 Brokers and Finders; Advisors. Except for Geneva Corporate
Finance, Inc., neither the Sellers nor the Subject Company nor their respective
agents have incurred any obligation or Liability for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement. The Sellers agree to indemnify the Purchaser and the Subject Company
against and to hold the Purchaser and the Subject Company harmless from, any
claims for brokerage or similar commission or other compensation which may be
made against the Purchaser or the Subject Company by any third party in
connection with the Transactions, which claim is based upon such third party
having acted as broker, finder, investment banker, advisor, consultant or
appraiser or in any similar capacity on behalf of the Subject Company, the
Sellers or any of their respective Affiliates.
5.26 Disclosure. No representation or warranty of the Sellers in this
Agreement and no statement in the Disclosure Schedules omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Sellers as follows:
6.1 Organization of Purchaser. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and corporate authority to own, lease and
operate its properties and to carry on its business in the manner in which such
business is now being conducted, to own the Stock being acquired in the
Acquisition pursuant to this Agreement and to enter into and perform its
obligations under this Agreement.
6.2 Corporate Authority and Ability. All requisite corporate
authorizations for the execution, delivery and performance by the Purchaser of
this Agreement and the consummation of the Transactions have been obtained. The
Purchaser has the financial ability to perform its obligations under this
Agreement.
6.3 Authorization: No Conflict.
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(a) This Agreement constitutes the legal, valid, and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms. Upon the execution and delivery by the Purchaser of the
Transaction Documents to which it is a party, such Transaction Documents
will constitute the legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their respective terms,
except where such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditors' rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law. The
Purchaser has the absolute and unrestricted right, power, and authority to
execute and deliver this Agreement and the Transaction Documents to which it
is a party and to perform its obligations under this Agreement and the
Transaction Documents to which it is a party.
(b) Neither the execution and delivery of this Agreement by the
Purchaser nor the consummation or performance of any of the Transactions by
the Purchaser will give any Person the right to prevent, delay, or otherwise
interfere with any of the Transactions pursuant to: (i) any provision of the
Purchaser's Organizational Documents; (ii) any resolution adopted by the
board of directors or the stockholders of the Purchaser; (iii) any Legal
Requirement or Order to which the Purchaser may be subject; or (iv) any
Contract to which the Purchaser is a party or by which the Purchaser may be
bound, except in the case of each of clauses (iii) and (iv) above, for such
contraventions, conflicts, violations, Liabilities, reassessments,
revaluations, breaches or creations of Encumbrances which, individually and
in the aggregate, would not have a Material Adverse Effect with respect to
the Purchaser. The Purchaser is not and will not be required to obtain any
Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the
Transactions.
6.4 Proceedings. There is no pending Proceeding that has been
commenced against the Purchaser and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Transactions. To the Purchaser's knowledge, no such Proceeding has been
Threatened.
6.5 Investment. The Purchaser is purchasing the Stock for its own
account for investment, without a view to their distribution within the meaning
of Section 2(11) of the Securities Act. The Purchaser acknowledges that the
Stock has not been, and as of the Closing will not be, registered under the
Securities Act of 1933 or any applicable state law and that the Stock will not
be resold, absent appropriate registration or unless exemption from registration
is available. The Purchaser has had an opportunity to review the books and
records of the Subject Company and to ask questions of appropriate officers and
directors regarding the business of the Subject Company.
6.6 Brokers or Finders. The Purchaser and its respective officers and
agents have incurred no obligation or Liability, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Sellers harmless
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from any such payment alleged to be due by or through the Purchaser as a result
of the action of the Purchaser or its respective officers or agents.
6.7 Financial Statements. The Purchaser has delivered to the Sellers
(a) an internally prepared balance sheet of the Purchaser as of March 31, 1998
and the related statement of income, for such period, and (b) an audited balance
sheet of the Purchaser as of December 31, 1997 (including the notes thereto) and
the related combined statement of income, changes in the shareholders' equity
and cash flow for the twelve month period then ended, together with the report
thereon of Ernst & Young LLP, independent certified public accountants
(including the notes thereto) (the "Purchases Financial Statements"). The
Purchaser Financial Statements fairly and accurately present the financial
condition and the results of operations, income, expenses, assets, liabilities,
changes in stockholders' equity, and cash flow of the Purchaser as of the
respective dates of and for the periods referred to in the Purchaser Financial
Statements, all in accordance with GAAP; the Purchaser Financial Statements
reflect the consistent application of such accounting principles throughout the
periods involved. No financial statements of any person other than the
Purchaser are required by GAAP to be included in the Purchaser Financial
Statements.
6.8 Nonaffiliation. The Purchaser is not an Affiliate of any of the
Senior Creditors or of the Administrative Agent (each as defined in Section
2.4(f) hereof).
ARTICLE VII
ACTIONS OF THE SELLERS AND THE PURCHASER BEFORE
AND AFTER THE CLOSING DATE
Each of the Sellers and the Purchaser covenant and agree with each other
as follows:
7.1 Access and Investigation. Between the date of this Agreement and
the Closing, the Sellers will (a) afford the Purchaser and its Representatives
(collectively, "Advisors") full and free access to the Subject Company's
properties, Contracts (other than personnel Contracts), books and records and
other documents and data, (b) furnish the Purchaser and its Advisors with copies
of all such Contracts, books and records and other existing documents and data
as they may reasonably request and (c) furnish the Purchaser and its Advisors
with such additional financial, operating and other data and information as they
may reasonably request.
7.2 Between the date of this Agreement and the Closing, the Sellers
will cause the Subject Company to:
(a) conduct its business only in the Ordinary Course of Business;
(b) use its Best Efforts to preserve intact its current business
organization, keep available the services of its current officers, employees
and agents and maintain the relations
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and good will with its suppliers, customers, landlords, creditors,
employees, agents and others having business relationships with it;
(c) confer with the Purchaser and its Advisors concerning operational
matters of a material nature; and
(d) otherwise report periodically to the Purchaser concerning the
status of its business, operations and finances.
7.3 Negative Covenants.
(a) Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing, the Subject Company and the
Sellers will not, without the prior consent of the Purchaser, take any
affirmative action or fail to take any reasonable action within its control,
as a result of which any of the changes or events listed in Section 5.14 is
likely to occur.
7.4 Required Approvals.
As promptly as practicable after the date of this Agreement, each party
will make all filings required by Legal Requirements to be made by it in order
to consummate the Transactions. Between the date of this Agreement and the
Closing, the parties will (a) cooperate with respect to all filings that they
may elect to make or may be required by Legal Requirements to make in connection
with the Transactions and (b) cooperate in obtaining all consents identified in
Schedule 5.2.
7.5 Notification.
Between the date of this Agreement and the Closing, each party to this Agreement
will promptly notify each other party hereto in writing if such party becomes
aware of any fact or condition that causes or constitutes a Breach of any of its
representations and warranties as of the date of this Agreement, or if such
party becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition; provided, however, that such disclosure
shall not be deemed to cure any Breach of a representation or warranty. Should
any such fact or condition require any change in the Disclosure Schedules if
such Schedules were dated the date of the occurrence or discovery of any such
fact or condition, the discovering party will promptly deliver to each other
party a supplement to the Disclosure Schedules specifying such change. During
the same period, each party to this Agreement will promptly notify each other
party hereto of the occurrence of any Breach of any covenant or agreement by
such party in this Article VII or of the occurrence of any event that may make
the satisfaction of the conditions in Articles VIII and IX impossible or
unlikely; provided, however, that such disclosure shall not be deemed to
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cure any Breach of a covenant or agreement or to satisfy a condition. Each party
to this Agreement shall promptly notify each other party hereto of any default,
the threat or commencement of any Proceeding or any development that occurs
before the Closing that could in any way materially affect such party, the
business or assets of such party or the ability of such party to consummate the
Transactions.
7.6 No Negotiation.
Until sixty (60) days from the date hereof or unless this Agreement is
earlier terminated pursuant to Article XI, neither the Subject Company nor the
Sellers nor any of their respective Representatives will directly or indirectly
solicit, initiate or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than the
Purchaser) relating to any transaction involving the sale of all or a
substantial portion of its business or assets of the Subject Company or any of
its capital stock or other equity interests or any merger, consolidation,
business combination or similar transaction involving the Subject Company (each
such transaction referred to herein as a "Proposed Acquisition Transaction").
The Subject Company and the Sellers will immediately notify the Purchaser if any
discussions or negotiations are sought to be initiated, any inquiry or proposal
is made or any information is requested with respect to any Proposed Acquisition
Transaction and notify the Purchaser of the terms of any proposal which they or
their respective Representatives may receive in respect of any such Proposed
Acquisition Transaction, including without limitation the identity of the
prospective purchaser or soliciting party.
7.7 Best Efforts.
Between the date of this Agreement and the Closing, each of the
parties to this Agreement will use its Best Efforts to cause the conditions in
Articles VIII and IX to be satisfied.
7.8 Conduct of Subject Company's Business. From and after the Closing
Date until the calculation and payment of 2000 Adjusted EBIT, the Purchaser:
(a) will
(i) cause the Staffing Services Business of the Subject
Company to be conducted by the Subject Company (and not by the
Purchaser or any of its Affiliates);
(ii) maintain the separate corporate existence of the
Subject Company;
(iii) cause the Subject Company to maintain or provide
for the benefit of the Subject Company working capital and credit
facilities sufficient to pay as and when they become due all
Liabilities of the Subject Company
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incurred in the Ordinary Course of Business other than
Liabilities for capital expenditures and all Liabilities of
the Subject Company for capital expenditures requested by
the Sellers and consented to by the Purchaser (which consent
shall not be unreasonably withheld); and
(b) will not
(i) without the prior written consent of the Sellers
transfer or dispose of any of the assets or business of the
Subject Company, except in the Ordinary Course of Business,
transfer any of the employees or staffing contractors of the
Subject Company; or
(iii) shift in a manner inconsistent with GAAP any
income or expenses of the Subject Company from one year to
another year.
In addition, prior to January 1, 1999, without the prior written
consent of the Sellers, neither the Purchaser nor the Subject Company will
terminate or modify any of the Subject Company's Plans.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
The Purchaser's obligation to pay the Consideration and to take the
other actions required to be taken by the Purchaser at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Purchaser, in whole or in part):
8.1 Accuracy of Representations. All of the representations and
warranties of the Sellers in this Agreement (considered collectively) and each
of these representations and warranties (considered individually), must have
been accurate in all material respects as of the date of this Agreement and must
be accurate in all material respects as of the Closing as if made on the Closing
without giving effect to any supplement to the Disclosure Schedules.
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8.2 Sellers' and Subject Company's Performance.
(a) All of the covenants and obligations that the Sellers and the
Subject Company are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered collectively) and
each of these covenants and obligations (considered individually), must
have been performed and complied with in all material respects.
(b) The Sellers and the Subject Company must have delivered each of
the documents required to be delivered by the Sellers pursuant to Section
4.2.
8.3 Consents. Each of the Consents identified in Schedule 5.2 must
have been obtained and must be in full force and effect.
8.4 Additional Documents.
Sellers must have delivered to the Purchaser such documents as the
Purchaser may reasonably request for the purpose of (i) evidencing the accuracy
of any representation or warranty of the Sellers, (ii) evidencing the
performance by the Subject Company and the Sellers, or the compliance by the
Subject Company and the Sellers with, any covenant or obligation required to be
performed or complied with by the Subject Company and the Sellers, (iii)
evidencing the satisfaction of any condition referred to in this Article VIII or
(iv) otherwise facilitating the consummation of any of the Transactions.
8.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against the Purchaser or against any Person
affiliated with the Purchaser, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Transactions or
(b) that may have the effect of preventing, delaying, making illegal or
otherwise interfering with any of the Transactions.
8.6 No Claim Regarding Stock Ownership or Sale Proceeds. There must
not have been made or Threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to acquire
or to obtain beneficial ownership of, any stock of, or any other voting, equity,
or ownership interest in, the Subject Company, or (b) is entitled to all or any
portion of the Consideration payable for the Stock.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE
The Sellers' obligation to sell the Stock in exchange for the
Consideration and to take the other actions required to be taken by the Sellers
at the Closing is subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by the Sellers, in
whole or in part):
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9.1 Accuracy of Representations. All of the representations and
warranties of the Purchaser in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing as if made on
the Closing, without giving effect to any supplement to the Disclosure
Schedules.
9.2 The Purchaser's Performance.
(a) All of the covenants and obligations that the Purchaser is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed
and complied with in all material respects.
(b) Each document required to be delivered by the Purchaser
pursuant to Section 4.2 must have been delivered.
9.3 Additional Documents.
The Purchaser must have delivered to the Sellers such documents as
the Sellers may reasonably request for the purpose of (i) evidencing the
accuracy of any of Purchaser's representations and warranties, (ii) evidencing
the performance by the Purchaser of, or the compliance by the Purchaser with,
any covenant or obligation required to be performed or complied with by the
Purchaser, (iii) evidencing the satisfaction of any condition referred to in
this Article IX or (iv) otherwise facilitating the consummation or performance
of any of the Transactions.
9.4 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against the Sellers or the Subject Company any
proceeding (a) involving any challenge to, or seeking damages or other relief
in connection with, any of the Transactions or (b) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
ARTICLE X
INDEMNIFICATION; REMEDIES
10.1 Survival of Representations, Etc. The representations and
warranties of the Sellers and the Purchaser contained herein and the
indemnification obligations of the Sellers pursuant to Section 10.2(a)(iii)
shall survive until two (2) years after the Closing; provided, however, that the
representations and warranties contained in Section 5.3, Section 5.9, Section
5.11 with respect to ERISA plans and Section 5.17 shall continue to survive
until sixty (60) days after the expiration of the applicable statute of
limitations (giving effect to any waiver or extension thereof). The right to
indemnification, payment of Damages or other remedy based on such
representations,
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warranties, covenants and obligations will not be affected by any investigation
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with, any such representation, warranty, covenant or
obligation; provided, however, that any party to this Agreement who has
Knowledge on or prior to the Closing Date of an inaccuracy or Breach of a
representation, warranty, covenant or obligation of any other party to this
Agreement shall notify such other party of such inaccuracy or Breach prior to
the Closing hereunder. A failure to provide the notice required by the
foregoing sentence shall preclude the party with such Knowledge from making a
claim for indemnification, Damages or other remedy for such inaccuracy or
Breach.
10.2 Indemnification.
(a) By the Sellers. The Sellers shall indemnify, save and hold
harmless the Purchaser and its Affiliates and Subsidiaries and each of their
respective Representatives (individually, a "Seller Indemnified Party", and
collectively, the "Seller Indemnified Parties"), from and against any and all
costs, losses, Liabilities, obligations, damages, lawsuits, deficiencies,
claims, demands and expenses (whether or not arising out of third-party claims),
including without limitation losses in connection with workers compensation
claims, interest, penalties, costs of mitigation, losses in connection with any
Environmental Law (including without limitation any clean-up, remedial
correction or responsive action), damages to the Environment, reasonable
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing (herein, "Damages"), incurred in connection with, arising
out of, resulting from or incident to (i) any Breach of any representation or
warranty made by the Sellers in this Agreement; (ii) any Breach of any covenant
or agreement made by the Sellers in this Agreement or any certificate delivered
by the Subject Company or the Sellers at the Closing; or (iii) any services
provided by the Subject Company prior to the Closing to the extent not reserved
on the Closing Balance Sheet or covered by insurance.
The term "Damages" as used in this Section 10.2 is not limited to
matters asserted by third parties against any indemnified party, but includes
Damages incurred or sustained by an indemnified party in the absence of third
party claims. Payments by any indemnified party of amounts for which such
indemnified party is indemnified hereunder shall not be a condition precedent to
recovery. The rights and remedies provided in this Article X shall be exclusive
as to any Damages incurred by a party under this Agreement; provided, however,
that nothing herein shall preclude a party from exercising its rights under this
Agreement and applicable law to such equitable remedies, including without
limitation specific performance and injunctions.
(b) By Purchaser. Purchaser shall indemnify, save and hold harmless
the Sellers and their respective Affiliates and Representatives (the
"Purchaser Indemnified Parties") from and against any and all Damages
incurred in connection with, arising out of, resulting from or incident
to (i) any Breach of any representation or warranty made by the Purchaser
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in this Agreement; or (ii) any Breach of any covenant or agreement made
by the Purchaser in this Agreement.
(c) Cooperation. An indemnified party under this Agreement shall
cooperate in all reasonable respects with the indemnifying party and its
Representatives (including without limitation their attorneys) in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at
its own cost, participate in negotiations, arbitrations and the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The parties shall cooperate with each other in any
notifications to insurers.
(d) Defense of Claims. If a claim for Damages (a "Claim") is to be
made by an indemnified party hereunder against the indemnifying party,
the indemnified party shall give written notice (a "Claim Notice") to the
indemnifying party as soon as practicable after the indemnified party
becomes aware of any fact, condition or event which may give rise to
Damages for which indemnification may be sought under this Section 10.2.
If any lawsuit or enforcement action is filed against an indemnified
party, written notice thereof shall be given to the indemnifying party as
promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights
to indemnification hereunder, except to the extent that the indemnifying
party have been damaged by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party
that the indemnifying party shall be obligated under the terms of their
indemnity hereunder in connection with such lawsuit or action, then the
indemnifying party shall be entitled, if they so elect at their own
cost, risk and expense, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage
attorneys of their own choice, but, in any event, reasonably acceptable
to the indemnified party, to handle and defend the same unless the named
parties to such action or proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel that there may
be one or more legal defenses available to such indemnified party that
are different from or additional to those available to the indemnifying
party, in which event the indemnified party shall be entitled, at the
indemnifying party's cost, risk and expense, to separate counsel of its
own choosing and (iii) to compromise or settle such lawsuit or action,
which compromise or settlement shall be made only with the written
consent of the indemnified party, such consent not to be unreasonably
withheld.
If the indemnifying party fails to assume the defense of such lawsuit
or action within thirty (30) calendar days after receipt of the Claim Notice,
the indemnified party against which such lawsuit or action has been asserted
will (upon delivering notice to such effect to the indemnifying party) have the
right to undertake, at the indemnifying party's cost and expense, the defense,
compromise or settlement of such lawsuit or action on behalf of and for the
account and risk of the indemnifying party; provided, however, that such lawsuit
or action shall not be compromised or
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settled without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld. If the indemnified party settles or
compromises such lawsuit or action without the prior written consent of the
indemnifying party, the indemnifying party will bear no liability hereunder for
or with respect to such lawsuit or action. In the event the indemnified party
assumes the defense of the lawsuit or action, the indemnified party will keep
the indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement. The indemnifying party shall be liable for any
settlement of any action effected pursuant to and in accordance with this
Section 10.2 and for any final judgment (subject to any right of appeal) and the
indemnifying party agrees to indemnify and hold harmless an indemnified party
from and against any Damages by reason of such settlement or Judgment.
(e) Limitation on Indemnity/Commitments.
(i) The indemnification obligation of the indemnifying party with
respect to any Breach of any representation or warranty pursuant to
Section 10.2(a)(i), (a)(iii) or (b)(i) shall be limited to Claims
for Damages made prior to the last date of survival thereof referred
to in Section 10.1. The indemnification obligation of the
indemnifying party with respect to any Breach of any covenant or
agreement pursuant to Section 10.2(a)(ii) or (b)(ii) shall survive
indefinitely subject to the terms of this Agreement.
(ii) The Seller Indemnified Parties may not recover Damages from
the indemnifying party pursuant to Section 10.2(a)(i) and (iii) until
the aggregate amount of Damages relating to such Claims for which the
Seller Indemnified Parties, in the aggregate, are entitled to
indemnification under Section 10.2(a)(i) and (iii) exceeds One
Hundred Thousand Dollars ($100,000) (the "Threshold"); provided,
however, in the event that the aggregate amount of Damages for which
the Seller Indemnified Parties are seeking indemnification under
Section 10.2(a)(i) exceeds such amount, the Seller Indemnified
Parties may recover the full amount of such Damages; provided,
further, however, that the maximum aggregate amount of such Damages
for which the Sellers shall be liable shall not exceed an amount
equal to the Closing Payment. The Seller Indemnified Parties shall
have the right to make a Claim hereunder prior to the time at which
the Threshold that is applicable to Claims under Section 10.2(a)(i)
and (iii) has been surpassed for the purpose of asserting such Claim
within the relevant survival period of the applicable indemnification
obligation and any such Claim made within such period shall, to the
extent such Threshold ultimately is met, survive until its final
resolution.
(iii) The Purchaser Indemnified Parties may not recover Damages
from the Purchaser pursuant to Section 10.2(b)(i) until the aggregate
amount of Damages relating to such Claims for which the Purchaser
Indemnified Parties, in the aggregate, are entitled to
indemnification under Section 10.2(b)(i) exceeds the Threshold;
provided, however, in the event that the aggregate amount of Damages
for which the Purchaser Indemnified Parties are
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seeking indemnification under Section 10.2(b)(i) exceeds such amount,
the Purchaser Indemnified Parties may recover the full amount of such
Damages; provided, further, however, that the maximum aggregate
amount of Damages for which the Purchaser shall be liable pursuant to
Section 10.2(b)(i) shall not exceed Two Million Dollars ($2,000,000).
The Purchaser Indemnified Parties shall have the right to make a
Claim hereunder prior to the time at which the Threshold that is
applicable to Claims under Section 10.2(b)(i) has been surpassed for
the purpose of asserting such Claim within the relevant survival
period of the applicable indemnification obligation and any such
Claim made within such period shall, to the extent such Threshold
ultimately is met, survive until its final resolution.
(iv) Neither (a) the termination of the representations or
warranties contained herein, nor (b) the expiration of the
indemnification obligations described above, will affect the rights
of an indemnified party in respect of any Claim made by such
indemnified party received by the Sellers prior to the expiration of
the applicable survival period provided herein.
(f) Representatives. No individual Representative of any party
shall be personally liable for any Damages under the provisions
contained in this Section 10.2 (except to the extent any such Person
is party hereto in his or her individual capacity). Nothing herein
shall relieve either party of any Liability to make any payment
expressly required to be made by such party pursuant to this
Agreement.
10.3 Tax.
(a) Tax Indemnification. Except for Taxes that are reserved for on
the Closing Balance Sheet, the Sellers shall be responsible for and pay
and shall jointly and severally indemnify and hold harmless the Purchaser
and the Subject Company (and each of their respective affiliates,
successors and assigns) from and against (i) all Taxes imposed on the
Subject Company, or for which the Subject Company is liable, with respect
to (A) all periods ending on or prior to the Closing Date or (B) any
period beginning before the Closing Date and ending after the Closing
Date, but only with respect to the portion of such period up to and
including the Closing Date (such portion, a "Pre-Closing Partial Period"),
and (ii) a prorata portion of any costs or expenses incurred by the
Subject Company with respect to the Taxes indemnified hereunder. For
purposes of this Section 10.3(a), Taxes shall include the amount of Taxes
which would have been paid but for the application of any credit or net
operating or capital loss deduction attributable to any period (or portion
thereof) ending after the Closing Date, but shall not include amounts
which would have been paid but for the application of any credit or net
operating or capital loss deductions attributable to any period (or
portion thereof) ending on or before the Closing Date.
(b) Straddle Periods. Any Taxes with respect to the Subject
Company that relate to a Tax period beginning on or before the
Closing Date and ending after the Closing Date (a "Straddle
Period") shall be apportioned between the Pre-Closing
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Partial Period and the portion of such Straddle Period beginning on the day
after the Closing Date (the "Post-Closing Partial Period"), as determined
from the books and records of the Subject Company during the portion of
such period ending on the Closing Date and the portion of such period
beginning on the day following the Closing Date consistent with the past
practices of the Subject Company. The Purchaser shall cause the Subject
Company to file any Tax Returns for any Straddle Period, and the Purchaser
shall pay all Taxes shown as due on any such Tax Returns. The Sellers
shall pay the Purchaser all such Taxes apportioned to the Pre-Closing
Partial Period (to the extent not paid by the Subject Company prior to the
Closing Date or accrued or otherwise reflected as a Liability on the
Closing Balance Sheet) due pursuant to the filing of any such Tax Returns
under the provisions of this Section 10.3(b) within fifteen (15) business
days of receipt of notice of such filing by the Purchaser, which notice
shall set forth in reasonable detail the calculations regarding the
Sellers' share of such Taxes.
(c) Refunds. The Purchaser agrees to assign and promptly remit (and
to cause the Subject Company to assign and promptly remit) all refunds
(including interest thereon) net of any Tax effect to the Purchaser or the
Subject Company, received by the Purchaser or the Subject Company of any
Taxes attributable to any period on or prior to the Closing Date; provided,
however, that the Purchaser shall be entitled to the portion of any refund
resulting from a carryback (including carrybacks to periods ending on or
prior to the Closing Date) of a net operating loss, net capital loss, Tax
credit or similar item sustained or arising in any period ending after the
Closing Date or in any Post-Closing Partial Period.
(d) Tax Returns for Pre-Closing Periods. The Sellers shall prepare
or cause to be prepared, and timely file or cause to be filed, all Tax
Returns of the Subject Company for all taxable periods of the Subject
Company ending on or prior to the Closing Date and shall pay or cause to be
paid all Taxes due with respect to such Tax Returns (to the extent not paid
by the Subject Company on or prior to the Closing Date or accrued or
otherwise reflected as a Liability on the Closing Balance Sheet). With
respect to any Tax Return of the Subject Company for a 1998 partial year
period ending on or prior to the Closing Date, Sellers shall pay or cause
to be paid all taxes due with respect to such period as determined from the
books and records of the Subject Company for such period (to the extent not
paid by the Subject Company on or prior to the Closing Date or accrued or
otherwise reflected as a Liability on the Closing Balance Sheet). With
respect to any such Tax Returns required to be filed by the Sellers and not
required to be filed before the Closing Date, the Sellers shall provide the
Purchaser and its authorized Representatives with copies of any such
completed Tax Return at least ten (10) business days prior to the due date
for filing of such Tax Return and the Purchaser and its Representatives
shall have the right to review such Tax Return prior to the filing of such
Tax Return. Sellers and the Purchaser agree to consult and resolve in good
faith any issues arising as a result of such review.
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(e) Other Matters. The Purchaser shall promptly notify the Sellers in
writing upon receipt by the Purchaser or any Affiliate of the Purchaser of
notice of (i) any pending or threatened federal, state, local or foreign Tax
audits or assessments of the Subject Company and (ii) any pending or threatened
federal, state, local or foreign Tax audits or assessments of the Purchaser or
any Affiliate of the Purchaser which may affect the Tax Liabilities of the
Subject Company with respect to any period ending on or before the Closing
Date. The Sellers shall promptly notify the Purchaser in writing upon receipt
by the Sellers of notice of any pending or threatened federal, state, local or
foreign Tax audits or assessments relating to the income, properties or
operations of the Subject Company.
The Purchaser and the Sellers shall cooperate with each other in the
conduct of any audit or other proceedings involving the Subject Company for
periods beginning before the Closing Date and each may participate at its own
expense, provided that the Sellers shall have the right to control the conduct
of any such audit or proceeding for which the Sellers (i) agree that any
resulting Tax is covered by the indemnity provided in Section 10.3(a) of this
Agreement and (ii) demonstrate to the Purchaser their ability to make such
indemnity payment. Notwithstanding the foregoing, neither the Purchaser nor the
Sellers may settle or otherwise resolve any such claim, suit or proceeding
without the consent of the other party, such consent not to be unreasonably
withheld.
After the Closing Date, the Purchaser and the Sellers shall make available
to the other, as reasonably requested, all information, records or documents
relating to Tax liabilities or potential Tax liabilities of the Subject Company
and shall preserve all such information, records and documents until the
expiration of any applicable statute of limitations, including extensions
thereof, or such other period as required by law. The Purchaser and the Sellers
shall, if possible, make available to each other as reasonably requested by the
Purchaser or the Sellers, as the case may be, personnel responsible for
preparing or maintaining information, records and documents, in connection with
Tax matters. In case at any time after the Closing Date any further action is
necessary to carry out the purposes of this Agreement, the parties hereto shall
take all such reasonably necessary action.
All sales, value added, use, state or local transfer and gains Taxes,
registration, stamp and similar Taxes imposed in connection with the
Transactions shall be borne equally by the Purchaser, on the one hand, and the
Sellers, on the other hand.
Any payments made to the Sellers, the Subject Company or the Purchaser
pursuant to this Article X shall constitute an adjustment of the Consideration
for Tax purposes and shall be treated as such by the Purchaser and the Sellers
on their Tax Returns to the extent permitted by law.
All Tax sharing or similar agreements, if any, to which the Subject
Company is a party will be canceled at or prior to the Closing and neither the
Purchaser nor the Subject Company shall have any obligation under any such
agreement.
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ARTICLE XI
TERMINATION
11.1 Termination Events.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by the Sellers, on the one hand, or by the Purchaser on the
other hand, if a Breach of any provision of this Agreement has been
committed by the other party or its Affiliates and such Breach has not
been expressly waived in writing;
(b) (i) by the Purchaser if any of the conditions in Article VIII
has not been satisfied as of the Closing or if satisfaction of such a
condition is or becomes impossible (other than through the failure of the
Purchaser to comply with their respective obligations under this
Agreement) and the Purchaser has not expressly waived such condition in
writing on or before the Closing; or (ii) by the Sellers, if any of the
conditions in Article IX has not been satisfied as of the Closing or if
satisfaction of such a condition is or becomes impossible (other than
through the failure of the Sellers or the Subject Company to comply with
its obligations under this Agreement) and the Sellers have not expressly
waived such condition in writing on or before the Closing;
(c) by mutual consent of Purchaser and the Sellers; or
(d) by either the Purchaser or the Sellers if the Closing has not
occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before July 2, 1998 (the "Closing Date"), or such later
date as the Parties may agree upon.
11.2 Effect of Termination.
Each party's right of termination under Section 11.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 11.1, all further obligations of the Parties
under this Agreement will terminate, except that the obligations in Sections
12.6, 12.9 and 12.10 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of this Agreement by the other
party or because one or more of the conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
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ARTICLE II
MISCELLANEOUS
12.1 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other party; except that the Purchaser may, without such consent,
assign all such rights to any lender as collateral security and assign all such
rights and obligations to a wholly owned Subsidiary (or a partnership controlled
by the Purchaser) or Subsidiaries of the Purchaser or to a successor in interest
to the Purchaser which shall assume all obligations and Liabilities of the
Purchaser, as the case may be, under this Agreement; provided, however, that no
such assignment shall relieve the Purchaser of any obligation or liability under
this Agreement. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.2 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to the Purchaser, addressed to such Purchaser at:
Xxxxxxx X. Xxxxxxxxx
Corporate Staffing Resources, Inc.
000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxx Xxxxxxxxx & Xxxxxx LLP
0000 Xxx Xxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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If to the Sellers, addressed to the Sellers at the following
respective addresses:
Xxxxx X. Xxxx
00000 Xxxxx Xxxxx Xxxxx
Xx. Xxxxx, XX 00000
With a copy to:
Xxxxx Xxxxxx
Susman, Schermer, Rimmel & Xxxxxxx, L.L.C.
Tenth Floor Xxxxxx Place
0000 Xxxxxxxxxx Xxxxxx
Xx. Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
12.3 Choice of Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware (without giving effect to
its choice of law principles), except with respect to matters of law concerning
the internal corporate affairs of any corporate entity which is a party to or
the subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
12.4 Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto (including the Disclosure
Schedule and the other agreements referred to herein), constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. This Agreement may not be amended
except in an instrument in writing signed on behalf of each of the parties
hereto. No amendment, supplement, modification or waiver of this Agreement shall
be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
12.5 Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.6 Expenses. Each Party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the Transactions (it being understood that in the event of
termination of this Agreement, the obligation
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of each party to pay its own expenses will be subject to any rights of such
party arising from a breach of this Agreement by the other party).
12.7 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
12.8 Titles. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
12.9 Publicity. Except as required by law, none of the Purchaser,
the Subject Company nor the Sellers shall issue any press release or make any
public statement regarding this Agreement and the Transactions, without prior
written approval of the other parties; provided, however, that in the case of
announcements, statements, acknowledgments or revelations which either party is
required by law to make, issue or release, the making, issuing or releasing of
any such announcement, statement, acknowledgment or revelation by the party so
required to do so by law shall not constitute a breach of this Agreement if such
party shall have given not less than two (2) calendar days prior notice to the
other party, and shall have attempted, to the extent reasonably possible, to
clear such announcement, statement, acknowledgment or revelation with the other
party. Each party hereto agrees that it will not unreasonably withhold any such
consent or clearance. The Purchaser may, without the consent of the Sellers,
issue or make an appropriate press release or public announcement after the
Closing.
12.10 Confidential Information.
(a) No Disclosure. The parties acknowledge that the Transaction
described herein is of a confidential nature and shall not be disclosed
except to consultants, advisors and Affiliates or as required by law,
until such time as the parties make a public announcement regarding the
Transaction as provided in Section 12.9.
(b) Preservation of Confidentiality. In connection with the
negotiation of this Agreement, the preparation for the consummation of
the Transactions, and the performance of obligations hereunder, the
Purchaser acknowledges that it will have access to confidential and
proprietary information relating to the Subject Company and the Sellers
acknowledge that they will have access to confidential information
relating to the Purchaser and its Affiliates, in each case, including
technical or marketing information, ideas, methods, developments,
inventions, improvements, business plans, trade secrets, scientific or
statistical data, diagrams, drawings, specifications or other proprietary
information relating thereto, together with all analyses, compilations,
studies or other documents, records or data prepared by the Sellers and
the Subject Company or the Purchaser, as the case may be, or
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their respective Representatives or Affiliates, which contain or otherwise
reflect or are generated from such information ("Confidential
Information"). The term "Confidential Information" does not include
information received by one party in connection with the Transactions
which (i) is or becomes generally available to the public other than as a
result of a disclosure by such party or its Representatives, (ii) was
within such party's possession prior to its being furnished to such party
by or on behalf of the other party in connection with the Transactions,
provided that the source of such information was not known by such party
to be bound by a confidentiality agreement with or other contractual,
legal or fiduciary obligation of confidentiality to the other party or any
other Person with respect to such information or (iii) becomes available
to such party on a non-confidential basis from a source other than the
other party or any of their respective Representatives, provided that such
source is not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the other
party or any other Person with respect to such information.
(c) Each party shall treat all Confidential Information of the other
party as confidential, preserve the confidentiality thereof and not
disclose any such Confidential Information, except to its Representatives
and Affiliates who need to know such Confidential Information in
connection with the Transactions. Each party shall use all reasonable
efforts to cause its Representatives to treat all such Confidential
Information of the other party as confidential, preserve the
confidentiality thereof and not disclose any such Confidential
Information. Each party shall be responsible for any breach of this
Agreement by any of its Representatives. If, however, Confidential
Information is disclosed, the party responsible for such disclosure shall
immediately notify the other party in writing and take all reasonable
steps required to prevent further disclosure.
(d) Until the Closing or the termination of this Agreement, all
Confidential Information shall remain the property of the party who
originally possessed such information. In the event of the termination of
this Agreement for any reason whatsoever, each party shall, and shall
cause its Representatives to, return to the other party all Confidential
Information (including all copies, summaries and extracts thereof)
furnished to such party by the other party in connection with the
Transactions.
(e) If one party or any of its Representatives or Affiliates is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process) or is required by
operation of law to disclose any Confidential Information, such party
shall provide the other party with prompt written notice of such request
or requirement, which notice shall, if practicable, be at least
forty-eight (48) hours prior to making such disclosure, so that the other
party may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. If, in the
absence of a protective order or other remedy or the receipt of such a
waiver, such party or any of its Representatives are nonetheless, in the
opinion of counsel, legally compelled to disclose Confidential
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Information, then such party may disclose that portion of the
Confidential Information which such counsel advises is legally required
to be disclosed, provided that such party uses its reasonable efforts to
preserve the confidentiality of the Confidential Information, whereupon
such disclosure shall not constitute a breach of this Agreement.
12.11 Burden and Benefit. This Agreement shall be binding upon and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. There are no third party beneficiaries of this
Agreement except the Senior Creditors as provided in Section 2.4(f); provided,
however, that any Person that is not a party to this Agreement but, by the terms
of Section 10.2, is entitled to indemnification, shall be considered a third
party beneficiary of this Agreement, with full rights of enforcement as though
such Person was a signatory to this Agreement.
12.12 Service of Process; Consent to Jurisdiction.
(a) Service of Process. Each of the parties hereto irrevocably
consents to the service of any process, pleading, notices or other papers
in connection with a legal proceeding by the mailing of copies thereof by
registered, certified or first class mail, postage prepaid, to such party
at such party's address set forth herein, or by any other method provided
or permitted under Delaware law.
(b) Consent and Jurisdiction. Each party hereto irrevocably and
unconditionally (i) agrees that any suit, action or other legal
proceeding arising out of this Agreement may be brought in the United
States District Court for the Northern District of Indiana or the United
States District Court for the Eastern District of Missouri; (ii) consents
to the jurisdiction of either such court in any such suit, action or
proceeding; and (iii) waives any objection which such party may have to
the laying of venue of any such suit, action or proceeding in either such
court.
12.13 Attorney's Fees. If any party to this Agreement brings an
action to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
12.14 Limitation of Liability. Notwithstanding anything to the
contrary in this Agreement, in no event shall any party hereto be liable for any
incidental or consequential damages occasioned by any failure to perform or the
breach of any obligation under this Agreement, except as provided in Section
2.4.
12.15 Additional Survival. In addition to the survival of
representations and warranties and other provisions referenced in Section 10.1
and 10.2 of this Agreement, which shall survive pursuant to the terms of such
Section, the obligations of the Sellers and the Purchaser contained in Sections
4.2, 12.6, 12.9 and 12.10 and in Article II, III, subject to the provisions of
Section 3.5, X and XI of this Agreement shall survive the Closing Date
indefinitely.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
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SELLERS: PURCHASER:
Corporate Staffing Resources, Inc.
_______________________________
Xxxxx X. Xxxx, individually and
as Trustee of the Xxxxx X. Xxxx _____________________________________________
Living Trust dated May 11, 1998 By: Xxxxxxx X. Xxxxxxxxx
Its: Chairman of the Board &
Chief Executive Officer
_______________________________
Xxxx X. Xxxx, as Trustee of the
Xxxxx X. Xxxx Living Trust
Dated May 11, 1998
_______________________________
Xxxxxx X. Xxxxxx
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SCHEDULE 2.4
REQUIRED ADJUSTMENTS TO EBIT - 1999 AND 2000
1. All items of expense in the nature of management fees or corporate
overhead of the Purchaser or its Affiliates shall be excluded.
2. The expense of payroll, billing and other administrative services
provided to the Subject Company by the Purchaser or its Affiliate in excess of
the cost for which those services could be performed by the Subject Companies
shall be excluded.
3. Gains and losses from the sale, disposition or destruction of assets
shall be excluded.
4. Debits or credits classified as extraordinary items shall be excluded.
